Internal Visibility of External Supplier Risks and the Dynamics of Risk Management Silos

Abstract

This paper investigates the factors behind silo-based risk management practices in organizations. Based on interviews with different actors working with the supply management processes within and across different organizational levels in a major multinational manufacturing corporation, it reveals how silos of risk management activities are formed. The findings show that there are profound differences in risk visibility between different actors due to differences in their hierarchical levels, organizational positions, and business contexts. Drawing on the theoretical lenses of bounded rationality and contingency theory, the paper reveals how these differences in visibility create silo-based risk management processes and discusses the pros and cons of such configurations. It concludes that silo-based behaviors are inherent features of any complex organization and that the implications of managing risks in silos are strongly influenced by the types of dependences (positive or negative) among risks. Therefore, it is elemental for organizations to be aware of this phenomenon and configure their risk management processes accordingly based on the dependences among the various risks to which the organizations are exposed.