Managing Reputation Risk in Supply Chains: The Role of Risk Sharing Under Limited Liability

2020 ◽  
Author(s):  
Vibhuti Dhingra ◽  
Harish Krishnan
Keyword(s):  
Operations Management ◽  
Risk Sharing ◽  
Limited Liability ◽  
Operational Risk ◽  
Worst Case ◽  
Dual Sourcing ◽  
Reputational Risk ◽  
Reputation Risk ◽  
Procurement Strategies

When a supplier fails to comply with social and environmental standards, the buyer’s reputation suffers. Reputation costs can typically be very high for the buyer, whereas the supplier’s liability is often limited. Conventional procurement strategies such as dual sourcing mitigate the buyer’s operational risk, but they often do so at the expense of increasing its reputation risk and sourcing costs. In this paper, we propose a risk-sharing contract for managing the buyer’s reputation concerns. We find that by sharing some of the supplier’s operational loss, the buyer may (in some conditions) decrease its reputational risk, but this has to be balanced against an increase in the operational risk. Risk sharing also reduces sourcing costs because the buyer takes on some of the worst-case loss of a wealth-constrained supplier. These results suggest that risk sharing can be superior, as a procurement strategy, to conventional approaches such as dual sourcing or penalty contracts. This is true when reputation and sourcing costs are a significant concern and operational costs are not that high. Under some conditions, the buyer may choose risk sharing even if it increases reputation risk in order to reduce procurement costs. This paper was accepted by Victor Martínez-de-Albéniz, operations management.

The Role of Financial Innovation in EU Market Integration and the Capital Markets Union

2018 ◽  
Author(s):  
Emilios Avgouleas
Keyword(s):  
Capital Markets ◽  
Risk Sharing ◽  
Market Integration ◽  
Financial Innovation ◽  
The European Union ◽  
Recent Developments ◽  
Capital Markets Union ◽  
Critical Overview ◽  
The Eu

This chapter offers a critical overview of the issues that the European Union 27 (EU-27) will face in the context of making proper use of financial innovation to further market integration and risk sharing in the internal financial market, both key objectives of the drive to build a Capital Markets Union. Among these is the paradigm shift signalled by a technological revolution in the realm of finance and payments, which combines advanced data analytics and cloud computing (so-called FinTech). The chapter begins with a critical analysis of financial innovation and FinTech. It then traces the EU market integration efforts and explains the restrictive path of recent developments. It considers FinTech's potential to aid EU market integration and debates the merits of regulation dealing with financial innovation in the context of building a capital markets union in EU-27.

scholarly journals Robust Universal Inference

Entropy ◽  
2021 ◽  
Vol 23 (6) ◽  
pp. 773
Author(s):  
Amichai Painsky ◽  
Meir Feder
Keyword(s):  
Robust Estimation ◽  
Minimax Estimator ◽  
Worst Case ◽  
Capacity Theory ◽  
Alternative Approach ◽  
True Model ◽  
Finite Set ◽  
Universal Prediction ◽  
Estimation Scheme

Learning and making inference from a finite set of samples are among the fundamental problems in science. In most popular applications, the paradigmatic approach is to seek a model that best explains the data. This approach has many desirable properties when the number of samples is large. However, in many practical setups, data acquisition is costly and only a limited number of samples is available. In this work, we study an alternative approach for this challenging setup. Our framework suggests that the role of the train-set is not to provide a single estimated model, which may be inaccurate due to the limited number of samples. Instead, we define a class of “reasonable” models. Then, the worst-case performance in the class is controlled by a minimax estimator with respect to it. Further, we introduce a robust estimation scheme that provides minimax guarantees, also for the case where the true model is not a member of the model class. Our results draw important connections to universal prediction, the redundancy-capacity theorem, and channel capacity theory. We demonstrate our suggested scheme in different setups, showing a significant improvement in worst-case performance over currently known alternatives.

Dual Sourcing Under Random Supply Capacities: The Role of the Slow Supplier

2016 ◽  
Vol 25 (7) ◽  
pp. 1232-1244 ◽  
Author(s):  
Burcu Tan ◽  
Qi Feng ◽  
Wen Chen
Keyword(s):  
Dual Sourcing

scholarly journals Innovations and Analogies in the Legal Regulation of Withdrawal from a Limited Liability Company under Current Russian Law

Laws ◽  
2021 ◽  
Vol 10 (2) ◽  
pp. 21
Author(s):  
Viktor A. Mikryukov
Keyword(s):  
Law Enforcement ◽  
Limited Liability ◽  
Fair Value ◽  
Legal Regulation ◽  
Business Climate ◽  
Positive Role ◽  
Freedom Of Contract ◽  
Study Find ◽  
Russian Law

The purpose of the study is to highlight the most significant legal gaps in the mechanism under study, find doctrinally relevant ways to overcome them casually in law enforcement, and propose options for generally filling the gaps in rulemaking. It is equally important to test the effectiveness of the analogy as a means to combat legal gaps. The methodological framework was formed by general (analysis, synthesis, abstraction, and concretization) and specific (comparative, formal, and technical legal) scientific research methods. The positive role of analogy as a method of combating legal uncertainty and the formation of legislative innovations was confirmed. The conclusion was made about the absence of a formal need for additional legislative authorization for Limited Liability Companies’ members to create a conditional or individualized withdrawal procedure. Backed by the legal analogy, the necessity to extend the freedom-of-contract doctrine in determining the fair value of a withdrawing shareholder’s share was argued. The achievements provided the basis for specific practical proposals to enhance existing Russian legislation and harmonize corporate relationships, which should improve Russia’s business climate.

Disclosure and Secrecy in Employee Monitoring

2010 ◽  
Vol 22 (1) ◽  
pp. 187-208
Author(s):  
Mitchell A. Farlee
Keyword(s):  
Risk Aversion ◽  
Moral Hazard ◽  
Monitoring System ◽  
Risk Premium ◽  
Risk Sharing ◽  
Limited Liability ◽  
Efficient Production ◽  
System A ◽  
Liability Risk ◽  
Employee Monitoring

ABSTRACT: Disclosure and monitoring policy are studied, where disclosure relates to information about the monitoring system. A moral hazard model is presented where employee monitoring occurs with some exogenous probability and the owner privately learns whether he will be monitoring before the employee chooses his productive action. Disclosure policy is an owner choice between revealing to the employee whether he will be monitoring before the action (Disclosure) or remaining silent (Secrecy). The results rely on the joint presence of risk aversion and limited liability. Risk aversion creates an efficiency/risk tradeoff where secrecy obtains risk-sharing benefits. Limited liability reduces these benefits, allowing preference for disclosure. Lower monitoring probabilities increase the risk premium required to obtain effort with secrecy. For small monitoring probabilities, disclosure is preferred even though less efficient production is achieved, because disclosure provides a greater risk-sharing benefit. For high monitoring probabilities, secrecy is preferred because it leads to greater efficiency despite a greater risk premium.

Ambidextrous leadership, entrepreneurial orientation, and operational performance

2017 ◽  
Vol 38 (2) ◽  
pp. 229-253 ◽  
Author(s):  
Trong Tuan Luu
Keyword(s):  
Operations Management ◽  
Entrepreneurial Orientation ◽  
Operational Performance ◽  
Content Type ◽  
Business Context ◽  
Organizational Social Capital ◽  
Software Companies ◽  
Predictive Role ◽  
Ambidextrous Leadership

Purpose The purpose of this paper is to investigate the role of ambidextrous leadership in fostering entrepreneurial orientation (EO) and operational performance. The research also seeks an insight into the moderating role that organizational social capital (OSC) plays on the relationship between ambidextrous leadership and EO. Design/methodology/approach The responses to the questionnaire survey were collected from 427 managers from software companies in Vietnam business context. Findings The data analysis verified the positive effect of ambidextrous leadership on EO, which was positively moderated by OSC. The research results also shed light on the predictive role of EO for the organization’s operational performance. Originality/value This research contributes to literature through identifying the convergence of entrepreneurship and operations management research streams, and the moderation role of OSC for the ambidextrous leadership-EO relationship.

scholarly journals Welfare Consequences of Information Aggregation and Optimal Market Size

2017 ◽  
Vol 9 (4) ◽  
pp. 303-323 ◽  
Author(s):  
Kei Kawakami
Keyword(s):  
Asymmetric Information ◽  
Risk Aversion ◽  
Risk Sharing ◽  
Information Aggregation ◽  
Market Size ◽  
Positive Externality ◽  
Trading Model ◽  
Welfare Implications ◽  
The Right

We analyze the welfare implications of information aggregation in a trading model where traders have both idiosyncratic endowment risk and asymmetric information about security payoffs. The optimal market size balances two forces: (i) the risk-sharing role of markets, which creates a positive externality amongst traders, against (ii) the information-aggregation role of prices, which leads to prices that are more correlated with security payoffs, thereby undermining the hedging function of markets. Our analysis indicates that a market with infinitely many traders may not be the right welfare benchmark in the presence of risk aversion and information aggregation. (JEL D43, D62, D82, D83)

South Africa at a Turning Point?

2015 ◽  
Vol 53 (3) ◽  
pp. 477-486 ◽  
Author(s):  
Elke Zuern
Keyword(s):  
South Africa ◽  
Turning Point ◽  
Case Scenario ◽  
State Collapse ◽  
Worst Case ◽  
South Africans ◽  
Nelson Mandela ◽  
Wide Range ◽  
Electricity Provision

South Africa is at a crossroads. The state has not adequately addressed dire human development needs, often failing to provide the services it constitutionally guarantees. As a result, citizens are expressing their frustrations in a variety of ways, at times including violence. These serious challenges are most readily apparent in poverty, inequality and unemployment statistics, but also in electricity provision, billing and affordability as well as a recent spate of racially motivated attacks which highlight the tension both among South Africans and between South Africans and darker skinned foreigners. The country has, however, been on the brink before and avoided the worst-case scenario of full-scale civil war and state collapse. Far too often South Africa's past successes have been attributed to the role of one man, Nelson Mandela. While Mandela was indeed an extraordinary human being who rightly deserved the international awards and accolades as well as the deep admiration of so many, South Africa's triumphs as a society and a state are the product of both cooperative and conflicting contributions by a wide range of actors. A central question at the present juncture is how well equipped domestic actors and institutions are to address the crisis. The following pages seek to provide some insights and through the perspectives of three authors to consider causes and possible responses.

FROM SUBCONTRACTED R&D TO JOINT COLLABORATION: THE ROLE OF TRUST IN FACILITATING THIS PROCESS

2004 ◽  
Vol 01 (02) ◽  
pp. 205-231 ◽  
Author(s):  
PAUL RYAN ◽  
MAJELLA GIBLIN ◽  
EDEL WALSHE
Keyword(s):  
Organizational Behavior ◽  
Operations Management ◽  
Management Practices ◽  
Selection Process ◽  
Negative Relationship ◽  
High Tech ◽  
Effective Selection ◽  
Unstable Environment ◽  
Consumer Tastes

High-technology companies operate in a dynamic and unstable environment due to rapidly changing technologies and consumer tastes. An increasing number of companies are engaging in joint R&D projects to subvent the constraints to competitiveness in this turbulent environment. Collaborative R&D activity has been studied from the perspectives of strategic management [Dodgson (1992)], organizational behavior [Powell et al. (1996)], operations management [Nooteboom et al. (2000)] and business-to-business marketing [Turnbull et al. (1996)]. Within the literature, trust has been identified as highly significant to alliance effectiveness, governance and the development of a long-term mutually beneficial relationship. [Perry et al. (2002); Ramaseshan and Loo (1998); Morgan and Hunt (1994); Ganesan (1994); Nooteboom et al. (2000)]. This paper describes a collaborative R&D project between two high-tech companies to trace the development of trust between the partners. It specifically considers the role of trust in facilitating the progression of their relationship from subcontracting to joint collaboration. Reaffirming existing theories, the findings of the paper identify partner compatibility and an effective selection process as well as openness and honesty as the foundations for trust. Moreover, sound management practices were found to foster high levels of co-operation and commitment to the relationship. The main contribution of the paper is the identification of opportunistic behavior as a possible positive phenomenon. This provides new insight to existing literature which traditionally assumes a negative relationship between trust and exploitative behavior.

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