Risks In International Logistics – International logistic providers face many challenges, which include but are not limited to operational or strategic risks. The risks involved can arise due to various factors like cross-border conflicts, legal issues, economic instability, and more. With increasing globalization, the risks associated with transportation increase as well. This is why it is important to use strategies that not only safeguard transports but also reduce the risks involved.
Risks In International Logistics
Let’s have a look at the risks international logistic providers face.
The Main Risks
The main risks include acquisitions or mergers, lack of security or safety features, or the risk of theft or delay. Various logistic providers have dealt with risks such as those which arise due to filing of bankruptcy by transport providers, or liability for the loss or damage to the goods.
It is important to note that a few of the risks, which occur due to lack of safety and security measures, can be avoided by implementing appropriate procedures. Some of which include automation, the inclusion of chain of responsibility, enhancing the efficiency of security interface, and so on.
The Legal Risks
Legal risks arise when the provider is unable to meet the contractual obligations or when there are disputes over the conditions and terms stated in the contract. Some of the common terms and conditions mentioned in the contact are related to confidentiality, claim procedures, the relationship shared by the parties, severability, and more. Wrong interpretations of such clauses often result in disputes which end up in court.
The Financial Risks
Canadian logistic companies face various financial risks, which occur due to budget and cost overruns or due to a lack of financing. Financial risk can also happen when bankruptcy is filed by the supplier or the fluctuation in the exchange rate.
The Environmental Risks
Climatic changes or natural hazards can have a negative impact on international logistics, and on the various modes of transportation. While the risks on the providers exist, transportation of goods also leads to pollution of air, water, and soil. A study has shown that international shipping is a major contributor to gas emissions.
Risks Due to Socio-Political Factors
International logistic providers often face damages or delays due to socio-political factors. In most cases, there can be a major delay when the goods need to be moved across countries. The associated risk is much higher when unstable borders are involved. Socio-political risk is calculated based on social, political, and economic indicators.
Ship Fires or Transportation Accidents
While not all logistic providers face this, there is always a risk of ship fires, or vehicle accidents. Cargo fires on the sea have occurred and therefore companies need to pay extra attention to the safety measures taken.
In the year 2018, two fires occurred on container vessels and many accidents and fires of container ships followed this incident. One of the largest incidents that occurred was on January 3 when a vessel was transiting to Canada from Sri Lanka via the Atlantic Ocean.
Most fires occur on the containers that move dangerous goods, or when the cargo is not secured properly. Container fires are always a risk for supply chains that are very dependent on maritime transport.
Aviation Safety and Shutdowns Due to Drones
Even though there has been quite a progress when it comes to aviation regulations involving drones in various countries, the lack of awareness by the public has caused disruptions for air traffic logistics. Drones are easily accessible these days, and the users are unaware of the aviation regulations and cause delays or even cancellations of flights. A study stated that disruptions caused due to drones and flight cancellations have increased by more than 1000% since the year 2014. Airports across The United States and Canada have reported various cases of near misses with drones. Countries like Russia, Egypt, France, Poland and New Zealand are a few of the countries, which have reduced this risk by implementing strict rules.
Other factors that increase the risks in international logistics are the increasing or fluctuations in fuel or energy prices, and goods regulations. International logistic companies need to work towards reducing the risks as it not only improves cost-effectiveness but also improves customer satisfaction.
The risks in international logistics are dynamic and are being called out openly in public or financial statements, which convert minor disruptions into board-level conflicts. Companies face new challenges every year, with new unexpected threats like Covid-19.
This is what makes it important to re-evaluate risks and rethink the implemented strategy. With the help of intelligence provided by supply chain management companies, firms can now adapt to their networks and work towards protecting their bottom line.
- Posted by admin
- On October 13, 2020