Risk Management Practices in a Global Logistics Organization

Introduction
This report involves an audit of the risk management practices used in an
organization that is a logistics service provider. The logistics organization
provides customized logistics solutions to companies worldwide and has global
expertise into land transport, ocean and air freight services. It has an
international network of 5000 offices working with over 72,000 vehicles and 425
aircraft carriers in 220 countries including 120,000 destinations. The organization
has over 300,000 employees working for them. The aim of this report is to
investigate the risk management structures used in the organization to
understand their effectiveness through exploration of tools and techniques used
for investigation, analysis and mapping of risks, disaster recovery planning
process, contingency planning, control, and organizational structure.
Risk Management Audit
Risk Management
For risk management, standard steps can be followed including risk
identification, risk analysis, risk ranking, and risk response.
Risk Identification: For identification of risks, macro ad microscopic aspects
related to different perspectives have to be considered including social,
technical, political, managerial, temporal, environmental, financial, geographical,
financial, and legal and outreach (Anderson, 2010). Based on these topics, sub-
topics and risk scenarios can be identified for the logistics company as shown in
the table below:
Risk Topic Risk Sub-topics Risk Scenarios
Social Education
Competition
If staff is not trained properly, they would not
perform
Market share will drop with stiff competition
faced
Technical System System failure can cause data loss resulting
into interruptions in business
Political Security Loss of transported goods can negatively
affect company reputation
Financial Delays Delays in fund release or salary disbursement
would damage company reputation
Infrastructur
e
Transportation
modes
Delays in deliveries
Environment
al
Pollution Vehicles used in transportation cause emission
of harmful gases
Outreach Marketing Incorrect customer segmentation
(APM Group Ltd, 2017)

Risk Assessment: The strategic objectives of the organization have to be
defined such that the risks identified can be explored to understand how they
would be affected. The strategic objectives can be identified from the four
categories including delivering highest quality through utilization of local
expertise as well as global network, creation of global environment using multi-
cultural heritage, providing superior quality solution using efficient processes,
and creating cooperation between citizens by considering social and
environmental needs of local communities, employees, and the public. Risk
assessment involves identification of severity of risk and probability of it
occurrence (Armour, 2017). This value can be used for giving rank to the
respective risks
Table A: Risk Impacts
Impact
Level
Descriptor Description
0 Negligible No monetary loss
1 Minor Some loss of dignity and finance
2 Moderate Moderate financial loss and reputation loss
3 Serious Serious loss causing interruption in business
4 Severe Major loss and interruption
5 Catastrophic Failure that can lead to shut down of the company
(Avdoshin & Pesotskaya, 2011)
Table B: Risk Probabilities
Probabilit
y Level
Descriptor Description
0 Impossible Event would not happen
1 Rare Event can occur in exceptional circumstances
2 Unlikely Event can occur at times
3 Moderate Event should occur some time
4 likely Event can occur in most circumstances
5 Most certain Event is expected to happen (Bayne, 2002)
Risk Ranking: Based on the level of impact and the risk probabilities, risk
ranking can be provided to each risk from acceptable, moderate, significant, and
severe to high risk categories.
Risk Probability
Impact
Level
0 1 2 3 4 5
0 0 0 0 0 0 0
1 0 1 2 3 4 5
2 0 2 4 6 8 10
3 0 3 6 9 12 15
4 0 4 8 12 16 20
5 0 5 10 15 20 25
Risk
Catego
No Risk 1-2: Acceptable 3-5:
Moderat
6-12:
Significa
13-18:
Severe
19-25:
High

ry e nt Risk
(Bodicha
, 2005)
Risk Matrix: Each identified risk can be given ranking based on its likelihood of
occurrence and impact on the project to form the risk matrix as shown below:
Risk Impact Probabilit
y
Rankin
g
If staff is not trained properly, they would not
perform
4 3 12
Market share will drop with stiff competition faced 4 2 8
System failure can cause data loss resulting into
interruptions in business
5 1 5
Loss of transported goods can negatively affect
company reputation
4 2 8
Delays in fund release or salary disbursement
would damage company reputation (Health and
Safety Authority, 2006)
3 3 9
Delays in deliveries 4 4 16
Vehicles used in transportation cause emission of
harmful gases
4 2 8
Incorrect customer segmentation 5 1 5
(Coop
er,
2004)
Risk Response: Based on the level of severity of the risk, an appropriate
response can be planned from acceptance, avoiding, transfer and mitigation.
Acceptable risks are not worked upon while high and sever risks are avoided.
Moderate level risks can be mitigated and significant risks can either be avoided
to transfer to another party or mitigated in case both are not possible (Curtis &
Carey, 2012)
Risk Ranking Descripto
r
Response
If staff is not trained
properly, they would not
perform
12 Significa
nt
Avoid by identifying training
needs and making provisions
for training
Market share will drop with
stiff competition faced
8 Significa
nt
Transfer by negotiating with
suppliers or mitigate by cost
cutting
System failure can cause
data loss resulting into
interruptions in business
5 Moderate Mitigate by recovering the lost
data
Loss of transported goods
can negatively affect
company reputation
8 Significa
nt
Transfer the risk to
transporter or insurance
company for damaged goods
(Solomon Island Government,
2009)
Delays in fund release or 9 Significa Mitigate risk by releasing