Risk Assessment Index System of A Logistics Project
4.2 Risk Assessment Index System
4.2.2 Risk Assessment Index System
１００ Fiscal Risk Investment risk Investment risk is due mainly to the uncertainty caused by
the business activities from the financial results of the logistics enterprises.
Liquidity risk Liquidity risk refers to the possibility that the assets of the logistics enterprise cannot transfer cash through a normal and certain method, or the debt and the payment obligation cannot be performed normally.
Financing risk Financing risk refers to the uncertainty caused by the fiscal of enterprises from the financial results due to changes in the supply and demand markets of funds and the
macroeconomic environment.
Risk of changes in interest rates
The same or similar as the exchange rate.
Environment Risk
Macroeconomi c development
Logistics projects include most things in society. If the macroeconomics of a country proceeds well, sizeable opportunities for logistics enterprises to develop their projects will occur, otherwise, the development of logistics projects may be affected because of the effect of numerous other activities.
Policy and law Policy and law risks refer to the government’s major changes in the policies of the relevant logistics enterprises or the introduction of important measures and regulations, which cause fluctuations in the price of the logistics market.
Political risk Political risk is the uncertainty caused by the political environment of the host country or the political relationship between the host country and other countries.
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system based on Sun (2003) (for the detail of WBS method, please see Chapter 3), which refers to the grouping of the elements in a project based on the purpose of deliverables. WBS summarises and defines the scope of work for the entire project, with each part of WBS representing a detailed definition of the project’s work. By using WBS method, this thesis can clarify the nature of the various components of the risk and their relationship with one another (Xu et al., 2018; Zhang, 2014), as well as the relationship between the risk and the environment, thereby reducing the uncertainty in the process of identifying the project risk. Therefore, this thesis uses WBS method to transform large into small systems, decompose complex into simple and easily recognised situations and clearly show the hierarchical relationship of risk. By doing this, this thesis can construct more clearly and concise a risk index system. The specific steps taken in this process are as follows. The entire large-scale logistics project is decomposed into subprojects by category and hierarchy, and each potential risk factor is then decided separately. Subsequently, the subproject is further decomposed, and finally, layer analysis is performed until all relevant risk factors are determined.
Specifically, the basic idea of WBS is to ask people to consider each part of project to make the work plan more concise. Following the same steps and idea, this thesis at firstly considers from the whole process to divide risk into two parts: logistics enterprise risk and logistics environment risk as discussed previously in this chapter, which is the first step of WBS. Then considering each part separately, for logistics enterprise risk, this thesis divides it further into 3 parts, which are management risk, technical risk and operation risk also shown separately earlier in this chapter. Then for each part, this thesis divides into different types of risks. As seeing from here, following the idea of WBS method, this thesis considers risk from top to bottom and considers each type of risk that large-scale logistics projects may face. Following the same steps, this thesis sets 23 indicators for the six types of risk to evaluate the risk of the logistics project based on the actual situation. (Figure 4-3). The logistics enterprise risk includes mainly management, technical and operational risk, whereas the logistics environment risk includes mainly market, fiscal and environment risk. This is presented as follows:
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Figure 4- 3 Risk Assessment Index System
(1) Logistics enterprise risk
a) Management Risk (U1): Manager quality (U11), Organizational structure (U12), Corporate culture (U13), Shareholder protection (U14) and Management process (U15);
b) Technical Risk (U2): Technical deficiencies (U21), Technical protection (U22), Technical development (U23) and Technical use (U24);
c) Operational Risk (U3) : Risk due to shippers (U31) , Risk due to equipment (U32) and Risk due to customers (U33);
(2) Logistics environment risk
a) Market Risk (U4): Changes of consumer demand (U41), Behavior of competitors
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(U42), Uncertain and asymmetrical information (U43) and Exchange rate (U44);
b) Fiscal Risk (U5): Investment risk (U51), Liquidity risk (U52), Financing risk (U53) and Risk of changes in interest rates (U54);
c) Environment Risk (U6): Macroeconomic development (U61), Policy and Law (U62) and Political risk (U63).
The notation for each risk, such 1, will be used in Chapter 5 in the detailed discussion and presentation of a logistics application. Sun (2003) argued that the index system cannot be the same at all times and must be changed with different situations. The index systems of certain projects have not changed for several years. These index systems often fail to keep up with changes, and index evaluation has just become a kind of form.
An index system must be adjusted in a timely manner to respond to the variant changes in the real situation. What the market demands and what customers require must be reflected in the performance index in a timely manner. When the reality changes, the index should be adjusted in time using the method introduced in this thesis and the evaluation criteria and weights should be adjusted at any time to reflect the risk focus of the logistics enterprises.