Risk assessment and profit sharing in business networks

Abstract

Nowadays network is the preferred governance form to conduct economic transactions. Network solution allows to reach flexibility maintaining cost and quality level. The network concept refers to a great variety of organizational hybrids then it is possible to choose the one that fits better market requirements. The new trends in inter-organization relationships push towards network solutions: companies are interested in relationships with partners and customers to overcome resource dependence, enter too risky market or simply differentiate their business portfolio. The proposed research focuses on the network concept aiming at highlighting threats and opportunities to investigate the double nature of the risk concept. Network structures offer flexibility and higher profit as a consequence and business risk sharing opportunity. These two aspects (profit and risk) are strictly related and this implicates that risk assessment and management in network environment cannot neglect profit sharing or, in other words, that profit sharing mechanism should use risk as drivers. In this context our research proposes a methodology to measure risk taking into account network peculiarities; risk estimation is a basic step to evaluate network net present value that is assumed as base in the profit sharing process. The profit sharing process has been tackled using the Shapley value approach that is inspired to fairness principle.