The relationship between impact and probability in supply chain risk management: a cargo theft example

Abstract

This study analyses the relationship between probability and impact for different combinations of incident and transport chain location type based on supply chain risk management theories. A deductive research method was used via employing data from the transport-related crime database incident information service (IIS). While the total risk may be the same for different probability-impact combinations, different risk management strategies are required. Regressing probability on impact gives an estimated effect of about ?0.5, instead of the theoretically expected ?1, indicating that an impact reducing strategy may reduce the total cargo theft risk more than a probability-focused strategy. An alternative risk ranking approach was suggested, which emphasises impact risk as more important than probability risk, implying that certain modi operandi are generating higher impact losses. The risk management strategy should therefore focus on reducing the probability for those incident categories.