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Introduction
Business communities are facing increasingly more risky environments recently. Stringent competitions, internal instability caused by employee strikes and technical failures, changes in macro-economy and politics, as well as natural and man-made disasters are sources of risks facing business communities nowadays. In the context of supply chain (SC), the increasing risks are partly due network complexity as a result of companies outsourcing more activities to outside parties. A study conducted by [6] Finch (2004) revealed that the inter-organizational networking increased large companies' exposure to risks, especially if the partners are small and medium enterprises. [4] Craighead et al. (2007) argues that SC structure which includes such factors as density, complexity, and node criticality could increase the severity of SC disruptions. In addition, factors such as reduction of supply base, globalization of SC, shortened product life cycles, and capacity limitation of key components also increase SC risks ([15] Norrman and Jansson, 2004).
Risk is a function of the level of uncertainty and the impact of an event ([19] Sinha et al. , 2004). As pointed out by [8] Goh et al. (2007) there are two types of SC risks based on their sources: risks arising from the internal of the SC network and those from the external environments. [22] Tang (2006a) classified SC risks into operations and disruptions risks. The operations risks are associated with uncertainties inherent in a SC which include demand, supply, and cost uncertainties. Disruption risks, on the other hand, are those caused by major natural and man-made disasters such as flood, earthquake, tsunami, and major economic crisis. Both operations and disruption risks could seriously disrupt and delay materials, information, and cash flow, which in the end could damage sales, increase costs, or both ([3] Chopra and Sodhi, 2004). Analysis conducted by [9], [10] Hendricks and Singhal (2003, 2005) show that companies experiencing disruption risks were significantly outperformed by their peers in terms of operating as well as stock performance.
To survive in a risky business environment, it is imperative for companies to have a proper SC risk management. If poorly handled, disruptions in SC could result in costly delays causing poor service level and high cost ([2] Blackhurst et al. , 2005). According to [15] Norrman and Jansson (2004), the focus...