Common ways to mitigate the detrimental consequences of supplier bankruptcies are to install redundancy and to pursue a multiple-sourcing strategy. This is based on the assumption that the adverse event of one supplier going out of business is largely independent from the default of other...

Firms maintain a capital charge to manage the risk of low-frequency, high-impact operational disruptions. The loss distribution approach (LDA) measures the capital charge using two inputs: the frequency and severity of operational disruptions. In this study, we investigate whether or not capital...