https://doi.org/10.52903/wp2025337
CLIMATE STRESS TEST OF THE GLOBAL SUPPLY CHAIN NETWORK: THE CASE OF RIVER FLOODS
Georgios Papadopoulos
Bank of Greece
Javier Ojea-Ferreiro
Bank of Canada
Roberto Panzica
Bank of Portugal
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, floods, agent-based, data-driven
JEL-classifications: C60, C63, D85, Q54
Disclaimer: The analytical work has been completed while the authors were working at the Joint Research Centre of the European Commission, Italy. The views expressed are those of the authors and do not necessarily reflect those of the Bank of Greece, the Bank of Canada, the Bank of Portugal, the Joint Research Centre or the European Commission. All errors and omissions are ours.
Correspondence:
Georgios Papadopoulos
Economic Analysis and Research Department
Bank of Greece
El.Venizelos 21, 10250 , Athens, Greece
Tel.: +30-2103202415
email: georpapadopoulos@bankofgreece.gr