Risk of logistics processes in the context of value added creation – relationship matrix: risk management – value added of logistics processes
One of the fundamental goals of increasing generated and delivered value added is continuous process improvement. A number of opportunities and potentials in this regard are associated with the concept of risk management. Planning, organizing, executing, and controlling disruptions in the course of logistics processes contributes to creating a higher level of realized value added for the customer and higher value added for the enterprise.
Achieving the assumed goals in this area can be considered in two directions. On one hand, the identification and assessment of processes in terms of creating and realizing value added is of key importance in designing an integrated risk management system; on the other hand, an optimally designed integrated risk management system translates directly into its creation. The first aspect of the relationship between risk management and the creation of value in logistics processes is associated with the division of logistics processes according to their contribution to the creation and realization of value added. The second, however, points to the fact that the better the developed risk management system (better risk assessment), the greater the increase in process value.
Developing risk management strategies based on identifying the contribution of processes to the creation and delivery of value added allows for:
- precise identification of risks in a given area of process significance in terms of creating and delivering value added
- determining which processes should be considered first when creating a strategy
- determining which processes are worth allocating greater financial resources to in order to protect them from the occurrence of undesirable phenomena
- determining how to reduce the probability of a given threat occurring
- determining how to limit the consequences of a given threat occurring
- developing common, transparent criteria for assessment, possibilities for comparison, and skills for dealing with risks concerning a specific area of process significance in terms of creating and realizing value added
- defining the relationship between the effectiveness of risk management and the creation and realization of value added by logistics processes.
Even intuitively, it can be stated that the better the developed risk management system, the greater the increase in process value. The problem is that, until now, it has been mainly intuitive. There is no precise, number-based data yet that clearly indicates how, for example, EBIT changed after the implementation of a risk management system, let alone value added.
Estimating the probability of risk using analytical methods is not an easy task. This is due to the fact that most cases concern the assessment of one-off events that have no precedents, making them difficult to describe analytically.
The basis for developing an analytical model for quantifying risk in the context of creating and delivering value added can be the proposed relationship matrix: risk management – value added of logistics processes.
The article comes from the “Logistyka” magazine 2/2009.