* Corresponding author. Tel.: #358-5-621-2671; fax: #358- 5-621-2667. E-mail address: jukka.hallikas@lut." (J. Hallikas). Int. J. Production Economics 78 (2002) 45}55 Risk analysis and assessment in network environments: A dyadic case study Jukka Hallikas *, Veli-Matti Virolainen , Markku Tuominen Department of Industrial Engineering and Management, Lappeenranta Uni versity of Technology, P.O. Box 20, FIN-53851 Lappeenranta, Finland Department of Business Administration, Lappeenranta Uni versity of Technology, P.O. Box 20, FIN-53851 Lappeenranta, Finland Received 12 April 2000; accepted 21 December 2000 Abstract The aim of this paper is to describe a conceptual framework for risk analysis of production networks from the view of both a buying company and a supplier. The primary objective is to illustrate how a company can analyze and assess the risks associated with networking. Two approaches: internalaudit,and computer aided cause and e!ect analysis, are demonstrated as instruments for the analysis of risk. This study uses case study methodology and information. Two companies, operating as "nal assemblers in the electronics and metal industry sectors, and n suppliers have been interviewed. 2002 Elsevier Science B.V. All rights reserved. Keywords: Production networks; Supply chain management; Risk management 1. Introduction 1.1. Background The study considersissuessurroundingrisk management associated with a network environ- ment.A great dealofinterest has been shown in networking and business risk management separ- ately in recent years. However, in this study these two topics are considered together. There are many bene"ts associated with net- working,but it is a new phenomenon that has broughtwith it a number of risks. Small and medium-sizedenterprises(SMEs)in particular have been athe forefront of signi"cant changes when functioning as part of the value chain of a larger network involving "nal assemblers. Rapidly changing technologicaldevelopmentand in- creasing global competition have forced companies to adopt greater#exibility and to adaptmore rapidly. 1.2. Objectives and methodology The purpose of this study is to describe a concep- tual framework of risk analysis and assessment for production networks from the pointof view of subcontractors. The primary aim isto illustrate how small and medium-sized enterprises can assess and analyze business risks related to networking. Even though this study considers the subject from 0925-5273/02/$ - see front matter 2002 Elsevier Science B.V. All rights reserved. PII: S 0 9 2 5 - 5 2 7 3 (0 1 ) 0 0 0 9 8 - 6