Improving risk management in supply chain management – A case study of risk management system implementation

Abstract

The current changing business environment has forced companies to consider strategies and approaches for managing risks in order to maintain competitiveness in the market. Previous studies have shown that even though the importance of supply chain risk management is widely recognized by companies, many of them have not taken the required actions to mitigate the risk due to problems that have occurred in the design or implementation of risk management systems. This study focuses on risk management in supply chain management with a particular focus on system implementation.

The study was conducted as an action research which attempts to solve a problem or a process occurring in a target organization. The empirical data for the study was gathered through semi-structured interviews and participant observation. The main objective was to explore how risk can be managed in a supply chain context and which elements are crucial for successful system implementation. In the case company, a new management control system aiming to control supply risk was designed and implemented which provided the base for the empirical analysis. The findings in the case study were reflected back to the earlier introduced theory and analyzed accordingly. For the theoretical basis of the study, central theories in the field of supply chain risk management and management control system implementation are introduced. Kasurinen’s (2002) framework was adopted for the analysis of the factors that influence the change in the case company when implementing the new risk management system. The framework defines advancing forces of change and factors disrupting the change, both of which were identified also in the case environment.

In the case study, the facilitating or inhibiting factors for change seem similar to the ones presented in existing literature. The study contributes to the management accounting literature in two ways. It provides evidence concerning how a management control system can be used as a risk prevention tool in supply chain risk management and points out the crucial elements for successful system implementation perceived in the case environment.