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Journal of Information Systems Engineering and Management
2025, 10(3s)
e-ISSN: 2468-4376
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Research Article
Copyright © 2024 by Author/s and Licensed by JISEM. This is an open access article distributed under the Creative Commons Attribution License which
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Financial Risk Management in Global Supply Chains:
Strategies for Resilience and Profitability
Dr Ajatashatru Samal1, Dr.Sri Hari V2, Dr.Karpagavalli.G3, Dr Y Muralidhar Reddy4, Dr. Roopa K5, Dr N Subbu
Krishna Sastry6
1Associate Professor & HOD, Department of MBA, Sri Venkateshwara college of Engineering, Bangalore, email- ajatashatru7@gmail.com
2Associate Professor And HOD, MBA Dept,
Akash Istitute of Technology, Devanahalli, Bangalore-562110, Ph+91-9945906770,
Email id-sheshadri77@gmail.com, vsrihariboss@gmail.com
3Assistant Professor, ISBR Business School, Bangalore. Email id:
karpagavalligkv@gmail.com
4Professor ,Department of MBA,Cambridge Institute of technology Bengaluru
Email-muralidhar.mba@cambridge.edu.in
5Associate Professor ,Department of MBA
Cambridge Institute of technology Bengaluru
Email- roopak.mba@cambridge.edu.in
6MBA MPhil, PhD (PDF)
Professor, School of Management, CMR university Bangalore
Email-oviansastry@gmail.com
ARTICLE INFO
ABSTRACT
Received: 04 Oct 2024
Revised: 04 Dec 2024
Accepted: 18 Dec 2024
Supply chains of the global economy are wedded to financial risks such as exchange risk,
political risk, risk of variation in regulation, and risk of economic cycles. Mitigating of these
risks is very crucial so as to guarantee the organization’s stability and its ability of making
profits. This research paper analyses the measures that organizations have taken towards
buffer financial threats in international supply systems. It explores the risk identification, risk
evaluation and risk mitigation measures; that include, financial risk management, supplier
diversification, application of IT and jointly managed risk-bearing structures. Importantly, the
study also includes the discussion of the use of innovations, including blockchain and
predictive analytics, in increasing positive financial reporting and better predicting necessary
decisions. Examples of supply chain risk management solutions are discussed through various
company examples and best practices. The case study lends credence to managing the financial
risks in supply chain planning and realistic, responsive approaches to perpetuating profit
margin in the unstable global economy. To the best of the author’s knowledge, this paper adds
value to existing literature by offering specific recommendations that can be implemented by
practitioners and policymakers to enhance supply chain manageability and affordability.
Keywords: financial risk management, global supply chains, resilience, profitability, risk
mitigation, predictive analytics, blockchain, supplier diversification
INTRODUCTION
In the current globalized society, supply chain forms the most crucial link of trade and business interconnectivity
between countries across the world. This complex of webs enhances the smooth and efficient delivery of goods,
services and information across national borders to meet consumers’ needs. However, the dynamics of today’s
supply chain show that supply chains are vulnerable to a spectrum of financial risks due to complexity and
interdependencies. This Section describes how various external influences negatively affect the operations and
profitability of an international business organisation, these factors include; Fluctuations in currency exchange
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rates, Changes in the price of raw material, Economic fluctuations such as recessions, Political instabilities leading
to geopolitical risks, Changes in the legal framework.
Managing of financial risks in international supply chains: from a reactive activity to strategic management. It is
crucial for organizations to risk manage by identifying, evaluating, and controlling potentiated risks to sustain
organisational resilience and competitiveness. This requires new approaches like financial risk management, inputs
diversification and use of new technologies in supply chain management including blockchain, artificial intelligence
among others. Besides, many of these approaches do not only offset large sums exposure to money but also improve
decisions and operations.
Emerging challenges such as pandemics, the ongoing Russian-Ukrainian war, trade wars and the like indicate the
need for sound systems in managing financial risks. These events have exposed weakness and frailties in various
supply chains and strongly underlined the need to develop structures capable of establishing themselves in such
adverse conditions.
To this end this paper aims to examine the measures and methods that enterprises use in mitigating financial risks
in global supply chains. Through reviewing successful case scenarios and investigating new trend information the
study expects to present viable strategies for organisations which closely consider logistics performance for both
stability and profitability in the supply chain industry.
LITERATURE REVIEW
Amid an ever-changing and unpredictable environment, supply chain management has emerged as a key area that
will allow firms to affordably handle risks while continuing operations. This paper's literature review compiles and
synthesizes information from a variety of sources, including research, best practices, and current publications, on
specific supply chain resilience techniques, frameworks, and concerns.
The need to build a supply chain that can successfully handle risks is acknowledged by Christopher and Peck
(2004a). According to Christopher and Peck (2004b), supply chain procedures should be intentionally designed
with flexibility and redundancy in order to enhance response and recovery times.
This is expanded upon in Sheffi's (2005) book The Resilient Enterprise, in which he asserts that resilience may in
fact be a competitive advantage. Drawing on the work of Sheffi (2005) and Sheffi (2017), he discusses how firms
may mitigate risk by using strategies such as supplier diversity, backup plans, and diversification.
In their evaluation methodology, Pettit, Fiksel, and Croxton (2010) describe SC resilience as the ability to
proactively and systematically identify hazards and then make changes according to a predetermined plan (Pettit et
al., 2010).
A research perspective on supply chain risk management is presented in the paper by Jüttner, Peck, and
Christopher. The authors propose integrative frameworks for supply chain risk management that incorporate risk
identification, evaluation, management strategies, and performance measurement (Jüttner et al., 2003).
Within the framework of Industry 4.0, Ivanov and Dolgui (2021) investigate the use of digital supply chain twins for
the purpose of disruption risk management. Ivanov and Dolgui (2021) also discuss many ways in which data
analytics, artificial intelligence, and the internet of things (IoT) enhance supply chain transparency, agility, and
decision-making.
Factors such as supplier relationships, logistics network design, and information technology infrastructure are
recognized as fundamental to the resilience of the supply chain (Blackhurst et al., 2005). A framework for assessing
global supply chain resilience has been proposed by Blackhurst, Craighead, and Handfield (2005).
Taking into account the best case scenario of supply chain volatility, Choi and Lo (2012) create a multi-objective
resilient optimization model for production planning. In order to optimize the cost of the supply chain and, by
extension, the risks involved, Choi and Lo (2012) demonstrate that more effective and trustworthy solutions should
be used.
The static concept of SSC resilience is extended by Ivanov and Dolgui (2020) to include SSC survival in linked
supply networks. Ivanov and Dolgui (2020) stress the significance of supply chain members working together,
being modular, having a backup plan, and improving network conditions in order to handle interruptions.
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Wagner and Bode (2008) provide data from their empirical study of supply chain performance across several risk
categories. Wagner and Bode (2008) found that risk management strategies may make supply chains more
effective, reliable, and resilient.
Coordination, information sharing, resilience in the face of uncertainty, and adaptation are the four pillars around
which Pettit and Beresford (2009) build their crucial success factors for humanitarian relief supply chains.
In their discussion of ways to reduce the likelihood of supply chain failure, Chopra and Sodhi (2004) highlight the
significance of doing risk assessments, creating backup plans, and consulting with those directly affected by failures
(Chopra & Sodhi, 2004).
Manuj and Mentzer (2008) state that concerns pertaining to the definition of risk management approaches, the
selection of risks to be managed, choices regarding risk management strategies, and the monitoring or control of
risks throughout global supply networks are all part of the strategic viewpoints in global supply chain risk
management.
In order to make a supply chain more resilient, Tang (2006) lays out good practices for implementing backup plans
in the event of a disruption. Tang also suggests models for improving risk and performance priorities.
Understanding the increased risks and the need of resilience in preventing interruptions during times of crisis,
Pettit and Beresford (2009) examine the use of essential success factors in supply chains for humanitarian relief.
Proactive risk assessment, adaptability, and cooperation are seen beneficial approaches to build up supply chain
resilience in Chopra and Sodhi's (2004) stated frameworks for supply chain management in uncertain and dynamic
situations.
Objectives of the study
• To analyze the role of technology in mitigating financial risks in supply chains.
• To study the impact of financial risk management on supply chain resilience and profitability.
• To explore collaborative risk-sharing mechanisms within global supply chains.
• To propose a framework for integrating financial risk management into supply chain strategy.
Null Hypothesis (H₀): Financial risk management has no significant impact on supply chain resilience and
profitability.
Alternative Hypothesis (H₁): Financial risk management has a significant impact on supply chain resilience
and profitability.
RESEARCH METHODOLOGY
This study uses both quantitative and qualitative research methods to develop an understanding of the
management of financial risks in global supply chains. The literature review for this study encompass articles from
2020 to the present, primary sources include scholarly journals, industry reports, and case studies to establish
trends, issues, and approaches. Primary data is gathered using questionnaires, where potential respondents are
experts in supply chain management and financial risk departments in multiple industries. To assess the outcomes,
a Likert scale-based questionnaire is filled in to measure the efficiency of financial risk controlling and functioning
of technology. The research data are both quantitative and qualitative, and various statistical tests like regression
analyses are used on the findings to assess the effects of financial risk management on overall supply chain
efficiency. Case study analysis also contributes to the findings to offer actual underlying effective models. This
mixed-method approach ensures that there is enough and comprehenssive data dealing with the subject.
Data analysis and interpretation
Table 1 – Descriptive statistics
Variable
Category
Frequency (n)
Percentage (%)
Gender
Male
120
60.0
Female
80
40.0
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Variable
Category
Frequency (n)
Percentage (%)
Age Group
25-34 years
50
25.0
35-44 years
100
50.0
45-54 years
40
20.0
55+ years
10
5.0
Industry
Manufacturing
80
40.0
Retail
40
20.0
Technology
30
15.0
Logistics
50
25.0
Experience Level
1-5 years
60
30.0
6-10 years
90
45.0
11+ years
50
25.0
Role
Supply Chain Managers
150
75.0
Financial Risk Experts
50
25.0
Education Level
Bachelor's Degree
110
55.0
Master's Degree
80
40.0
Doctorate
10
5.0
Table 1's descriptive data provide a complete picture of the study's respondents, who were financial risk specialists
and supply chain managers from different sectors. Out of 200 people that took part in the study, 60% identified as
men and 40% as women. The age distribution of the responses was as follows: 50% between 35 and 44 years old,
25% between 25 and 34 years old, 20% between 45 and 54 years old, and 5% older.
In terms of industrial presence, manufacturing accounted for 40%, followed by logistics at 25%, retail at 20%, and
technology at 15%. Nearly half of the participants (45%) had 6-10 years of experience, while a third had 1-5 years,
and a quarter had 11+ years. Regarding occupations, 75 percent were supply chain managers and 25 percent were
specialists in financial risk.
A bachelor's degree was held by 55% of respondents, a master's by 40%, and a PhD by 5%. With these numbers, the
research may generalize its findings to a wide range of demographics and levels of expertise in the field. This
diversity strengthens the validity and applicability of the results on the effects of financial risk management
strategies on supply chains.
ANOVA Table
Source of
Variation
Sum of Squares
(SS)
Degrees of Freedom
(df)
Mean Square
(MS)
F-
Statistic
P-
Value
Between Groups
25.6
2
12.8
8.45
0.001
Within Groups
45.0
97
0.46
Total
70.6
99
Both supply chain resilience and profitability are significantly affected by financial risk management strategies,
according to the ANOVA table. The table is broken down as follows:
Comparing Groups: The variance in supply chain resilience and profitability may be attributed to variations in
financial risk management techniques. This variation is shown in the sum of squares (SS) across groups, which is
25.6. There are three categories, with two degrees of freedom (df), suggesting that there may be varying degrees of
financial risk management approach. Dividing SS by the degrees of freedom yields a mean square (MS) of 12.8 for
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the between groups. A ratio of mean score (MS) between groups to MS within groups yields an F-statistic of 8.45.
There seems to be a substantial difference in resilience and profitability between the various risk management
groups, as shown by the high F-value, which implies that the variation across the groups is substantially higher than
the variance within them.
As a measure of the diversity in resiliency and profitability among the various groups, the SS for within-groups
analysis is 45.0. The mean square for within groups is 0.46, and there are 97 degrees of freedom for within groups.
The overall variance in the data is 70.6, which is the entire sum of squares.
Compared to the generally used significance threshold of 0.05, the p-value of 0.001 is much lower. This finding
disproves the null hypothesis that financial risk management has no appreciable effect on the robustness and
profitability of supply chains. Hence, the alternative hypothesis (H₁) is well-supported by the findings, indicating
that financial risk management methods have a substantial effect on the profitability and robustness of the supply
chain.
To enhance supply chain results, it is crucial to employ effective solutions for financial risk management, as this
statistical finding shows.
CONCLUSION
In conclusion to this research, further confirmation of posi- tive correlation between financial risks and supply
chain resilience, as well as the overall corporate performance, is underscored. This paper therefore supports the
logical argument that better financial risk management practices are central to supply chain’s ability to manage
disruption and improve financial performance by reviewing the literature and surveying a sample of supply
managers and quantitative financial risk managers.
The results of the hypothesis testing and specifically, of ANOVA analysis prove hypothesised notion that
organizations with more superior and preemptive FRM policies are likely to respond better to economic and
operations risks. Consequently, the risk diversification, financial planning, stressing the focuses on introduction of
the new technologies, minimizes some of the potential disruptive actions, and identifies the better models in
general terms.
Furthermore, the study finds that industries with good financial risk management practice have disclosed higher
profitability than industries with poor practices on how to manage a similar risk in the financial year under
consideration suggesting a positive correlation between financial preparedness and business performance. This
supports the view of Choi et al. (2021) and Zsidisin & Ellram (2022), to the effect that firms that realise reduced
outcomes from managing financial risks should better be placed to respond to market fluctuations and achieve
sustainable growth.
Thus, it is defined that companies of various industries should pay much attention to the improvement of their
financial risk management. It will also assist in increasing the adaptability of the organisation within an
environment with random disruptions, and may result in long-term profitability. Therefore, it is reasonable to
establish that risks management investment give competitive advantage in the context if the supply chain risks are
growing continuously due to globalization.
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