Risk management system in business relationships—Polish case studies

Abstract

The article discusses the problem of risk management in business relationships. The authors' research (including a case study analysis of 5 different relations) enabled them to identify and characterize the risk management systems based on a combination of formal control and relational mechanisms. In the authors' research it has been assumed that relational risk has a negative influence on the cooperation results and therefore it should be a subject of management. The main objective is not to avoid taking risk in relationships, but to reduce it to the minimum possible level. Companies' cooperation, including partnerships with different entities and participation in business networks, is an immanent characteristic of contemporary business. Therefore managers should look for the most efficient methods of dealing with additional relational risk and opportunistic behavior of potential partners.In the paper the case study analysis of five relationships of companies operating on Polish market was presented. The main objective was to demonstrate the relation between the level of trust and the intensity of formal control (including contract and formal monitoring). The range of social control applied in analyzed relationships was also an important issue of consideration.The research presented in the paper indicated that companies located in Poland in order to reduce relational risk aimed at diversification of its partners or full integration. Managers often underlined their fear of being dependent on one particular partner. This phenomenon could comprehensively decrease the advantages of intensive and deepened inter-organizational cooperation in Poland. Furthermore, the research demonstrated the decisive role of relational mechanisms and limited significance of contract in business relationship risk management. However, relatively higher importance of contract was observed in unbalanced relations between partners representing diverse bargaining power. A positive relationship between application of relational tools and cooperation results was identified as well.The aim of the paper is to demonstrate the nature of the relationship risk management system and the role of particular mechanisms that enable to reduce risk and its negative influence on cooperation results.