Climate stress test of the global supply chain network: the case of river floods

Georgios Papadopoulos, Javier Ojea-Ferreiro and Roberto Panzica
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Javier Ojea-Ferreiro: Bank of Canada
Roberto Panzica: Bank of Portugal

No 337, Working Papers from Bank of Greece

Abstract: This study investigates how extreme flood events can indirectly impact the global supply chain through production disruptions. Using a data-driven, agent-based network model that combines company-level data with flood hazard maps, the research simulates the transmission and amplification of shocks. The findings emphasize that the size of inventories is crucial; a lean-inventory system leads to faster shock propagation, higher losses, and fewer recoveries compared to an abundant-inventory system. Additionally, the study identifies that the number and criticality of flooded companies' trade links, along with the magnitude of the flood, correlate with the speed and severity of contagion. Interestingly, a key metric -the average criticality of affected firms' outgoing links- consistently peaks before the onset of the shock's fast-propagation regime. This could serve as an early warning indicator, giving businesses and policymakers precious time to react. By identifying these critical vulnerabilities, this research provides a framework for enhancing the resilience of global supply chains in the face of increasing climate-related and other risks.

Keywords: climate risk; supply chain; agent-based; data-driven (search for similar items in EconPapers)
JEL-codes: C60 C63 D85 Q54 (search for similar items in EconPapers)
Pages: 52
Date: 2025-02
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Working Paper: Climate stress test of the global supply chain network: the case of river floods (2025)
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