Operational risk assessments by supply chain professionals: Process and performance

We consider the “process-performance paradox” in the assessment of operational risks by professionals in the field of operations and supply chain management (OSCM). The paradox states that although professionals with more expertise tend to decide in different ways, they often do not make better assessments than those with less expertise. We first replicate that this paradox exists in a context of the assessment of operational supply risks, and then show how the paradox can be understood as the consequence of process characteristics mediating the relation between expertise and assessment performance.Using an experimental setup, we had 234 OSCM-professionals assess the operational risk in two series of different business cases, and measured several characteristics of their decision-making process. The strength of our approach lies in the fact that the business cases were real-life cases from our database of purchasing transactions in the area of IT-purchasing. This allows a comparison of the risk assessments of the professionals with the actual supply risk as was known from the survey database. Our findings show that, contrary to what is often assumed, the OSCM-professionals with more expertise do not use less information while assessing, nor are they faster. Instead, our results show that specialized expertise goes with increased certainty about the assessments, and general expertise goes with an increased use of intuitive judgment. However, the net effects of these expertise characteristics on assessment performance are zero. In the case of specialized expertise this is because specialized expertise is itself negatively related to performance. In the case of general expertise this is because the net effects of the use of intuition on performance are zero.