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A Credit Risk Modelling Approach to Assess Supplier Default Risk

In: Operations Research Proceedings 2010

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Listed:
  • Stephan M. Wagner

    (Swiss Federal Institute of Technology Zurich (ETH Zurich))

  • Christoph Bode

    (Swiss Federal Institute of Technology Zurich (ETH Zurich))

Abstract

The purpose of this paper is to quantify the supplier default risk in a buying firm’s supplier portfolio. Based on credit risk models, we develop a methodology that buying firms can use to pro-actively determine their exposure to supplier default risk. To illustrate the proposed methodology, we use empirical data pertaining to supplier portfolios of executive-size car models from three German automotive OEMs. We show that some supplier portfolios are exposed to higher default risk which places them at a disadvantage, because they face a higher probability that the supply of components can be disrupted and cars cannot be built and sold.

Suggested Citation

  • Stephan M. Wagner & Christoph Bode, 2011. "A Credit Risk Modelling Approach to Assess Supplier Default Risk," Operations Research Proceedings, in: Bo Hu & Karl Morasch & Stefan Pickl & Markus Siegle (ed.), Operations Research Proceedings 2010, pages 471-476, Springer.
    • Handle: RePEc:spr:oprchp:978-3-642-20009-0_75
    DOI: 10.1007/978-3-642-20009-0_75
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    Cited by:

    1. Vos, Frederik G.S. & Schiele, Holger & Hüttinger, Lisa, 2016. "Supplier satisfaction: Explanation and out-of-sample prediction," Journal of Business Research, Elsevier, vol. 69(10), pages 4613-4623.

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