Chapter 9
What are the 3 risk concept commitments?
Commitment of time and expertise, Commitment of financial resources, & Commitment to frequent revision & continuous improvement
The focus is to address terrorist threat to use maritime containers to deliver weapons
Container Security Initiative (CSI)
Purpose is to improve international SC and US border security through VOLUNTARY government business cooperative relationships
Customs-Trade Partnership Against Terrorism (C-TPAT)
Managing security risk is not done by one country alone, For imports the most effective SC security measures are conducted BEFORE cargo reaches the US, For exports, the revers is required
Department of Homeland Security policy
Combines common RM principles, security practices, industry partnerships and IT
Free and Secure Trade (FAST)
Focus is to security and safety of North America via commercial processing program alignment at US/ Canada/ and US/Mexico ports of entry
Free and Secure Trade (FAST)
Provides expedited processing for participants. Participants qualify by enhancing security of facilities and shipping systems as per C-TPAT; ON US/ Mexican border foreign manufacturers must also use properly placed high security seals
Free and Secure Trade (FAST)
What are some the 3 general types of risk reduction strategies (step 3)?
Hedging, Postponement, & buffering
What are the two important desirable characteristics of RM strategies in Step 3?
Most focus on high priority risks, & Should produce an action plan for mitigating high priority risks
What are some sources of transport risk?
Nature-related disruptions, Labor-related unrest, Equipment failures or network congestion, Piracy, pilferage, terrorism, Administrative mistakes, & International trade policy disputes
List of potential disruptions should be classified into broad risk categories, such as:
Product loss, Product damage, Delivery delay, Contamination, SC interruption, & Security breach
Purpose is to identify potential disruptions to freight moving though SC; Step One
Risk Identification
Testing and reviewing risk mitigation plans and disruption recovering efforts
Step 4: Risk Review and Monitoring
Mandates submission of advance electronic data on all inbound or outbounds shipments
Trade Act of 2002
Risk is the ____ and disruption is a ___
possibility; problem
Delaying resource commitments; example is delaying dispatch of drivers
postponement
The likelihood of the risk occurring
probability
What are the two key dimensions of evaluation STEP 2
probability and impact
Risk environment is dynamic, Action plans should change and improve, Goal of risk review
review and update of action plans (step 4)
A hazard or source of danger that has a possibility of incurring loss
risk
The chance of something going wrong
risk
Eliminate risk by not performing activity associated with the risk (step 3)
risk avoidance
From a supply chain perspective, pushing risk to another portion of SC is NOT what?
risk avoidance
The variety of activities undertaken by an organization to control and minimize threats to the continuing efficiency, profitability, and success of its operations
risk management (RM)
Strategies that reduct likelihood of risk or mitigate severity of financial loss (step 3)
risk reduction
For some risks, the most cost-effective strategy is to retain the risk; retained risks should be managed, including monitoring and development of contingency plans
risk retention (step 3)
All ports classified at risk for a transport security incident must have what according to the Maritime Trans Sec Act of 2002
security plans
Evaluate identified risks, Developed priorities for directing risk management and contingency planning resources
step 2 of risk assessment
Creates strategies and plans for cost effective mitigation and management of risks, Identifies specific efforts, actions, and procedures needed to reduce frequency and impact of high priority risks
step 3 of risk management strategies
An unanticipated event that interrupts the normal flow of goods and materials through the SC. These disruptions expose companies in the SC to operational and financial risks
transportation disruption
A future freight movement event with some probability of occurrence and the potential for impacting SC performance
transportation risk
Which of the following is NOT a transportation risk reduction strategy? A. Use of generic packaging B. Monitoring carrier finances C. Use of low cost service providers D. Employing cargo tracking technologies E. Performing preventative maintenance
use of low cost service providers
Focus is to identify high risk cargo in containers
Advanced Manifest Regulations
Requires carriers to submit cargo declaration to CBP before cargo reaches US (see Table 9-2)
Advanced Manifest Regulations
Targeted particularly at ocean container cargo; Trade Act of 2002
Advanced Manifest Regulations
What are some techniques for risk identification (step 1)?
Brainstorming with others, Individual interviews & surveys, & Historical data on actual disruptions
Includes advance planning to develop readiness plans in even of a disruption; "Fire Drill" approach
Business Continuity Planning (BCP)
The processes and procedures an organization puts in place to ensure that essential functions can continue during and after a disruption or disaster
Business Continuity Planning (BCP)
Focus was to protect US ports and waterways from terrorists attack, Renews security plans, tracking, managing ports vs. other countries
Maritime Transportation Security Act of 2002
Diversification; example is using multiple transport carriers rather than sole sourcing transport
hedging
What is the most common form of risk transfer (step 3)?
insurance
RM and BCP require
top management initiative (ownership) to be effective
What are the 5 new legislative acts and government programs? Important.
1. Maritime Transportation Security Act of 2002 2. Container Seurity Initiative 3. Advanced Manifest Regulations 4. CUSTOMS-TRADE PARTNERSHIP AGAINST TERRORISM 5.Free and Secure Trade
In step 3 of risk management strategies, action plans reflect one of the four approaches. What are those 4 approaches?
1. Risk Avoidance 2. Risk Reduction 3. Risk Transfer 4. Risk Retention
In the Maritime Trans Sec Act of 2002, tankers and other HIGH risk vessels must have what what two things?
Certified security plans updated at least every 5 years, & Automatic ID systems that enable vessel tracking
What are two examples of risk management?
Proactive planning a route to avoid likely delays, Developing a planned response for replacement inventory
The Container Security Initiative is implemented by who?
US Customs and Border Protection (CBP) personnel
Risks must be identified and assessed ___ cargo is loaded and ship sails
before
Risk ID should seek input from ____ of managers, supervisors, and hourly personnel
broad cross-section
Adding additional equipment capacity
buffering
Risk avoidance is often NOT
feasible
The goal of the Container Security Initiative (CSI) is to identify and inspect in ____ all containers that pose potential terrorism risk
foreign ports
The consequences, in terms of time, cost or service quality, if the risk does occur
impact
Risk is ___, uncertain, and costly
pervasive
Participating businesses in the Customs-Trade Partnership Against Terrorism (C-TPAT) act must do what 3 things?
1. Must ensure integrity their security practices 2. Must verify security guidelines of SC partners 3. Enjoy a more secure and faster SC
What are the 4 steps of the risk management process?
1. Risk identification 2. Risk assessment (evaluate impact and place priorities on identified risks) 3. Risk management strategies- create plans for cost effective mitigation & management of risks 4. Risk view- monitoring and updating
In step 3 of risk management strategies, risk mitigation action plans should contain what 4 things?
1. Roles & responsibility for developing, implementing, and monitoring strategy 2. Specification of required resources 3. Timelines 4. Description of acceptable risk level
What are the 2 approaches to testing in step 4?
1. Well communicated, controlled tests 2. Surprise tests (examines performance under pressure)
The Container Security Initiative currently covers how many ports and what percent of all containerized imported cargo
58; 86%
What are 4 ways that transport disruption can result in?
Inventory increases, Decreased in asset turnover, Lower operating performance levels, & Significant stock price declines
Risk environment is ___ & the likelihood and expected impacts of existing risks change, New risks emerge.
dynamic
T/F. Risk management is basically up to the discretion of each company, ex: there are very few government regulations
false
T/F. The second step in an effective Risk Management program is to evaluate the firm's insurance coverage.
false
What changes were made after 9/11 and the impact it had on international SC
more complex US Customs clearance process, & Challenge for U.S. policy-makers