The Impact of Environmental Risks in Supply Chain Resilience

Abstract

In the past decade, firms have become more aware of supply chain disruptions and their impact on the firm. Developing a supply chain resilience organizational culture has been proposed as an effective way to manage supply chain risks. This study intends to explore how the geographical location risks impact the decision to develop a supply chain resilience strategy, in particular, to anticipate the disruption proactively and have a business continuity plan in place. Using a unique database including thousands of manufacturing locations that belong to over 7,000 firms across 102 countries, we test three hypotheses to understand if geographical location risks, frequency of disruptive events, and the region in which a site is located are factors for the likelihood of a firm having a business continuity plan at their locations. The study also seeks to understand if there are regional effects and firm effects affecting the decision to develop resilience. With a particular focus in Latin America and the firms with a manufacturing presence in that region. The main findings of the study are that natural disaster risks do tend to develop a culture of resilience, while macroeconomic risks tend to do the opposite. These results remain stable for firms' effects. The Latin America region shows no observable statistical difference in developing resilience compared to the Asia region. While the Northern America region shows more resilience compared to Asia. We conclude that economic risk is less predictable and harder to develop a plan for than disruptions, such as natural disasters. The findings of this study present an opportunity for governments to develop resilience plans that can make their countries more attractive for investment to multinational firms looking to establish new manufacturing locations around the world.

Citation

Martínez, C., Paraskevas, J.P., Grimm, C., Corsi, T. and Boyson, S. (2020), "The Impact of Environmental Risks in Supply Chain Resilience", Yoshizaki, H.T.Y., Mejía Argueta, C. and Mattos, M.G. (Ed.) Supply Chain Management and Logistics in Emerging Markets, Emerald Publishing Limited, Leeds, pp. 11-39. https://doi.org/10.1108/978-1-83909-331-920201002