A Strategic Risk Management Framework for Multinational Enterprise

27 Pages Posted: 23 Apr 2007

See all articles by Torben Juul Andersen

Torben Juul Andersen

Copenhagen Business School - Department of Strategic Management and Globalization

Date Written: September 2005

Abstract

Liberalizations of international trade and improvements in communication and information technologies allow companies to organize around extensive multinational structures of cross-border sourcing networks. In a freely interacting market setting multinational enterprise is exposed to financial and economic risks that can be monitored within conventional reporting systems and managed through use of various derivative instruments. All the while, a dispersed multinational structure can be vulnerable to disruptions caused by changing economic conditions, competitive moves, and geopolitical developments as well as natural disasters and terrorist events that are difficult to forecast. Consequently, current risk management techniques span from conventional gap analyses and quantitative value-at-risk measures of market-related exposures to more qualitative assessments of competitive exposures and low-frequency high-impact disaster events based on scenario analyses. Hence, there is a need to consider risk management approaches that integrate relatively transparent financial exposures with the consequences of uncertain and hard-to-quantify event risks. This paper outlines the contours of such a strategic risk management framework incorporating conventional exposure measures and simulation techniques to assess vulnerability and responsiveness in a turbulent global setting.

Keywords: Computerized simulations, Derivative instruments, Real option structures, Strategic management process

Suggested Citation

Andersen, Torben Juul, A Strategic Risk Management Framework for Multinational Enterprise (September 2005). Available at SSRN: https://ssrn.com/abstract=982066 or http://dx.doi.org/10.2139/ssrn.982066

Torben Juul Andersen (Contact Author)

Copenhagen Business School - Department of Strategic Management and Globalization ( email )

Porcelænshaven 24
Frederiksberg, 2000
Denmark
+45 3815 3030 (Phone)
+45 3815 3035 (Fax)

HOME PAGE: http://www.cbs.dk/staff/torben_juul_andersen

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