Risk Management in the Oil Supply Chain: A CVaR Approach

Maria C. Carneiro · GABRIELA PINTO RIBAS · Sílvio Hamacher

108 citations0/0 files storedIndustrial & Engineering Chemistry Research

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Risk and Portfolio Optimization Supply Chain and Inventory Management Process Optimization and Integration

Abstract

This study analyzes the strategic planning of an oil supply chain. To optimize this chain, a two-stage stochastic model with fixed recourse and incorporation of risk management was developed. The model took a scenario-based approach and addressed three sources of uncertainty. To deal with these uncertainties, the conditional value-at-risk (CVaR) was adopted as a risk measure, and then the model was applied to the supply chain of six oil refineries. The goal of the study was to maximize the expected net present value, E (NPV), of the supply chain under analysis. The results indicate that the optimization of the several scenarios yielded an E (NPV) variation that reached US$ 36 million. Such a significant difference demonstrates that taking uncertainties into consideration is a fundamental step in decision-making processes.

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References

1999Coherent Measures of Risk 2000Optimization of conditional value-at-risk 2002Conditional value-at-risk for general loss distributions 2000Value At Risk: The New Benchmark for Managing Financial Risk 1991Mean-Absolute Deviation Portfolio Optimization Model and Its Applications to Tokyo Stock Market 2001Portfolio optimization with conditional value-at-risk objective and constraints 2001Financial Risk Manager Handbook 2000Planning logistics operations in the oil industry

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