Economic Supply Chain Risk Capital (ESCRC) is a framework developed from the research of Dr. Kamil J. Mizgier, bridging financial risk capital principles and operational supply chain risk management. ESCRC quantifies potential losses across interconnected supply networks and enables organizations to allocate resources strategically.

What is ESCRC?

ESCRC adapts the concept of economic capital—traditionally used in financial institutions—to supply chain networks. Instead of allocating capital purely for operations or investments, ESCRC:

• Measures tail-risk exposure in supply chains
  
  

• Aligns capital allocation with risk contribution
  
  

• Supports risk-adjusted performance assessment
  
  

By translating uncertainty into measurable economic terms, ESCRC transforms supply chain risk from a reactive concern into a strategic tool for decision-making.

Why ESCRC Matters

Supply chains are complex networks where disruptions propagate through multiple suppliers, manufacturers, and logistics nodes. Traditional linear risk assessments fail to capture systemic exposure. ESCRC:

• Identifies the most impactful suppliers and nodes
  
  

• Quantifies risk contributions for each part of the network
  
  

• Enables capital allocation decisions based on statistical models
  
  

This approach ensures that resources are focused where they reduce the greatest risk, improving resilience and operational efficiency.

1. Quantify Network Risk
   
   

   • Model the supply chain as an interdependent network
     
     

   • Measure potential disruptions and cascading effects
     
     

2. Measure Tail-Risk Exposure
   
   

   • Apply stochastic simulation and scenario analysis
     
     

   • Identify extreme loss events
     
     

3. Allocate Capital Based on Risk Contribution
   
   

   • Distribute economic capital across business units and suppliers
     
     

   • Prioritize investments and risk mitigation strategies
     
     

4. Assess Risk-Adjusted Performance
   
   

   • Track outcomes relative to allocated capital
     
     

   • Optimize supplier development, sourcing strategy, and risk mitigation
     
     

Benefits of ESCRC

• Data-driven decision-making: Moves beyond qualitative scorecards
  
  

• Strategic resilience: Protects against systemic disruptions
  
  

• Risk transparency: Clear mapping of risk contributions
  
  

• Resource optimization: Allocates capital where it reduces the most risk
  
  

• Academic foundation: Based on peer-reviewed research by Kamil J. Mizgier
  
  

Who Should Use ESCRC?

• Procurement and supply chain managers
  
  

• Enterprise risk management teams
  
  

• CFOs and finance teams integrating operational and financial risk
  
  

• Organizations managing global supply networks
  
  

Learn More About SCIRISK Frameworks

• Supply Chain Risk Modeling – Quantify and simulate network risks
  
  

• Risk-Based Capital Allocation – Optimize investment under uncertainty
  
  

• About Kamil J. Mizgier – Explore the research underpinning ESCRC