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Operational disruptions and business cycles

Author

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  • Wagner, Stephan M.
  • Mizgier, Kamil J.
  • Papageorgiou, Stylianos
Abstract
In the aftermath of the financial crisis, companies have advanced models for measuring and managing operational disruptions. However, the measurement and management approaches neglect the existence of business cycles. In this exploratory research, we investigate the relationship between business cycles and operational risk in two distinct U.S. industry sectors, namely financial services and manufacturing. We find that a positive lagged relationship between business cycles and the severity of operational disruptions exists. Moreover, we identify and model the dynamics of that relationship when operational risk is categorized according to the industry sector. Our findings also suggest that there is a degree of dependency between operational risk losses in the two sectors. Finally, we provide implications for improved forecasting of operational risk and the development of an effective policy design. The effects of business cycles should be taken into account to more accurately calibrate operational risk models used not only by banks but also by manufacturing firms.

Suggested Citation

  • Wagner, Stephan M. & Mizgier, Kamil J. & Papageorgiou, Stylianos, 2017. "Operational disruptions and business cycles," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 66-78.
    • Handle: RePEc:eee:proeco:v:183:y:2017:i:pa:p:66-78
    DOI: 10.1016/j.ijpe.2016.10.002
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    Cited by:

    1. Kelei Xue & Ya Xu & Lipan Feng, 2018. "Managing Procurement for a Firm with Two Ordering Opportunities under Supply Disruption Risk," Sustainability, MDPI, vol. 10(9), pages 1-32, September.
    2. Sahebjamnia, Navid & Torabi, S. Ali & Mansouri, S. Afshin, 2018. "Building organizational resilience in the face of multiple disruptions," International Journal of Production Economics, Elsevier, vol. 197(C), pages 63-83.
    3. Lu Wei & Jianping Li & Xiaoqian Zhu, 2018. "Operational Loss Data Collection: A Literature Review," Annals of Data Science, Springer, vol. 5(3), pages 313-337, September.
    4. Christopher M. Durugbo & Zainab Al-Balushi, 2023. "Supply chain management in times of crisis: a systematic review," Management Review Quarterly, Springer, vol. 73(3), pages 1179-1235, September.
    5. Roc'io Paredes & Marco Vega, 2020. "An internal fraud model for operational losses in retail banking," Papers 2002.03235, arXiv.org.
    6. Wu, Yang & Wang, Ziyang & Yao, Jianming & Guo, Haixiang, 2023. "Joint decision of order allocation and lending in the multi-supplier scenario purchase order financing," International Journal of Production Economics, Elsevier, vol. 255(C).
    7. Pantano, Eleonora & Priporas, Constantinos-Vasilios & Stylos, Nikolaos, 2018. "Knowledge Push Curve (KPC) in retailing: Evidence from patented innovations analysis affecting retailers' competitiveness," Journal of Retailing and Consumer Services, Elsevier, vol. 44(C), pages 150-160.

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