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A Credit Risk Modelling Approach to Assess Supplier Default Risk

Part of the Operations Research Proceedings book series (ORP)

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.

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Correspondence to Stephan M. Wagner .

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© 2011 Springer-Verlag Berlin Heidelberg

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Wagner, S.M., Bode, C. (2011). A Credit Risk Modelling Approach to Assess Supplier Default Risk. In: Hu, B., Morasch, K., Pickl, S., Siegle, M. (eds) Operations Research Proceedings 2010. Operations Research Proceedings. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-20009-0_75

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