Supply Chain Shock Simulator
Model how a stock price decline cascades through a company's supply chain. Select a company, choose a drop percentage, and see which suppliers and customers face the most revenue exposure.
Understanding Supply Chain Risk
What is Supply Chain Risk?
Supply chain risk refers to the potential for disruptions in a company's network of suppliers and customers to negatively affect its financial performance. When a major company faces difficulties, the impact can cascade through its entire supply chain, affecting revenue, operations, and stock prices of connected companies.
How the Simulator Works
This tool models cascade effects by analyzing revenue dependency relationships between companies. When you simulate a price drop, it estimates the potential revenue impact on each connected company based on the percentage of revenue they derive from the affected company. Risk levels are assigned based on revenue concentration and the strength of the relationship.
Revenue Concentration Risk
Companies with high revenue concentration from a single customer or supplier face greater exposure to supply chain disruptions. The Herfindahl-Hirschman Index (HHI) measures this concentration. Higher HHI values indicate that revenue is concentrated among fewer partners, increasing vulnerability.
Single Points of Failure
A single point of failure (SPOF) is a supplier or customer that, if disrupted, would cause significant revenue loss. These are typically relationships where one partner accounts for a disproportionate share of revenue. Identifying and monitoring SPOFs is critical for risk management.