Author(s)

Lei Zheng, Senyu Xu

Corresponding Author

Senyu Xu

Abstract

This paper proposes an internal control system for commercial retail enterprises based on risk management. Based on the mean-preserving transformation and mean-CVaR criterion in probability theory, the author first studies the impact of demand variability reduction and risk preference on the supply chain system. This paper then builds a centralized system of supply chains and demonstrates that promotional efforts and reduced demand variability can increase the profitability of centralized systems. Finally, this paper establishes a decentralized supply chain system under the risk preference of retailers. System simulations demonstrate that a combined contract of revenue sharing and quantity discount can coordinate a supply chain where demand depends on promotional efforts and levels of variability.

Keywords

Risk Management, Retail, Supply Chain, Internal Control, Internal Control Risk System