Managing Agricultural Price Risk in Developing Countries

We survey the experience of risk management in developing country agricultural supply chains. We focus on exposure, instruments, impediments to access and developing country futures markets. We draw on lessons from experience over the past two decades.Commodities, Risk Management, Developing Countries

Risk perception and decision making in the supply chain: theory and practice

For over sixty years, academics and practitioners from different backgrounds, including psychology, sociology, and management, have studied the perception of risk and how different decision making affects daily life and business activities. Although it is almost six hundred years since Machiavelli stressed the importance of calculation of risk and effective response to it, approaches to risk measurement and assessment, and to decision making in risky situations, continue to develop and evolve. In the business world, managers strive to find ways to understand how different internal and external factors influence risk, how to judge and interpret the available evidence on the possibility of loss, and how to take individual actions to manage the risk (Slovic 2000). In this decade, a number of risk management frameworks (e.g. IS031000) have been proposed and employed in different areas. These frameworks provide foundations and building blocks for managers to collect available data to analyse risk. Most importantly, such frameworks allow managers to gather knowledge intellectually, to properly judge their experience and to assess the current situation, so as to enter into the most appropriate decision

Supply Chains and Porous Boundaries: The Disaggregation of Legal Services

The economic downturn has had significant effects on law firms, and is causing many of them to rethink some basic assumptions about how they operate. In important respects, however, the downturn has simply intensified the effects of some deeper trends that preceded it, which are likely to continue after any recovery that may occur. This paper explores one of these trends, which is corporate client insistence that law firms “disaggregate” their services into discrete tasks that can be delegated to the least costly providers who can perform them. With advances in communications technology, there is increasing likelihood that some of these persons may be located outside the formal boundaries of the firm. This means that law firms may need increasingly to confront the make or buy decision that their corporate clients have regularly confronted for some time. The potential for vertical disintegration is a relatively recent development for legal services, but is well-established in other sectors of the global economy. Empirical work in several disciplines has identified a number of issues that arise for organizations as the make or buy decision becomes a potentially more salient feature of their operations. Much of this work has focused in particular on the implications of relying on outsourcing as an integral part of the production process. This paper discusses research on: (1) the challenges of ensuring that work performed outside the firm is fully integrated into the production process; (2) coordinating projects for which networks of organizations are responsible; (3) managing the transfer of knowledge inside and outside of firms that are participants in a supply chain; and (4) addressing the impact of using contingent workers on an organization’s workforce, structure, and culture. A review of this research suggests considerations that law firms will need to assess if they begin significantly to extend the process of providing services beyond their formal boundaries. Discussing the research also is intended to introduce concepts that may become increasingly relevant to law firms, but which currently are not commonly used to analyze their operations. Considering how these concepts are applicable to law firms may prompt us to rethink how to conceptualize these firms and what they do. This paper therefore is a preliminary attempt to explore: (1) the extent to which law firms may come to resemble the vertically disintegrated organizations that populate many other economic sectors and (2) the potential implications of this trend for the provision of legal services,the trajectory of legal careers, and lawyers’ sense of themselves as members of a distinct profession

Corporate Financial Risk Management Interventions in the Organic Agri-Food Chains

This study arises from the need to propose an alternative solution to existing hedging methods to all companies interested in hedging the price risk of raw materials. The research focuses mainly on the actors of the agri-food supply chains, in particular the organic sector, given the growing trend of the cultivation methodology and the need to protect entrepreneurs involved in short-chain spinneret who have less possibility of relieve higher costs incurred to ensure the sustainability of the product. However, our analysis envisages a customizable hedging method for any company that intends to protect itself from the price fluctuations of the commodity that represents the inherent nature of its business. The technique consists in the construction of specific contracts (in particular, derivative financial instruments) by investment banks or commercial banks oriented to the corporate segment that offer this service. Personalization is achieved by calibrating the constituent elements of the derivative on the basis of hedging needs. The parameterization is carried out by replicating the contractual specifications of the main futures on commodities listed on regulated markets. This will allow the creation of a combination of option contracts listed on the over-the-counter market in an overall strategy aimed at medium-long term hedging

Shopping for Water: How the Market Can Mitigate Water Shortages in the American West

The American West has a long tradition of conflict over water. But after fifteen years of drought across the region, it is no longer simply conflict: it is crisis. In the face of unprecedented declines in reservoir storage and groundwater reserves throughout the West, we focus in this discussion paper on a set of policies that could contribute to a lasting solution: using market forces to facilitate the movement of water resources and to mitigate the risk of water shortages. We begin by reviewing key dimensions of this problem: the challenges of population and economic growth, the environmental stresses from overuse of common water resources, the risk of increasing water-supply volatility, and the historical disjunction that has developed between and among rural and urban water users regarding the amount we consume and the price we pay for water. We then turn to five proposals to encourage the broader establishment and use of market institutions to encourage reallocation of water resources and to provide new tools for risk mitigation. Each of the five proposals offers a means of building resilience into our water management systems. Many aspects of Western water law impose significant obstacles to water transactions that, given the substantial and diverse interests at stake, will take many years to reform. However, Western states can take an immediate step to enable more-flexible use of water resources by allowing simple, short-term water transactions. First, sensible water policy should allow someone who needs water to pay someone else to forgo her use of water or to invest in water conservation and, in return, to obtain access to the saved water. As a second step, state and local governments should facilitate these transactions by establishing essential market institutions, such as water banks, that can serve as brokers, clearinghouses, and facilitators of trade

Understanding smart contracts as a new option in transaction cost economics

Among different concepts associated with the term blockchain, smart contracts have been a prominent one, especially popularized by the Ethereum platform. In this study, we unpack this concept within the framework of Transaction Cost Economics (TCE). This institutional economics theory emphasizes the role of distinctive (private and public) contract law regimes in shaping firm boundaries. We propose that widespread adoption of the smart contract concept creates a new option in public contracting, which may give rise to a smart-contract-augmented contract law regime. We discuss tradeoffs involved in the attractiveness of the smart contract concept for firms and the resulting potential for change in firm boundaries. Based on our new conceptualization, we discuss potential roles the three branches of government – judicial, executive, and legislative – in enabling and using this new contract law regime. We conclude the paper by pointing out limitations of the TCE perspective and suggesting future research directions