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Why Quants Should Manage Your Supply Chain Risk

Risk Management, for all of its stress and troubles, is quickly becoming one of the most important elements in supply chains. Supply chain risks can come from natural and man-made disasters, political strife, and simply the nature of a worldwide supply chain. This article by Carlos Alverenga explains why risk in supply chain isn't just a potential cost, the problem with current supply chain managers, and how CEOs can rethink what it means to manage a global supply chain and the risk that comes with it. First, however, Alverenga explains why risk is often an untouched topic in supply chains: Risk is an abstract concept and hence often an uncomfortable topic for executives who make their living in the all-too-physical world of procurement, manufacturing and logistics. The same can be said for traditional supply chain risk management consultants and academics, who, after all, share a similar background. This lack of comfort with both the quantitative aspects of risk and the more sophisticated options available to operational executives is (in some industries literally) dangerous. Indeed, anyone who claims to be managing supply chain risk without understanding subjects like real options, hedging, Value at Risk models, financial simulation, and so on, is more like a security guard than a real risk manager. Supply chain risk management is changing, with CEOs and CFOs becoming more and more responsible and interested in the success and security of supply chains. An increasing amount of PhDs and actuaries are finding their ways on to supply chain teams, making risks management and reactive planning more of the usual than the extraordinary. The problem (and the solution) comes down to quantitative decision making. With quantitative analysis business leaders and supply chain managers can reduce the cost associated with risks and help determine the manner that risk management is handled and understood.

About Matthew Kabik

Matthew Kabik is the former Editor of Computer Aid's Accelerating IT Success. He worked at Computer Aid, Inc. from 2008 to 2014 in the Harrisburg offices, where he was a copywriter, swordsman, social media consultant, and trainer before moving into editorial.

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