Evaluating supply chain finance risks in a cross-border e-commerce context: An improved TOPSIS approach with loss penalty

The rapid development of cross-border e-commerce (CBEC) has created urgent demands for efficient capital coordination among cross-border supply chain members. Here, CBEC-supply chain finance (CBEC-SCF) is considered an effective solution. Based on the classification of traditional supply chain finance and CBEC characteristics, this study systematically proposes three categories of operational modes for CBEC-SCF: CBEC-based warehouse receipt financing, order financing, and factoring. Then, CBEC-SCF risks are analyzed from various perspectives, including credit, market, operational, and legal risks. Evaluating the overall risk levels of different CBEC-SCF modes is a typical multi-criteria decision-making (MCDM) problem, where various sub-risks serve as criteria. Given that decision makers (e.g., banks) are usually loss-averse, this study proposes an improved Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) method with a loss penalty to rank the overall risk levels of different CBEC-SCF modes. The boundary conditions under which the improved method changes the ranking of alternatives are theoretically proven. To better fit a wider range of application scenarios, the improved TOPSIS is further extended to cases involving multi-level criteria, “experts” as the criteria, and fuzzy decision-making. Finally, case studies are conducted to verify the proposed method’s applicability and significance. The results show that the ranking of the CBEC-SCF modes may change depending on the bank’s degree of loss aversion.