Covid-19: Balancing risk and reward in business: A multi-case research studying Covid-19’s effects Swedish based firms’ supply chains and whether firms’ risk management has been sufficient or not.

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Covid-19: Balancing risk and

reward in business

A multi-case research studying Covid-19’s effects Swedish based firms’ supply chains and whether firms’ risk management has been sufficient or not.

Bachelor Thesis

Authors: John Lystrand, William Andersson-Junkka

Supervisor: Heidi Coral Thornton Examiner: Susanne Sandberg

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Definitions

3LOD = Three Line Defense Model

SC = Supply Chain

SSC = Service Supply Chain RM = Risk Management RMM = Risk Maturity Model SCM = Supply Chain Management SCRM = Supply Chain Risk Management VAG = Volkswagen Auto Group

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Abstract

When global complications occur firms must possess the capability to work around the new obstacles and aim to proceed with their operations as normal as possible. With the Covid-19 situation escalating day by day, the worries regarding if the companies of the world grow consequentially. This research has then been conducted with multiple cases in order to understand if the supply chains for production firms as well as service supply chains for service firms has been compromised in any way. If this is the case, the authors also aimed to find out whether there were any specific measures within the supply chains that can be applied to lower the negative consequences. To gain another level of depth to the understanding of the situation, the authors also chose to analyze the risk management aspect of the selected firms, to see if a lack of risk management and risk preparedness can affect the issues for the firm. The findings of this paper ultimately reveal that cases with a high level of internalization and that are operating with a service supply chain are managing the urgent situation to a better degree, with fewer complications due to Covid-19.

Key words

Coronavirus; Covid-19; Supply Chain Management; Service Supply Chain Management; Risk Management; Risk Maturity; Supply Chain Risk Management

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Acknowledgments

Firstly, the authors would like to thank all representatives for the case firms for setting aside their valuable time for participating in our interviews, especially during the prevailing times of a global pandemic. Their openness and involvement are what have enabled us to create these results. It has also been a learning experience for us, and being able to take part and understanding each firms’ supply chain and international activities have truthfully been an experience.

We would also like to project our thankfulness to each individual within the Linnaeus University who has participated in the seminars during the process, who has taken time to evaluate this thesis and given constructive suggestions to further improve the quality of this study.

Ultimately, we would like to extend our gratitude to our supervisor Heidi Coral Thornton and our examiner Susanne Sandberg, both individuals have always brought useful tips, examples from their own experiences, and most importantly, motivating us to produce the best thesis we possibly could.

Thank you.

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Appendices

Figure 1 Outline 10

Figure 2 Supply Chain 12

Figure 3 Risk maturity analysis model 17

Figure 4 Conceptual Framework 19

Figure 5 Table of cases 25

Figure 6 Operationalization 26

Figure 7 Table of findings 49

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1 Introduction

This chapter introduces the foundation of this research in the background section and the results of the global economy not operating in its usual form. It also acknowledges how earlier pandemics of the world have had negative effects from an economic perspective and the current problematic economic situation due to the Covid-19 situation. The problem is defined, and the research questions are established with this in mind. The chapter is then rounded up with the purpose of this research.

1.1. Background

The coronavirus, hereby referred to as Covid-19, originates from the province of Wuhan, China (newscientist, 2020). Although it is difficult to establish the definitive circumstance and how “patient zero” was contaminated due to the wild spread of misinformation. It is believed that the virus originates from bats, however it is very unlikely that a bat directly infected a human, and therefore, scientists believes that another unknown animal has carried the virus and then provided it to the first patient (newscientist, 2020). Covid-19 has as of now reached a significant global spread, with over 5 000 000 confirmed cases and confirmed fatalities surpassing 325 000 globally as of May 20th of 2020. (Who, 2020). This has resulted in some nations taking severe precautionary actions, such as Italy, France, United Kingdom, and certain states in the US have enforced total lockdowns for its population with restrictions that heavily limit one's freedom of being mobile outside of the residence (Nelson, 2020). One of the most heavily hit nations is Italy, having to deal with high death rates and an alarmingly rapid spread of the virus. France amongst others has also entered this state with more restrictions to one’s mobility being in place as a consequence (Elliot, 2020). The experience of a struggling society to this degree, where people are advised to stay home, to not visit dear ones and in many cases not being able to work is unsettling. Albeit, some have the privilege of working from home. Many have faced the harsh reality of being laid off due to their employing organization not being able to perform as usual, and thus their position being redundant. Many firms are recognizing declining sales and occupancy, and some are uncertain if they can manage to stay in business until the situation has settled (Adamczyk, 2020).

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Furthermore, on a global level, it has compromised what is a big trait of the globalized society; travels. The ability to move candidly with no interruption is something many have become dependent upon and have taken for granted. The decrease in travels is confirmed by the significant reduction of air pollution (Newburger, 2020). On another hand, the urban lifestyle and the number of people living in urban areas are progressively increasing (Ritchie and Roser, 2018) which furthermore leads to a higher population density. Contributing factors such as increased popularity and investments in public transport (Brandtsegg and Hultén, 2007) also further strengthens the fact that modern societies are characterized by constant proximity to other people in the surroundings. Whilst this may be fine and safe when everything is operating as usual, it becomes especially problematic during a pandemic outbreak. The distribution of Covid-19 cases in Sweden makes it clear that areas with high congestion are the most affected, as the region of Stockholm accounts for 44% of all Swedish cases as of the 5th of April (Folkhälsomyndigheten, 2020). Due to this fact, one can assume that firms located in larger cities will experience heavier struggles.

When looking at the globalized society from a business perspective, it is clear that many firms today are involved in one way or another with a foreign actor. Many firms may even rely on its international operations to such an extent that they would not survive by only being active in the home market. A substantial example case in point is Volvo, which lost 8% in sales during February of 2020 as a direct result of Covid-19 and its impact, mainly on the Chinese market (Volvocars, 2020). However not all industries are expecting less turnover as a result of the situation. The constant increase of Covid-19 cases leads pharmaceutical companies to experience increasing pressure from governments, organizations, and people to produce products at a faster rate. The global production firm 3M, who is primarily producing medical equipment, was supposed to deliver a large shipment of protection masks to Singapore (Politi, Sevastopulo and Fedor, 2020), however, the US president Trump has ordered 3M to transport the masks to the US instead of sending it to Singapore (Politi et al., 2020). Many firms in the pharmaceutical industry have had issues keeping up with this newfound demand for face masks, disinfection products, and medical units (Balfour, 2020). The problems that have arisen during the pandemic is mainly in regard to delays in production from suppliers, leaving many hospitals without proper equipment and adequate quantities to handle the pandemic (Alltucker, 2020). With a lack of equipment, hospital staff are experiencing an increased risk of catching the

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virus and thus increasing the pressure on proper equipment since more people needs to be treated and handled in a safe cautionary environment. Covid-19 also affects the medication industry, as an increasing number of countries have entered temporary lockdown states and the production firms also have to deal with the Covid-19 outbreak to prevent the spread of the virus (Blankenship, 2020). In Asia one of the largest medications producing regions has entered a state of lockdown (Blankenship, 2020). This creates a large gap for many companies both in Europe, the US, and Asia that are going to be without supplies of medications for a while (Blankenship, 2020). Despite the increasing pressure and delays, there have been efforts towards creating stronger relationships between different pharmaceutical suppliers, this industry is one of the only ones that is expected to gain significant economic growth from the current situation (Lerner, 2020). The primary issue that has arisen from this can be traced back to the supply chain, where firms, hospitals, and suppliers have been unprepared for such a situation causing huge delays for the necessary resources to be able to handle the situation. Whilst the pharmaceutical industry acts quite differently from other industries, their current supplier-related issues can give an indication of the severity of the whole Covid-19 situation for firms. With the inclusion of the pharmaceutical industry it becomes apparent that the pandemic may have effects on all industries, providing opportunities for some, but also proving to be a grueling circumstance for many others.

One other sector that is performing particularly well in terms of sales is the canned food industry (Garver, 2020). The stockpiling behavior of consumers has kept supermarkets busy, and some have experienced a shortage of canned foods (TT, 2020). According to Garver (2020), the companies that are performing domestic production and domestic sales are able to perform in accordance with the newfound demand and premises of the market. Though, firms that rely on international operations within this industry are experiencing difficulties with performing on the same level, mainly due to logistical complications (Garver, 2020).

In terms of consequences on an individual level, one can still see the aftermaths that the financial crisis of 2008 had on the world. This event had the trait of being disastrous for many members of society, for example, due to a negative growth of wages in the private sector (Milne, 2017). Despite the tragedy that this event resulted in, the financial crisis of 2008 provided learnings and greater understandings for the future in how to foresee economic downturns and recessions. An article was written by J. Fox (2013) in the

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Harvard Business Review explains that the main takeaway from the crisis was the fact that banks and corporations had underappreciated the importance of the financial sector. Nowadays everyone carefully evaluates it so that similar occurrences will not happen again. Although the risk of a crisis of that caliber can be reduced by proactive measures. No action can eliminate the concept of business cycles, and both firms and individuals act in a certain way prior to a downturn. People tend to spend less on unnecessities, and high-end manufacturers will, thanks to this indication, be able to sense recessions quite early on. As a matter of fact, many experts have noticed certain signals that a recession in 2020 was expected even prior to the global outbreak of the Covid-19 (Fitzgerald, 20Covid-19). One of the key signals for a possible recession in 2020 was the interest rate reduction of 2019 by the federal reserve of the USA. It is the first time since prior to the crisis of 2008, which is considered to be alarming (Fitzgerald, 2019). Other (American) indicators are a decrease in national GDP growth, a decrease of national corporate profits, a decrease of national manufacturing growth, stagnation of copper prices as well as an increase in gold prices. A new downturn in 2020 is therefore highly plausible according to these stats, even if Covid-19 was not a matter. Whilst these stats are mainly centered on the United States, it is worth taking into consideration for other nations, as it can indicate where the global economy is heading (Fitzgerald, 2019).

It is now believed by many that Covid-19 will accelerate the process of entering this predicted recession and that it will be more significant and rapid than expected (Walters and Helmore, 2020). This will put the preparedness on trial. Despite the pessimistic projections for the year 2020, a few are optimistic regarding Covid-19’s effect on the global economy. An article written by Conerly (2020) presents the presumption that the current significant downturn in the stock market has an inconsiderable effect on the global economy itself. Conerly (2020) states that the stock market commonly reflects the state of the global economy and not that the global economy reflects the state of the stock market, as many believe (Conerly, 2020).

In terms of supply chains, Mentzer, DeWitt, Keebler, Min, Nix, Smith, and Zacharia. (2001) describes that the supply chain in many firms have evolved from being under the same roof to a more externalized and internationalized supply chain. This may enhance the vulnerability for said firms, since the principal of outsourcing certain operations brings reduced controllability, especially in the case of prevailing situations. The control of an internalized supply chain can provide higher mobility for the firm, and thus, presumably,

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increasing the possibility of maintaining operations as usual or temporarily pause its activities. Another matter that is brought up by Mentzer et al, (2001) is the fact that the supply chain is oftentimes complemented by the service supply chain. It has its fundamentals in the fact that firms are focusing more on the demand from its customer and tailoring its suppliers and supplies from this. Firms with highly internalized SSC can once again control their activities to a higher degree and thus put themselves to a halt if the demand is lower than expected (Mentzer et al, 2001).

1.2. Problem Discussion

The Spanish flu is the most recent event that is comparable to the current Covid-19 pandemic, despite the fact that it took place in the early 1900s (cdc.gov, 2020). It lasted for over 2 years and infected over 500 million people all over the world. The death toll is estimated to be around 20-50 million (cdc.gov, 2020). In an article written by Garrett (2007) he explains that the economic disturbances were a fact, although it did not trigger a major crisis. It is however the most similar pandemic when it comes to potential scope and scale and thus the most comparable example to Covid-19 (Garret, 2007). The problem that arises here is that the only comparable situation took place over a hundred years ago. At that time the data collection was already very minor and with the current pandemic also having minor amounts of data creates a situation where information is in general lacking. Having only this semi-comparable case to go by, the biggest similarities that can be found between the two are the ease of spread, low death-rate compared to infected, and the social unrest that it is causing (Colvin and Mclaughlin, 2020).

Due to the current Covid-19 situation; events, social gatherings, and other similar social occasions have been banned in different degrees in almost every country around the world. Social gatherings are in general banned or heavily discouraged. Events such as the 2020 Olympics (Olympics 2020, 2020), UEFA 2020 (UEFA, 2020), Formula 1 2020 (F1 (formula1.com, 2020)) and the Eurovision song contest has therefore been canceled (Eurovision 2020, 2020). The Olympics, UEFA, Formula 1 and the Eurovision song contest are some of the biggest events in the world, with several of these cancellations the service industry has had a hard time adjusting (Kyodo, 2020). Events of this kind, with large venues and gatherings are especially dependent on the operations of their suppliers and business partnerships, hence why cancellations of said events can have devastating results for both the main firm and its suppliers (Kyodo, 2020).

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Struggles of firms are not limited to one specific industry, for example airline companies are also experiencing major revenue losses due to Covid-19 (Slotnick, 2020). Whilst most of the major airline companies within the US will still be able to endure the tensions created by the pandemic, in major parts thanks to the new stimulus bill bringing in 58 billion dollars in aid towards the airline industry (Slotnick, 2020). Nonetheless, several firms have already financially collapsed due to the situation and many others around the world are already on the verge of a crisis within the firm. It is highly likely that many of the airline firms will have major problems to maintain their business by the end of May (Slotnick, 2020). This is especially prominent in Sweden, as the Swedish airline firms have been struggling, in general, the past years, with a national penalty tax for domestic flights being in use since 2018 (svenskt flyg, 2020). This pandemic also affects companies that use air travel in regards to business occasions and the transport of special goods (Jones, Brown and Palumbo, 2020). These business opportunities are now limited because of restrictions and current company policies that affect this industry (Jones, Brown and Palumbo, 2020). This overall causes many firms to experience economic losses and delayed development cycles and cost increases. Since the goods need to be delivered by other means and at different occasions (O'Leary, 2020).

Many European firms that have offices and production facilities within China also gets affected by the situation. This causes even further losses in earnings and revenue due to a lack of orders (Cheng, 2020). Certain stores have also taken precautions because of the virus, with them closing temporarily in a proactive manner to reduce the impact on the company, such as Apple who is temporarily closing down all of its locations worldwide, excluding China (Spangler, 2020). In Apple’s case, the Covid-19 situation has also prolonged its current production with the closing of several factories in China. As well the increase of delivery time, since the transport agencies and border restrictions have been put in place which further on reduces the availability for the firms to deliver their products in between countries (O'Leary, 2020).

For Sweden, the situation does not look very different compared to what has happened and what is happening in the rest of the world. In Sweden the expected GDP growth is predicted to reduce from 2% to 1.5% (Lucas et al., 2020). With some of the major affected industries being included but not limited to tech, production, and car companies. The problem that arises in many cases is the issue of deliveries. China’s production had come to halt during its peak of the Covid-19 spread which left many companies with

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lacking resources and loss of production (Håkansson, 2020). Even though China has been able to open many of its factories again it still will not be enough for a large number of companies since Europe is now experiencing the pandemic in full force (Håkansson, 2020).

A key feature of managing during difficult times is the risk preparedness within the firm and throughout this pandemic there is a common theme that runs through most of the industries that are struggling with the current situation, a lack of risk management (Help Net Security, 2020). RM is when an organization is preparing for the unexpected risks that could potentially harm the firm in different ways. The firm achieves this by identifying the possible risk-sensitive parts, assessing the possible damage outcomes, and creating a plan that can counteract these damages that could arise (Scott, 2020). With a proper RM-plan the firm will have an advantage compared to firms lacking or not being as prepared as other firms. There are even examples of firms having created planning processes that are supposed to counteract several risks that the firm could be involved with. However, these plans are usually created on a “three-line-defense model” for RM (Governance of risk: Three lines of defense, 2019). A 3LOD model is defined to split up the RM process into three levels. The first one considers the owners of RM, the second are functions that provide information to the risk managers and the third line provides the firm with an auditor that confirms the effectiveness of the firm’s RM processes and provides information on how to further develop RM measures (Governance of risk: Three lines of defense, 2019). The problem with a “three lines defense model” is that it does not allow for fast changes within the firm. Creating a problem for the RM team when a problem arises that require faster changes and quicker countermeasures compared to the traditional models (Help Net Security, 2020). I.E when actions need to be taken quickly the 3LOD-model is not as sufficient as other risk management models since the 3LOD-model is more rigid and focuses on many actors in the process acting all at the same time. This could potentially be the case when it comes to the novel Covid-19, the virus will presumably bring many unexpected changes with it that firms will need to adapt to quickly. This may lead to problems for the RM teams who have prepared a 3LOD-model since this model is not adapted towards a fast-changing risk environment.

The Covid-19 pandemic has and is causing problems for many actors, however, there are certain companies that are experiencing bigger inconveniences than other firms. The car industry has in general been hard hit by the pandemic (Håkansson, 2020). Volvo has been forced to temporarily

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stop production in several of their locations due to a lack of resources being delivered. Since most of the supplying factories in other countries have also been shut down temporarily leading to a lack of parts in their supply chains (García-Herrero, 2020). This then leads to losses in earnings and losses in production since the company cannot continue with their current activities. The car industry is not the only area which has been affected; Apple, Samsung, and several other phone manufacturers also have to deal with this issue, since many of their suppliers have also stopped production because of Covid-19 (Mehta, 2020).

It becomes apparent that the supply chains within organizations have the potential to become severely affected by the Covid-19 pandemic, with Swedish manufacturers having to resort to different solutions in order to deal with the consequences of the situation (O'Leary, 2020). In most cases the solution is to temporarily close down all production, in other words, put the entire company in a state of stasis. It is imperative for organizations to handle these situations to avoid the consequences or to reduce the impact (Alicke and Strigel, 2020). Without the knowledge or proper plans for such situations the company lies in a position of high vulnerability and inaction. A company with proper planning and knowledge will be able to handle the situation unscathed or at least unaffected in general by the consequences of a pandemic. Furthermore, regarding the problems around the main topic Covid-19, a key issue is the lack of previous data due to the modernity of the case, this also means that the total effects on firms are yet unknown, and the authors will present findings which are profoundly current, but might differ from the ultimate results which cannot be interpreted until the pandemic is defeated.

1.3. Research questions

● How does Covid-19 affect firms based in Sweden in their international supply chains?

● What countermeasures can be applied within Swedish based firms to reduce the risk of potentially compromised international supply chains in the case of Covid-19?

1.4. Purpose

The purpose of this paper is to map out and interpret how Swedish based firms are affected due to the Covid-19 virus in their international supply chains and aiming to find out if insufficient RM can lead to further problems in this case. Coming to terms with and understanding the consequences would give clarity to other firms and actors in the business environment on how to tackle similar

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obstacles that this prevailing situation brings. Further, the aim is also to find out if there are any specific measures other firms can take to reduce said effects on the supply chain. The main objective is to gather new knowledge in an unknown area within the international business environment and ultimately aim to help Swedish based firms in the case of a similar situation in the future.

1.5. Delimitations

One main delimitation is the fact that this research is only conducted from a Swedish perspective by only interviewing respondents that are working for Swedish based firms, as it simply would be proven too vast to analyze the consequences from a multinational perspective.

Mainly since all nations are affected differently by the spread of the virus, thus the results of the research may not be applicable for firms in other countries. This study also fully distance itself from studying the virus itself or its scientific qualities. In terms of geographical scope, all targeted firms are based within Sweden, however, they are not obliged to be founded in Sweden, as some of the firms of interest may be a branch or subsidiary which is based in Sweden whereas the parent company could be from another nation.

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1.6. Outline

Figure 1, Outline (created by authors)

2 Literature Review

This chapter will introduce the chosen relevant theoretical frameworks that will support the empirical findings to further create a valid analysis. After a closer examination, it is apparent that Supply Chain Management, Risk Management, Supply Chain Risk Management, and Risk Maturity fits the topic well and will provide a solid foundation for the interview guide which will be used to gather empirical data in the following chapter.

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2.1. Supply Chain Management (SCM)

To understand this terminology, a breakdown of the term Supply Chain (SC) is a necessity. Whilst the supply chain management is a supplementary activity which may or may not be in use by the firm in question, the supply chain itself never ceases to exist. It mainly regards the flow of both tangible as well as intangible assets from one actor to another to ultimately arrive at the organization’s premises. This process usually covers all the steps from raw materials up until the final product is produced and has entered its final destination (at a store or at the end consumer (Jones and Riley, 1985)). In general SC covers the procurement of materials, production lifecycle management as well as the product life cycle, logistics, and order management (Jones and Riley, 1985). What is perhaps problematic is the fact that the supply chain model is regarded as quite outdated as it mainly regards production firms with many middlemen and suppliers, one can argue that this theory may not be applicable in firms which are not proceeding with any production activities (Jones and Riley, 1985).

After defining the supply chain, a definition of the Supply Chain Management itself (SCM) is possible. SCM itself is mainly regarding the control and monitoring of the flow of goods, data, and finances that are related to a certain product or service, rather than the flow itself. A complication of this framework however is the fact that several authors have different perceptions of the significance of SCM. The three main interpretations of SCM are; a

management philosophy, implementation of managerial philosophy, and a set of management processes (Mentzer et al., 2001).. The management philosophy mainly regards the fact that the manager directly prioritizes and puts the surveillance of transactions between the supplier and the firm in action, with the objective to optimize said transaction to make them as efficient and inexpensive as possible (Mentzer et al., 2001). The implementation of a managerial philosophy however, does not require the firm to directly apply any direct measures of SCM but rather a mindset of it, which e.g. may increase communications within the firm to some extent. A set of management processes also does not require the implementation of direct measures but recognizes SCM as a byproduct created from attempts of increasing customer values and customer relationships (Mentzer et al., 2001). The model claims that an increased level of SCM will result in more efficiency which further improves the value for customers. One can also argue that a reversed perspective on SCM reveals that a lacking control of the supply chain leads to

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less optimized processes which can be both cost some and time-consuming

(Mentzer et al., 2001).

Despite the fact that SCM may be regarded as dated for many firms, the shape of supply chain management has changed drastically throughout the years (Hayes, 2020). Today supply chain management and supply chain systems are being combined through the use of technology. With the use of A.I, automation, and sensors several parts of the supply chain can be overseen and predicted with no requirement of physical presence by an employee (Hayes, 2020). For example, with the use of A.I and sensors the machines themselves can predict when a certain part might break and which parts of the supply chain process that are under the most amount of pressure. The firm is then able to act proactively instead, fixing the problem before it occurs and making sure that the supply chain keeps on going continuously (Hayes, 2020).

Figure 2, Supply Chain. (Shafeelaw, 2020)

2.1.1 Service supply chain framework

Supply chain management can have different meanings depending on the purpose of its use within different firms (Kiger, 2020). The general definition of the supply chain framework focuses on the production of physical products and the processes that are involved in the supply chain model. Service supply chain management is specifically designed to focus on the service industry instead (Kathawala and Abdoud, 2003). In the service management model, it mentions the idea of overseeing the entire chain of processes, however, instead it makes services as of higher importance, which also oversees the same parts of the process that generally affects the supply chain. This means, however, that certain parts of the physical supply chain management model are removed, these parts can be logistics, transportation, and distribution channels (Kiger, 2020). E.G. for a company that produces physical products the supply chain ends when the raw materials have been transformed into a product and delivered to the customer. Whilst in a service-driven firm the supply chain

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ends when the service has been delivered. Even though both models share the same goal certain parts have been exchanged to fit in line with new conditions set by the firm. For instance, logistics within a service-based organization does not need to consider the use of storing products or transportation (Griffin and Co, 2020). It is replaced by a higher degree of information distribution where the firm needs to optimize distribution channels and apply proper employee efficiency that converges with the distribution channels to reduce overall costs with in this process (Kiger, 2020).

2.2 Risk Management

Risk management has become more important than ever due to the high damages that can arise with a lacking RM-plan. Chapman (2011) argues that enterprises today are more in contact with the rest of the world, leading to a higher plausibility of risks. The risk exposure has in other terms increased at a faster rate than the rate of organizational RM. The 2008 financial crisis stands as an exemplary case of callously dealing with the risks and failing to understand the importance of RM (The Financial Crisis Inquiry Commission, 2011). Dr. Ashby (2010) discusses the important lessons to learn from the failures and mistakes that created the 2008 financial crisis. Dr. Ashby (2010) mentions that large parts of it were lacking RM-plans in case of a major financial crisis, needless dependency on tools that could have been used for better causes, e.g. increase use of quantitative risk analysis tools whilst lacking in the department for management judgment and RM.

Threats and risks can be many different things with a similar end impact on the company, i.e. a reduction of capital gained or a decline in earnings for the enterprise (Scott, 2020). These risks could be; financial uncertainty in the form of a, unbeknownst to the company, economic downturn, or a financially uncertain future for the organization at hand, strategic management errors, legal liabilities, natural disasters, or IT-disasters (Rouse, 2019). An IT-disaster could be a data security breach that other competitors have gained access to or that the company experiences a distributed denial-of-service attack. Today an organization is at a greater risk than ever before, with the large number of channels that can be accessed by consumers it means that organizations must have a preparation plan to handle these occurrences (Rouse, 2019). One of these models is the 3LOD. The model is built up by three lines of defense. The first line of defense is the RM-team and managers of the firm. I.e. the people in the firm that have control of certain functions in the firm and the ones that need to manage risks (Governance of risk: Three lines of defense, 2019). The second line of defense is the functions that oversees or specializes in RM. This

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line of defense monitors the firm’s activities to confirm that they are being applied properly, it is meant to assist the risk managers in reporting risk-related information throughout the company (Governance of risk: Three lines of defense, 2019). The third line of defense consists of the functions that provide the auditors with information regarding the effectiveness of the previously mentioned stages. The auditors can then provide valuable advice on how the firm can proceed in the future to further strengthen its RM (Governance of risk: Three lines of defense, 2019). Additionally, another risk-reducing measure is to commit to long-term relationships in business (Aaker and Mascarenhas, 1984).

2.3 Supply Chain Risk Management (SCRM)

Supply chain risk management (SCRM) is regarding the application of different strategies to manage every day and rare risks that could arise alongside the supply chain. The general way to oversee the supply chain is to conduct continuous risk assessments with an overall goal of achieving profit, reducing vulnerability, and ensuring that the supply chain can continue unaffected by the risks (Wieland and Wallenburg, 2012). I.E SCRM is to apply these RM tools towards the suppliers (external) and the firm's processes (internal) in a firm's supply chain to manage the associated risks that affect the supply chain. A firm that uses a supply chain management plan can then achieve certain benefits. For example: in an SCRM-model the firm often considers the possibilities of late deliveries, wrong or faulty shipments, and unreliable suppliers which makes sure that the firm is protected from these scenarios (Wieland and Wallenburg, 2012).

A firm without a proper SCRM-plan has to deal with the consequences that arise with increased risk. When crises such as 9/11, the 2008 financial crisis, or hurricane Katrina happened firms needed to be prepared to handle the risks effectively to minimize potential damage to the firms (Thun and Hoenig, 2011). For instance, during the 2008 financial crisis many firms were forced to hire external companies to store their products in warehouses for a long period of time since they were not able to sell their products (Lynch, 2020). In 2009 inventories for many firms increased by 70% whilst sales were reaching particularly low levels (Lynch, 2020). Even though this area of RM has become more important as time has passed it still lacks proper research data, with only a minor amount of research being done on the subject. RM in general is something that is primarily seen as a “company-specific task” (Jüttner, Peck and Christopher, 2003). Meaning that companies apply RM to specific parts of the organization but still lacks definitive risk preparedness in the supply

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chain area. Even though the firms in most scenarios also are aware of the consequences that can arise alongside the supply chain (Jüttner et al., 2003).

2.3.1 Internal or External Risk Factors

When it comes to supply chains, it can be detrimental to determine whether the supply chain generally uses an internal supply mode or an external supply mode. With the increase of globalization, the different types of supply chain methods proceed to develop as well. Globalization allows for the ability of gaining access to many materials and resources, but it also provides for the ability of externalizing the production and eventually allowing for the entire supply chain to be produced externally (Robinson, 2020). Even though outsourcing can be greatly beneficial for the organization in the form of low-cost production. However, it does open up the possibility of potentially insecure parts of the supply chain (Essig, Bode, Kemmerling, and Wagner, 2013). The same can also be said when it comes to the internal aspects of a supply chain. Due to major parts of the supply chain taking place internally, it does not mean that the firm is immune to all types of risk. An internal supply chain can experience risks that are different compared to the external part. Demand-Side Risk can cause disruptions on the supply chain, it emerges from the downstream supply chain (Wagner and Bode, 2008). These disruptions might be caused by a miscalculation for the firm’s projections and actual demand from customers, it could also be affected by a poorly managed supply chain (Wagner and Bode, 2008). Some of the risks could also be equipment malfunctions or that one of the machines that the firm relies on has stopped operating (Essig, et al. 2013). RM must be applied differently if the supply chain mode is either external or internal (Essig, et al. 2013). Wagner and Bode (2008) discuss the idea of creating a two-level system based upon the idea of having internal/external supply chain management. The idea is that by splitting up the RM based upon the different supply modes, it will be able to decrease the possibility of risks, manage responsibilities in a better way and create custom RM-plans based upon the different parts in the supply chain and risks that could arise with them (Wagner and Bode, 2008).

2.4 Risk Maturity Model (RMM)

When it comes to determining the risk factor for an organization, there are several different methods that can be helpful. One of these methods is the Risk Maturity Model. The model is split up into a different set of variables depending on the version used. The original version created by Hillson (1997) was designed to allow organizations to conduct a thorough risk assessment

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analysis and properly introduce an RM-system. Furthermore, the model can also be applicable to tell how RM is set-up currently within the organization. Hillson’s model is divided into 4 levels and 4 attributes. The levels that the model consist of are; The Naive, the Novice, Normalized, and Neutral (Hillson, 1997).

The first level, the Naive, experiences no need for RM, it is neither aware of the risks that could potentially harm the firm or the potential that could be had by creating a structured RM-system. Most of the actions within the organization are done in a monotonous fashion without any aim towards the future or developing the current actions (Hillson, 1997).

The second level, the Novice, has discovered the purpose of RM and is testing out different methods oftentimes with a small experimental team. At this level the RM-team and RM-manager does not have any type of specialized structure or any specific processes created. Even though the firm has recognized the importance of RM the firm still has not been able to implement proper systems (Hillson, 1997).

The third level, the Normalized, discovers organizations that have built RM into their daily routine and implements RM on most or all parts of the organization. Risk processes that cover most of the organization are constructed and spread out within the organization to create a universal understanding of the RM-plan (Hillson, 1997).

The fourth and final level, the Natural, the organization has created a culture that is constantly aware of RM and has in general a more proactive approach to RM. In this stage the firm relies heavily upon informational guidance, with the use of risk information. The firm prepares for risk in advance to gain a competitive advantage (Hillson, 1997).

This model explains each stage that needs to be fulfilled in each category before a firm can be considered being a risk-aware organization. The model also allows for further analysis of the different firms and understanding the firm’s RM levels. With these four stages then set up it is vital to perform analysis;

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Figure 3. Risk Maturity analysis model (Hillson, 1997).

2.5 Conceptual Framework

The literature review within this part has provided the research with a thorough and clear understanding of the supply chain. Furthermore, the literature also presents different views on the supply chain and how these parts can differ depending on the type of supply chain. On the other side, the importance of RM is introduced and how a firm can and has to prepare themselves towards risks that can affect their supply chain as well as the firm. It has also concluded how a firm can be evaluated by understanding their level of RM-commitment. The conceptual framework is composed of two major parts. Supply Chain Management and RM. These two parts will be necessary to understand the impact Covid-19 has left on the firms that are being analyzed. Supply Chain Management can then be split up into two minor theories, external or internal supply chains as well as the service supply chain. The service supply chain theory allows for analysis of firms that necessarily do not have a physical supply chain with manufacturing. The external and internal supply chain creates another dimension that needs to be analyzed as well to gather sufficient results. With this theory the authors can understand how internal and external supply chains differ from each other and how they both affect the overall supply chain. RM is extended into the Risk Maturity model which is a tool that allows the authors to analyze a firm's level of risk preparedness. The model itself was created by Hillson (1992) with the intent of analyzing and standardizing a model to analyze firms’ RM levels. In the end, these factors

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all combine into the SCRM model. In this theory the RM aspects and the supply chain aspects are combined into one. Thus, creating a theory where both aspects of the SC and the aspects of the RM models can be analyzed together. For the authors, this model is imperative for the research’s success since it allows the authors to create definitive results based upon the theory and empirical gatherings.

Figure 4: Conceptual Framework (created by authors)

3 Methodology

This chapter will introduce how the authors will proceed with gathering empirical information for this paper. It will also present how the research is designed, as well as establish the connection with said information and the already existing theory that was introduced earlier.

3.1 Research Approach

When choosing the structure of the research, one can select either an inductive or deductive approach (Bryman and Bell, 2011). The selected approach determines if the researchers will focus more on new empirical findings (induction) or lean more towards creating a hypothesis from theory (deduction). The deductive approach is more suitable if the topic in question

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already carries a high level of previous research, which can enable the author to determine a plausible outcome by studying the results from said research and thus seeing a pattern which can provide an indication to the results of the author’s research. In terms of the induction approach, theory becomes secondary. Bryman and Bell (2011) states that an interpretative author may have the tendency to alter the selection of theory based on the results from the empirical findings. This is a possibility the deductive author does not have. Furthermore, one can also select the fairly recently developed abductive approach, which mainly acts as a combination of the two main approaches (Bryman and Bell, 2011).

The nature of the chosen topic lies within a significant uncertainty regarding predetermined theory and data. One would be very unlikely to draw a sufficient hypothesis regarding the subject by forming its research and hypothesis from the already existing theory, since its correlation to the topic may be difficult to estimate and establish. This is the main reasoning behind the selection of the Abductive method for this paper. The empirical data that is about to be collected is the main foundation of any potential hypotheses since it is of a greater significance due to the uncertain nature and the novelty of the subject. The data will then be analyzed through the perspective of the existing theory. The usage of an abductive approach is mainly declared in the search for a deeper context-understanding for the authors. What needs to be avoided however is the possibility of being too dependent on empirical findings and thus reducing the use of theory. According to Bryman and Bell (2011), the role of theory within abductive research is to establish a sustainable balance between empirical data and theory.

3.2 Research method

When designing the strategy for data collection the researcher can choose between a qualitative and a quantitative method. The fundamental aberration between these is the format of gathering. A qualitative data gathering focuses on achieving more elaborate responses to the researcher’s questions whilst a quantitative data gathering emphasizes the number of respondents rather than the elaboration of the answers. Another defining characteristic of the quantitative method is the ability to measure the results since the questions tend to be of a closed structure, i.e. the questions are typically designed to provoke a yes or no answer, whilst qualitative research has an objective to create a discussion and motivate the respondent to elaborate his answers (Bryman and Bell, 2011).

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This paper will be performed with a qualitative method, which then inclines the authors to gather empirical data from primary sources with the help of interviews. Bryman and Bell (2011) explains that a key reason for writers to choose this method is that the topic in question may not be suited for data collection that focuses on numbers and measurable factors. The topic may demand the respondents to elaborate on the situation and thus, give a more significant understanding. However, an issue with qualitative research is the fact that it may not carry the same rationality as in quantitative research (Bryman and Bell, 2011).

3.3 Research Design

Bryman and Bell (2011) explains that the significance of research design lies within the connection between the predetermined data and the new empirical data.In order to secure a successful data gathering it is important to make sure the research is designed to suit the topic and the research approach.

The following research designs are; Experimental Design, Cross-Sectional

Design, Longitudinal Design, Case Study Design, and Comparative Design;

Experimental Design focuses on collecting data in a measurable way, mainly numbers which then can be seen as variables. Manipulation of one measurable variable is then done, and the results of this manipulation can provide clarity to the importance of said variable. Since this design is mainly applicable in quantitative methods it will not be applied in this study. Cross-Sectional design is also mainly constructed for a quantitative method; however, it focuses more on gathering a large spread of data from many contrasting people and organizations. The widespread data is the main trait of this design; however, its quantitative characteristic reduces its usability in this study too. Longitudinal Design is not as commonly used as its peers mainly due to its complexity and resource-intensive progression. It strives to secure exceptional degrees of Validity by hosting multiple interviews and surveys over a long-time-span. A Case Study Design is quite self-explanatory in its nature since it describes that the researchers only will project their attention to one firm or one organization. The reasoning behind selecting this design could be that the authors have observed a particular situation within an organization and this topic may not be applicable for any other organization for multiple reasons. Performing a case study brings various disadvantages however, mainly in the fact that the outcome may carry a low degree of validity perhaps due to the results being in the current organization’s favor. It may also lack applicability

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for other organizations in the future as well, as the imaginable recommendations are tailored for the organization of the case study and not created from a constellation of multiple organizations. The final design is the comparative design, which emphasizes the differences between two or more firms, with the theory being an underlying foundation for the comparison (Bryman and Bell, 2011).

The selected design for this research is a comparative design since the main objective is to conclude an analysis between multiple organizations. Furthermore, it is the design that also would be considered the most appropriate for both the current research method as well as the general topic.

3.3.1 Research Purpose

During the process of selecting the research design, there are three categories of purposes which are the reasoning behind the design selection (Saunders, Lewis and Thornhill, 2012); the descriptive Purpose has its fundamentals in preexisting knowledge in the area within the author. This may be the result of conducting a study in an area in which he already has provided research, or it could be due to the research area being recognized and established. This, however, creates a flaw. Due to the already existing knowledge, the author may sense that there is a lack of mobility within the research topic since the author has to follow established boundaries and limitations. The author can also choose an exploratory purpose, which enables him to investigate in a new undiscovered research area, there may also be a lack of previous experience from his side. Though it does not fully rely on the absence of previous knowledge; the author could simply perform a study on an earlier discovered scope of research but from a new perspective which then can lead to new insights. On the contrary to the descriptive purpose, the exploratory purpose excels in the liberty it provides for the author. Provided that the area is relatively undiscovered the author can be more elaborate in his actions and adapt it to ever-changing circumstances. Lastly the author can select the

Explanatory Purpose, which seeks the correlation between and different

variables and ultimately has the casualty between said variables as the main objective (Saunders et al., 2012).

Due to the nature of both the undiscovered character of this research topic and the inexperience within the field amongst the authors, the exploratory purpose is the most appropriate for this paper. Saunders et al. (2012) also state that the exploratory purpose is highly compatible with a qualitative method, which

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further strengthens the reasoning behind selecting this particular research purpose.

3.3.2 Multi-case Study

When selecting plausible and relevant respondents for the data gathering, the researchers can decide whether to study respondents from one particular firm or representatives from multiple firms. The earlier mentioned single case study is mainly suitable if the topic in question is only applicable to a single organization. The topic selected for this research however is affecting a large number of firms and thus, multiple organizations can contribute to the analysis and furthermore making this paper a multi-case study. Eisenhardt (1989) argues that a multi-case study and its multiple case settings have its advantages over a case study with a single setting; an increased amount of empirical data, stronger validity, and furthermore the prospect of creating a more thorough analysis by having the option to compare multiple cases.

For this research, the conducted interviews will maintain a Semi-Structured format, which will enable the authors to maintain a solid connection between the given answers and the selected theory whilst still facilitating flexibility in the interview which can provide insightful answers as well as a natural dynamic between the respondents and authors.

3.3.3 Sampling

Since this research is condoned with a qualitative method, the selection of plausible respondents is tailored from a number of factors, mainly from the former networks and experiences amongst the authors. Since the ethos of a qualitative study is the search for a more thorough understanding, the authors are more likely to look for respondents in which they see a certain context within. This is also known as the nonprobability sampling strategy, which means that the authors are targeting a particular scope of individuals as possible respondents. On the other hand, one can also choose to apply the probability sampling strategy, which on the contrary means that there is no active targeting taking place. The authors would then try to obtain an irregular scope of cases within the search criteria. Whilst this provides a heavily unbiased spread of respondents, the continuity may not be as strong (Bryman and Bell, 2011).

A secondary strategy which has become increasingly popular is the so-called snowball effect, which mainly regards reaching out to possible respondents via the use of social medias, and the fact that each respondent also will search

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through his network to gather more individuals, hence the snowball effect (Bryman and Bell, 2011). This is a measure that will be used in this project, primarily with the help of the website LinkedIn to source individuals to build a network with and to furthermore establish interviews with.

The main objective with the interviews is to make sure that the respondents actually answer the asked questions, if there is a perception that the answer is lacking in context to the question, the researcher will ask follow-up questions in order to provide more clarity and enhanced usability of the findings. The time duration of the interviews is between 30 and 50 minutes, which has given the respondents space to thoroughly describe his answers.

Case firm criteria:

1. Be active on the Swedish market, though not obliged to be founded in Sweden.

2. Conduct international activities of some kind.

Case respondent criteria:

1. Be employed by the firm, preferably for a minimum of one year to ensure sufficient firm knowledge.

2. Hold a senior/managerial position within the firm.

3.3.4 Cases

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3.3.5 Operationalization

Figure 6: Operationalization, created by the authors (2020).

3.4 Data Collection

When deciding strategy for gathering empirical data the researcher can select between collecting their own data directly from the context (primary data) or they can choose to gather the findings from an earlier conducted research (secondary data) (Saunders et al., 2012). The preferred tactic in most cases is to gather data in a primary way, since the distance between the writer and the source is shorter and thus the representation of the source should in theory be more in line with what the source has provided. This is a shortcoming for the secondary data collection since it relies on another author, and the distance

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between the author and the source is elevated. It will also involve the risk of the connecting author not interpreting the source correctly, which means that the writer runs the risk of using misunderstood data which furthermore puts the accuracy of the research results at risk since it may not be as reliable as the primary data (Saunders et al., 2012).

3.4.1 Primary Data

This research will be conducted with the ambition to gather empirical data mostly via primary data. This may prove to be a particularly difficult task due to the ongoing Covid-19 situation which limits some actors’ capability to take the time to participate in interviews. The authors of this paper do have useable networks in their possession from earlier studies and experiences in the business environment in general. This creates an advantage that can enable this research to proceed with primary data collection despite the urgent times.

3.4.3 Semi-structured Interviews

Depending on the characteristics of the research topic as well as the research method, the authors can choose between different formats of conducting the interview itself. When performing a qualitative study, Bryman and Bell (2011) describes that there are two main formats; Unstructured and Semi-Structured interviews. The unstructured format has its perks in the fact that it allows truly elaborate and liberal answers, as it usually only centers around one main question. However, it can be difficult to grasp the outcomes of the interview, since it can be hard to define the correlation between the respondent’s answer and the research question as well as its connection to the theory. It is therefore rendered as the non-preferred alternative in this particular research. Then there are the Semi-Structured interviews, which still aim for a certain level of dynamic conversations between the researchers and the respondents whilst simultaneously being anchored in a priory defined interview guide which connects the discussion topics to the theory.

3.5 Data Analysis Method

Once the researchers have collected the empirical data, their objective is to reduce and interpret the data in an accurate and representative manner. The way of analyzing the data will form the foundation for the results of the paper (Merriam and Tisdell, 2016). A defining characteristic of research with a qualitative method is the difficulties in terms of data analysis, as the data in many cases lacks structure, measurability and thus rationality, since all authors interpret the data differently (Bryman and Bell, 2011). The role of the data also differs depending on the selected research approach for the paper. An

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inductive study will moreover focus on a rightful analysis since the empirical data is the central piece of the research. The abductive approach, which has been selected in this case, carries a dynamic relation between newfound data and predetermined literature, but the rightfulness within the research is still central (Merriam and Tisdell, 2016).

The conducted interviews for this research varied in length, some of the respondents contributed with more useful data than others, and thus the authors have had to condense certain aspects of the interviews, as well as judge what is relevant for the research and what is not. Full transcripts were made for each interview, which enables the authors to analyze and filter the data in a collected manner due to the possibility of categorizing the responses (Brinkmann and Kvale, 2015). Qualitative studies also tend to lack in terms of ability to generalize the results, as compared to a quantitative study (Merriam and Tisdell, 2016). However, the authors have aimed to obtain a certain diversity amongst the cases in terms of firm size and operational industry, as the research aims to be applicable to a larger number of organizations.

3.6 Research Quality

In order to establish the future usability of the research, it has to conform to a number of factors that collectively create a level of quality. Ultimately the quality aspects mainly regard that the data is gathered without bias, and that the results should reflect a reality (Bryman and Bell, 2011).

3.6.1 Reliability

Perhaps the most significant factor to take into consideration when establishing the research quality is Reliability. The consensus of this term is to maintain a reasonable consistency during the entire process, with emphasis on reducing fluctuations between each respondent. A key issue which many authors face is that there are incremental differences in the conceptualization amongst the writer and that the interpretations in each interview differ slightly (Bryman and Bell, 2011). The term reliability is furthermore sectioned into two aspects;

Dependability

Being closely associated with the reliability term within quantitative research, dependability mainly regards if the researchers can conduct the same study again. They also have to question whether the results would differ from the ones presented at this time. Since the topic, in this case, is vastly current, and the fact that new findings are published constantly makes the likelihood of a

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similar study being identical very low. The structure of the interview aims to provoke elaborate answers in accordance with a semi-structured interview, which furthermore reduces the dependability in this case (Bryman and Bell, 2011).

Confirmability

This terminology mainly regards the possibility of other actors conducting similar research with similar findings. Firstly, the author must question if the current research is transferable at all. To increase the confirmability the author must act unbiased in the conduction of an analysis. If the researcher does not act in good faith, other persons will struggle to replicate the study. Since this topic is constantly evolving, the confirmability may be regarded as relatively low from an external perspective. The selection of case firms may also be considered as quite uncommon as it signifies a widespread of industries. However, from an internal perspective the authors want to obtain an as high level of transparency as possible in order to enable future researchers to conduct similar studies (Bryman and Bell, 2011).

3.6.2 Validity

Transferability

The term transferability is primarily regarding how compatible the findings in a study are with situations in other contexts. One key disadvantage of qualitative methods as compared to quantitative methods is the lower level of ability to generalize the results due to the lower number of respondents (Yin, 2015). As this study primarily has its focus in the context of Covid-19, it may not be applicable to any other situation other than alternative pandemics. However, the ambition is to establish a strong relationship between the data and the theories, and thus aiming to make sure that the results are applicable to other future pandemics, and not limit the results and recommendations to only the current Covid-19 situation, which then will establish a stronger transferability to other cases (Bryman and Bell, 2011).

Credibility

Ultimately, the authors must ensure that the level of credibility is significant enough. Credibility means that the authors are responsible to make sure that the opinions and information provided by the respondents are projected correctly with no abbreviations from the writer’s point of view (Bryman and Bell, 2011). A measure to strengthen this is to include the interviewees more in the creation process and to make sure that they can take part in the final

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product. This is a measure the authors of this paper will take, also as a way of showing gratitude to the interviewees.

3.7 Author’s Contributions

During this project, the aim has been to obtain an as balanced and equal workload distribution as possible. To establish that each author has the same knowledge regarding each chapter, there has been a cross reading process that has ensured that both authors approve what has been written. This is also a measure which increases the continuity of the language structure, and to reduce fluctuations. The introduction chapter was written simultaneously between both authors, though the literature review as well as the methodology was sectioned off to increase the pace. Once these parts were conducted, each author had to accept the other author’s parts. During the process of establishing the Empirical data as well as the Analysis chapters, the workload has been delegated to once again achieve a sustainable pace. John has worked more with conducting the Supply Chain related aspects together with methodology, whilst William has defined the problem discussion together with working with the Risk Management related areas. When finished, the text has been carefully examined by the other author. Both authors have contributed equally in terms of sourcing respondents, and both were present on all interviews as well as participating in asking questions. Thanks to the even workload distribution and cross-examination, both authors can fully stand equally responsible for this paper.

3.8 Ethical Considerations

When conducting research, it is a definite necessity to establish that it is being performed in a way that cannot harm anyone in a physical or psychological manner (Brinkmann and Kvale, 2015). To ensure this, all interviews have been held digitally due to the current Covid-19 situation, as the authors do not want to put anyone at risk of being contaminated. Another measure to reduce potential harm was to ask whether the respondent would like to be anonymous both regarding the firm name and the personal name. The names of which whom that have chosen to be anonymous will not be specified. By accepting the participation in this research, the authors have been alerted of the possibility of this paper being published and available to the general public. In order to establish total transparency to the participants, the authors distributed the interview questions and a brief introduction regarding the research topic prior to the interviews. This also made sure that the respondents could prepare with purposeful answers. The authors of this paper encourage the participants

Covid-19: Balancing risk and reward in business: A multi-case research studying Covid-19’s effects Swedish based firms’ supply chains and whether firms’ risk management has been sufficient or not.