Real options flexibility or risk diversification: risk management of US MNEs when facing risk of war

Purpose The purpose of this paper is to examine how the risk of war aroused by North Korea’s threatening actions trigger strategic responses from US multinational enterprises (MNEs) operating in South Korea. The authors compare two competing perspectives of real options and risk diversification to see which prevails when US MNEs are facing risk of war. Design/methodology/approach The authors hand collected news articles regarding North Korea’s threatening actions that may trigger strategic responses from MNEs operating in South Korea. The authors use archival data of US MNEs to verify our results. Findings Empirical tests of the two competing perspectives reveal that US MNEs adopt the risk diversification strategy when threatened by the risk of war. However, as MNEs have more available foreign markets outside the host country that is at risk of war, MNEs tend to take an operational flexibility approach more seriously and shift their productions to the remaining global operations. The ownership structure of the subsidiary does not appear to have significant effect on US MNEs’ strategic risk management. Originality/value This paper compares two perspectives, namely, real options and risk diversification, to observe how US MNEs treat their subsidiaries when facing risk of war in South Korea.

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International projects and political risk management by multinational enterprises: insights from multiple emerging markets

International Marketing Review ◽

10.1108/imr-03-2020-0060 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Tahir Ali ◽

Aurangzeab Butt ◽

Ahmad Arslan ◽

Shlomo Yedidia Tarba ◽

Sniazhana Ana Sniazhko ◽

...

Keyword(s):

Risk Factors ◽

Risk Management ◽

Emerging Markets ◽

Social Exchange ◽

Multinational Enterprises ◽

Political Risk ◽

Analytical Framework ◽

International Project ◽

Content Type ◽

Political Risks

PurposeThis study investigates an under-researched yet fundamental question of how a developed country multinational enterprises (DMNE) perceives and manages political risks when undertaking infrastructure projects in the emerging markets (EMs).Design/methodology/approachThe authors use an abduction-based qualitative research approach to analyze six international project operations of a multinational enterprise originating from Finland in five EMs.FindingsThe findings suggest that the overall nature of political risks in EMs is not the same, except few political risk factors that are visible in most EMs. Consequently, the applied risk management mechanisms vary between EMs, except with few common mechanisms. The authors develop an integrative analytical framework of political risk management based on the findings.Originality/valueThis paper is one of the first studies to identify political risk factors for western MNEs while undertaking international project operations and link them to reduction mechanisms used by them. The authors go beyond the notion of risk being conceptualized at a general level and evaluate 20 specific political risk factors referred to in extant literature. The authors further link these political risk factors with both social exchange and transaction cost theories conceptually as well as empirically. Finally, the authors develop a relatively comprehensive analytical framework of political risk management based on the case projects' findings that combine several strands of literature, including the social exchange theory, transaction cost theory, international market entry, project management and finance literature streams.

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A futility, perversity and jeopardy critique of “risk appetite”

International Journal of Organizational Analysis ◽

10.1108/ijoa-06-2017-1175 ◽

2019 ◽

Vol 27 (1) ◽

pp. 51-73 ◽

Cited By ~ 3

Author(s):

Alasdair Marshall ◽

Udechukwu Ojiako ◽

Maxwell Chipulu

Keyword(s):

Risk Management ◽

Risk Taking ◽

Analytical Framework ◽

Content Type ◽

Strategic Risk ◽

Risk Appetite ◽

Analytical Perspective ◽

High Level ◽

Structured Means ◽

Strategic Risk Management

Purpose Risk appetite is widely accepted as a guiding metaphor for strategic risk management, yet metaphors for complex practice are hard to critique. This paper aims to apply an analytical framework comprising three categories of flaw – futility, perversity and jeopardy – to critically explore the risk appetite metaphor. Taking stock of management literature emphasising the need for metaphor to give ideation to complex management challenges and activities and recognising the need for high-level metaphor within strategic risk management in particular, the authors propose a means to scrutinise the risk appetite metaphor and thereby illustrate its use for further management metaphors. Design/methodology/approach The authors apply a structured analytical perspective designed to scrutinise conceivably any purportedly progressive social measure. The three flaw categories are used to warn that organisational risk appetite specifications can be: futile vis-a-vis their goals, productive of perverse outcomes with respect to these goals and so misleading about the true potential for risk management as to jeopardise superior alternative use of risk management resource. These flaw categories are used to structure a critical review of the risk appetite metaphor, which moves towards identifying its most fundamental flaws. Findings Two closely interrelated antecedents to flaws discussed within the three flaw categories are proposed: first, false confidence in organisational risk assessment and, second, organisational blindness towards contributions of behavioural risk-taking to true organisational risk exposure. A theory of high (over-optimistic, excessive or inappropriate) risk-taking organisations explores flaws within the three flaw categories with reference to these antecedents under organisational-cultural circumstances where the risk appetite metaphor is most needed and yet most problematic. Originality/value The paper is highly original in its representation of risk management as an organisational practice reliant on metaphor and in proposing a structured means to challenge it as a dominant guiding metaphor where it has gained widespread uncritical acceptance. The discussion is also innovative in its representation of high risk-taking organisations as likely to harbour strong managerial motives, aptitudes and capacities for covert and illicit forms of risk-taking which, being subversive and sometimes reactionary towards risk appetite specifications, may cause particularly serious futility, perversity and jeopardy problems. To conclude, the theory and its implications are summarised for practitioner and educational use.

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An art and science approach to strategic risk management

Strategic Direction ◽

10.1108/sd-04-2014-0056 ◽

2014 ◽

Vol 30 (4) ◽

pp. 28-30 ◽

Cited By ~ 1

Author(s):

Harold Schroeder

Keyword(s):

Risk Management ◽

Management Strategy ◽

Design Methodology ◽

Effective Means ◽

Risk Management Strategy ◽

Content Type ◽

Strategic Risk ◽

Balanced Approach ◽

Tools And Techniques ◽

Strategic Risk Management

Purpose – Discusses the importance of a balanced approach to risk management. Design/methodology/approach – Draws on the author's consulting experience to offer an insightful perspective. Findings – Opines that a combination of formalized tools and techniques, alongside more qualitative ‘right-brain’ thinking is the most effective means of developing a risk management strategy. Originality/value – Draws on the author's consulting experience to offer an insightful perspective.

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A leader’s guide to strategic risk management

Strategy and Leadership ◽

10.1108/sl-11-2014-0082 ◽

2015 ◽

Vol 43 (1) ◽

pp. 26-35 ◽

Cited By ~ 11

Author(s):

Joseph Calandro

Keyword(s):

Risk Management ◽

Financial Crisis ◽

Financial Risk ◽

Weak Signals ◽

Content Type ◽

Corporate Leaders ◽

Strategic Risk ◽

Hedging Strategies ◽

Market Pressures ◽

Strategic Risk Management

Purpose – Many firms did not have mechanisms in place prior to 2007 to identify and track the weak signals of an impending financial crisis, and as a result they were not prepared for the stresses and opportunities the crisis generated. The author aims to offer a guide to identifying these weak signals and a system for mitigating the risk of being hurt by another such crisis. Design/methodology/approach – This is a guide to strategic risk management (SRM), which defines a process of identifying, assessing and economically managing potentially enterprise-threatening losses. It is a way to mitigate developing ambiguous threats before they manifest themselves and then spiral out of control. Findings – Corporate leaders can follow the example of savvy investors who use risk management insights to mitigate the effects of a potential crisis and to profit from one if it develops. Practical implications – Market pressures can cause firms to loosen product or investment standards incrementally, which over time can radically change a business model’s risk profile without anyone acting to mitigate it. Originality/value – This guide to Strategic Risk Management provides insight into how corporate leaders can identify the “weak signals” of a financial crisis well before the actual crisis develops and also describes how they can mitigate financial risk in their portfolios and make opportunistic investments and adopt hedging strategies at very favorable price levels.

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Manufacturing reshoring

European Business Review ◽

10.1108/ebr-02-2018-0046 ◽

2019 ◽

Vol 31 (1) ◽

pp. 139-159 ◽

Cited By ~ 4

Author(s):

Francesco Ciabuschi ◽

Olof Lindahl ◽

Paolo Barbieri ◽

Luciano Fratocchi

Keyword(s):

Risk Management ◽

Process Model ◽

Future Research ◽

Internationalization Process ◽

Content Type ◽

Strategic Risk ◽

Risk Management Process ◽

Management Perspective ◽

Managerial Perceptions ◽

Internationalization Process Model

Purpose This paper aims to theorize on the internationalization process model to explain cases of manufacturing reshoring as decisions taken to manage risk when internationalizing. Design/methodology/approach The paper is of a conceptual nature. Building on the logic of the internationalization process model, the authors extend previous work by focusing on firms’ risk perception (determined by commitment, knowledge and uncertainty as key variables) to explain also reshoring decisions. Findings Four propositions were developed, concerning the likelihood of firms to make manufacturing reshoring decisions. The first two propositions deal with the effects of new risk contingencies, and the other two refer specifically to the effects of managerial perceptions of three different typologies of risk, namely, host-country, home-country and reshoring-process specific risk. Originality/value While reshoring has been discussed mainly on the basis of economic arguments, this paper offers an alternative, behavioural view of this phenomenon as a strategic risk-management process. Therefore, it offers initial steps to theorize about reshoring from a risk-management perspective and, in doing so, opens up a number of avenues for future research.

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The resurgence of nationalism and its implications for supply chain risk management

International Journal of Physical Distribution & Logistics Management ◽

10.1108/ijpdlm-01-2021-0019 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Remi Charpin

Keyword(s):

Risk Management ◽

Supply Chain ◽

Host Country ◽

Multinational Enterprises ◽

Supply Chain Risk Management ◽

Supply Chain Risk ◽

Economic Nationalism ◽

Supply Chain Disruptions ◽

Content Type ◽

Host Government

PurposeThis paper examines nationalism as a driver of political risk and how it can lead to supply chain disruptions for foreign multinational enterprises (MNEs).Design/methodology/approachConceptual research based on a review of the literature on nationalism and supply chain risk management.FindingsThis research unveils how economic nationalism could engender supply chain disruptions via discriminatory practices toward all foreign MNEs and how national animosity may generate additional risks for the MNEs of nations in conflict with one another. These discriminatory practices include an array of host government and grassroots actions targeting foreign MNEs. While economic nationalism and national animosity emanate from within a host country, they may stimulate geopolitical crises outside the host country and thereby affect the international supply chains of foreign MNEs.Research limitations/implicationsThis research lays the foundation for analytical and empirical researchers to integrate key elements of nationalism into their studies and recommends propositions and datasets to study these notions.Practical implicationsThis study shows the implications that nationalist drivers of supply chain disruptions have for foreign MNEs and thus can help managers to proactively mitigate such disruptions.Originality/valueThis study reveals the importance of integrating notions of national identity and national history in supply chain research, since they play a key role in the emergence of policies and events responsible for supply chain disruptions.

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A Better Way of Managing Major Risks: Strategic Risk Management

IESE Insight ◽

10.15581/002.art-2817 ◽

2016 ◽

pp. 15-22 ◽

Cited By ~ 5

Author(s):

Philip Bromiley ◽

Devaki Rau

Keyword(s):

Risk Management ◽

Strategic Risk ◽

Strategic Risk Management

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Methodological bases and practice of risk management of regional development (part 1)

Herald of Omsk University. Series: Economics ◽

10.24147/1812-3988.2020.18(2).114-126 ◽

2020 ◽

Vol 18 (2) ◽

pp. 114-126

Author(s):

Valery V. Karpov ◽

Anna G. Breusova ◽

Anna A. Korableva

Keyword(s):

Risk Management ◽

Regional Development ◽

Regional Economy ◽

Full Range ◽

Risk Identification ◽

Territorial Development ◽

Public Authorities ◽

Strategic Risk ◽

Risk Committee ◽

State Programs

The article is devoted to the theoretical foundations and analysis of the experience of subjects of the Russian Federation in the field of regional development risk management. The article examines the concept of risk, its difference and relationship with the concepts of uncertainty, threat, danger, security and others. It is determined that dangers are constantly present in the regional economy. And risk, as a measurable uncertainty with multiple outcomes, for which the probability of occurrence of a risk event is calculated, is manifested as a result of the occurrence of a hazard. When comparing the concepts of risk and security, this means that the security of the regional economy is manifested in the ability to resist threats and manage risks, and not in the complete absence of dangers. It is revealed that ISO standards distinguish between the concepts of risk management and risk management. For further discussion, risk management is understood as a systematic approach to using the full range of mechanisms available to public authorities to reduce emerging risks and threats to the socio-economic development of the region. Further, the analysis of risk management in the practice of regional management on the example of the Omsk, Novosibirsk and Tyumen regions is carried out. The relevant tools in the activities of government bodies, such as territorial development strategies, state programs and projects, were identified, which allowed us to introduce a classification of risks with the allocation of strategic, tactical risks of territorial development and project management risks, among which there is a strategic level. The analysis of the implemented tools for compliance with the mandatory stages of risk management showed mainly the absence of risk identification, unified requirements for risk accounting and systematic risk management of regional development. Among the assessed regions, the Tyumen region has the best practices in terms of risk management. For a more detailed analysis authors highlighted the key institutional and instrumental elements of risk management such as risk committee, strategic risk map, risk register, action plan for risk management, and defined logical relationships between them.

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