Managing the Risk Issue - Case Study Example

Risk Management Student’s Name: Instructor’s Name: Course Code: Date of Submission: 1. Introduction Risk management is becoming of issue in almost every sector. This is because of its ability to influence the operations of a given sector or industry. For instance in the transport sector its estimated that cost of operations as a result of fluctuating oil prices in the world market are always fluctuating (Flynn 2000). This has real increased the cost of doing business in the industry as many of the companies have failed to break-even. Further, safety is also become a very critical risk issue in the transport. It is estimated that over 50,000 people world over die each year as a result of transport related accidents. On the same line following the recent increase in terror attacks in the industry, it is becoming a worrying trend for many investors including the airline, road and water operators. The other emerging risks in the transport industry include the change in climate and happening of natural disasters such as earthquakes and floods (Willis Environmental 2001). The objective of this report is to take a critical view on risk management in the transport industry and report different risks in the industry, the management process and the risk associated with managing them and the ways in which some of the risks can be managed and thereafter identify what aspect is likely to go wrong when implementing the risk management approach (AASHTO 2002). 2. Issue Identification and Literature Review Author Issues in the article AASHTO 2002 The responsibility of different state agencies in deal with emergency issues in the transport sector. Cetron M and Owen D 2008 This article explains in details various risks issues and their likely implications to the business in the future. Chin SM, Hwang, O and Han LD 2002 Issues discussed in this article involve those that make the transport sector to be very vulnerable to risks. Deakin 2001 The article addresses issues related to the future and sustainability the industry ECA 2008 The prospects of the transport industry as an economic sector Flynn 2000 Security issues and ways to manage them Gielen and Fridtjof 2005 Alternative sources of energy other than fuel Garrick 2001 Assessment of risk in the transport industry Goldman 2003 Transport sector and the global economy Kelderman 2007 Ways to meet the needs of future railway industry Lockwood 2007 Factors that influence the stability and the state of the infrastructure Morgan and Abramson 2000 Ways to improve the world surface transport National Intelligence Council 2004 Intelligence issues about transport security issues U.S. Governmental Accountability Office 2007 Ways to address future intermodal barriers in the transport sector Willis Environmental 2001 Environmental risks and their effects to the transport sector Even though these have been considered as the most common risks in the industry it’s now becoming very clear that other forces are becoming into play and thus posing more risk to sector. Among these emerging risk issues in the transport industry include the ever increasing of world oil prices, economic instability as a result of great world recessions and increased threats from the terror activities (Goldman S 2003). All these issues are causing a major worry for the industry and therefore more than ever before it’s becoming very necessary to redesign their management approaches to address all these risks. To start with, large of the world transport depend on fuel to run the vessels. However, following the political instabilities in many countries that are large producers of oil like the kingdom of Saudi Arabia, Iraq, Iran, Nigeria and Libya has led to the scarcity of this major commodity and thus leading to escalation of prices of this important commodity. The other risk is now becoming very common and that is real threatening the industry, is the act of terror by Lockwood (2007). This report identifies acts of terror as the recent emerging risk issue in the transport industry that need to be addressed. Terror acts in the sector have been common starting with the most common of September 2001 in New York and Washington where quite a number of people lost their lives. The other events of terror on the transport sector have been recorded in the Indian Ocean along the coast of Kenya, Tanzania and Somalia (ECA 2008). It’s argued that the hijacking and attacking of ships along this region is planned and managed by Somalia pirates who have become a major threat in the horn of Africa. In essence therefore, this is becoming major risk and is expected that if not tackled at earlier stages, terrorism is going to cause a lot of damage to the industry especially the supply chain as many investors are likely to withdraw from those regions that are at risk. 3. Managing the Risk Issue The major risk issue that has been identified in this case is about the acts of terrorism and ship hijacking along the Indian Ocean waters. This risk, based on its nature and the context in which it occurs, there are two major ways the risk can be managed. First, the use of security agencies to patrol on the waters and other travelling vessels like planes and major railway stations can help detect any plans of terrorism or even make arrests (U.S. Census Bureau Forecasts 2008). By imposing heavy penalties and punishment on those engaged in these activities will inject fear and reduce their operations significantly. The other approach to managing this risk is to make use of negotiations strategies to determine what the motive behind the terrorist activities is and perhaps come up with ways to address the grievances raised by those involved. Employing the security agencies approach has appraised as the best method to deal with risk management from the aspect of terrorism and piracy. This approach first and foremost does not create room for entertaining other illegal organization to come into being in the name of terrorism in order to have the grievances heard. Further, this approach is especially important in ensuring that justice is done both to the victims who in this case are the investors and the offenders or terrorists (National Intelligence Council 2004). However, for this approach to be well implemented large amount of resources have to be used starting with manpower who are expected to be deployed into those areas that are more vulnerable. Investment in terms of financial resources and equipment also has to be put in place. In deploying all these resources, it is expected to be consolidative effort of all stakeholders who include various government security agencies and the investors who are affected (U.S. Governmental Accountability Office 2007). 4. Risk of Risk Management According to Garrick (2001), risk management alone is likely to become a risk affair if not well implemented. In the case of how, risk management team is likely to identify the exact risk and the forces behind them. This is to mean that risk identification is not based on facts and real data. In the case of what, it’s the approach to use in managing the risk. This is expected fail to solve the problem despite all the efforts that may be put in. the approach in managing terror risk for example may be either through negotiations or surveying the affected places and making the arrests and then presenting them before court for prosecution and judgment according to Morgan and Abramson (2000). In the case of when, is to decide the time the risk management approach should be implemented. Finally, where is used in risk management to determine where the approach should be implemented. It’s expected that the place of implemented will help tackle the larger problem more amicably as argued by Gielen and Fridtjof (2005). Take the case of making arrests of pirates and terrorists and judging them in court. The implication of this approach is the enormous resources will have to be employed. First and foremost the patrolling ships have to be engaged and other security agencies to combat the crime. This may be a very expensive affair. Further, taking legal course for all arrests will require that the involved transport companies have to look into the process of hiring and making use of good lawyers to execute their suits. This will be very costly in terms of money and time both of which are very important resources to the business (Kelderman 2007). The stakeholders in this risk implementation approach include different governments which are affected by these risks and security agencies as the indirect stakeholders. The direct stakeholders are the transport sector investors. What is likely to go wrong in this case, is the inability of the involved stakeholders to determine who is to what and the contribution of each to the approach. Further, the element of conflict of interest is likely to take place (Chin et al 2002). 5. Conclusion and recommendation Based on the analysis of risk management in the transport industry, it is very clear that is a tall order for the stakeholders to achieve if at all they are to remain in business. This is after it has emerged that risks involved are continuously evolving and becoming even more complex to manage. This follows the fact that after identifying the risk to manage, the process of managing the risk itself is risk. For instance after identifying that is a risk to the industry, the process of managing requires that a lot of resource be put in place. This therefore calls for consolidative effort of all stakeholders to reduce the effect of risk in managing the risk. Based on this trend therefore its recommendable that for the industry to sustain there is need to work together by all stakeholders. Most important is that most of these risks such as terrorism start as small illegal activities but become big and unmanageable later on. It is therefore advisable for the industry stakeholders to make risk management a continuous process so as to identify different risks as they emerge and provide quick solutions. References AASHTO 2002, Security and Emergency Response Survey of State Transportation Agencies, presented at the Annual Meeting of the Transportation Research Board, Washington, January 2002. Cetron M and Owen D 2008, 55 Trends Shaping Tomorrow’s World Forecasts and Implications for Business, Government, and Consumers. The World Future Society, Washington. Chin SM, Hwang, O and Han LD 2002, Security Vulnerability Assessment Resources for U.S. Highway Network, presented at the Annual Meeting of the Transportation Research Board, Washington, January 2002. Deakin, E 2001, Thinking about the Future: Sustainable Transport. University of California- Davis Transportation Center. Viewed 29th May 2012 from http://www.uctc.net/trends ECA 2008, Recent Economic Trends and Prospects for 2008. Viewed 29th May 2012 from http://www.uneca.org/era2008/ Flynn SE 2000, Transportation Security Agenda for the 21st Century, TR News, No. 211, November/December 2000, pp. 3-7. Gielen, D and Fridtjof U 2005, “Alternative Fuels: An Energy Technology Perspective.” pg 26 Viewed 29th May 2012 from www.iea.org/textbase/papers/2005/ETOAltFuels05.pdf Garrick BJ 2001, The Conceptual and Philosophical Basis of Quantitative Risk Assessment, presented at the Frank L. Parker Distinguished Lecture Series, Vanderbilt University, Nashville. Goldman S 2003, The BRIC’s Path to 2050: A Dramatically Different Global Economy. Viewed 29th May 2012 from http://coursenligne.sciences-po.fr/2005_2006/gouvernance/braga/cours_1_brics.pdf Kelderman, E 2007, Report: Tolls Can’t Meet Future Highway Needs. Viewed 29th May 2012 from http://www.roadsbridges.com/Tolls-can-039-t-meet-needs-of-future-highway-funding-- NewsPiece13180 Lockwood S 2007, Factors Affecting the State of Our Transportation Infrastructure. 2007 James L. Oberstar Forum. Viewed 29th May 2012 from http://www.cts.umn.edu/Events/OberstarForum/2007/documents/lockwoodpaper.pdf Morgan DF and Abramson HN 2000, Improving Surface Transportation Security Through Research and Development, TR News, No. 211, November/December 2000, pp. 28-30. National Intelligence Council 2004, Mapping the Global Future: A Report of the National Intelligence Council’s 2020 Project. Viewed 29th May 2012 from http://www.dni.gov/nic/NIC_globaltrend2020.html U.S. Governmental Accountability Office 2007. “Intermodal Transportation: State DOTs Could Take Further Actions to Address Intermodal Barriers.” GAO Report 07-718, Viewed 29th May 2012 from http://www.gao.gov/new.items/d07718.pdf U.S. Census Bureau Forecasts released August4, 2008, Viewed 29th May 2012 from http://www.censU.S..gov/population/www/projections/2008projections.html Willis Environmental 2001, Evaluation and Prioritization of the Environmental Risks of Terrorist Action, November 2001. Read More