A Risk Mitigation Deficit Measure to Control Risks in Supply Chains: An SME Perspective

The misalignment between the external risks a company faces, such as natural disasters or macroeconomic shocks, and the supply chain risk mitigation efforts it undertakes has received limited attention, particularly from the perspective of small and medium-sized enterprises (SMEs). Using contingency theory as a theoretical underpinning, this research introduces a novel fit measure, the risk mitigation deficit (RMD), to capture this misalignment. It then examines the impact of RMD on operational risk (OR), which refers to the failure of the supply chain to achieve key objectives such as cost efficiency, quality, and sustainability. SMEs face unique challenges, as risk mitigation efforts are resource-intensive, requiring careful alignment of mitigation measures with risk exposure. This study contributes by analyzing data from 213 SMEs in the Spanish agri-food supply chain. The results suggest that both upstream and in-house RMD positively influence output OR, while downstream RMD shows no such relationship. Similarly, upstream RMD does not appear to influence input OR. A robustness test examining the effect of mere risk mitigation effort (RME) on OR confirmed that RMD possesses explanatory power over OR that RME alone does not. These findings underscore that a one-size-fits-all approach to supply chain risk management (SCRM) is ineffective, especially for resource-constrained SMEs. Instead, tailored, context-specific solutions are needed to help SMEs efficiently balance risk profiles and mitigation efforts.