Lookup NU author(s): Dr Elizabeth Jackson,
Professor D John Mangan
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There is a plethora of literature on the topic of risk and risk management in the shipping industry and how it can be measured however, there are still varying points of view on how to define this highly complex and critical aspect of the sector. One of the most widely cited definitions of risk in the international shipping sector takes the view that risk is a negative phenomenon and is the “measurable liability for any financial loss arising from unforeseen imbalances between the supply and demand for sea transport” (Stopford, 2009, p.101). This definition has been developed from that of Downes and Goodman (1991, p.380) who recognise the mutual exclusivity between risk and uncertainty: “risk is the measurable possibility of losing or not gaining value. Risk is differentiated from uncertainty which is not measurable”. The fundamental difference between these authors’ points of view is Stopford’s inclusion of the term ‘measurable’. To further extend the discussion on risk, Waters (2007, p.17) suggests that “Uncertainty means that we can list the events that might happen in the future, but have no idea about which one will actually happen or their relative likelihoods”, while “Risk means that we can list the events that might happen in the future, and can give each a probability”. The key difference between risk and uncertainty, according to Waters (2007, p.17) which is aligned with Stopford’s thoughts, is that “risk has some quantifiable measure for future events, and uncertainty does not”. Therefore, risk is centred on uncertainty and measurability. If one subscribes to the philosophy that risk can be measured, then the time-honoured conclusions of Harrington (1991, p. 82) can be drawn upon: “If you cannot measure it, you cannot control it. If you cannot control it, you cannot manage it. If you cannot manage it, you cannot improve it.’’ Risk management is defined as “the process whereby decisions are made to accept a known or assessed risk and/or the implementation of actions to reduce the consequences or probability of occurrence” (Brindley, 2004 p. 22). Therefore, risk management is a key determinant for an industry, such as the shipping sector, which is dominated by cycles of rates and prices (Kavussanos and Visvikis, 2006). Risk management for shipping is defined from Syriopoulos (2011) as “the process by which various risk exposures are identified, measured and controlled”. In order for volatility and vulnerability experienced in the maritime container sector to be reduced, all risk management capabilities within shipping organisations need to be strengthened. In addition, existing risks and likely future risks must also be identified (Cardona, 2004). For that reason, many risks relevant to cost and connectivity of the maritime transport sector for the UK are addressed in this paper.
Author(s): Jackson EL, Karamperidis S, Mangan J
Editor(s): Wilding, R.
Publication type: Conference Proceedings (inc. Abstract)
Publication status: Published
Conference Name: 17th Annual Logistics Reseach Network Conference
Year of Conference: 2012