A risk appetite model of seaport-fulcrum supply chain risk – the case of Indonesia stakeholders

Abstract

Purpose – The use of risk appetite models was to understand how far the seaport-fulcrum supply chain stakeholders were willing to absorb the conditional seaport risk attribute to minimize potential revenue loss. Additionally, incorporating the decision-maker’s risk appetite into the supply chain risk assessment process enables organizations to develop tailored risk management strategies that align with their overall risk tolerance. Design/methodology/approach – The risk appetite models is consisted of two parameters, such as predicted probability of revenue loss and utility score. Both parameters reflect the relationships between preferences, utility and behavior of the stakeholders. Findings – The study found that port authorities, including seaport operators, were more willing to accept the conditional seaport risks than seaport users, who tended to be more risk-averse in both the sporadic and repetitive risk cases. This suggests that seaport users rely on the policies and decisions made by the port authorities. Research limitations/implications – Comparisons with the utility maximization concept are needed to understand to what extend the stakeholder preference toward the revenue loss is related to seaport-fulcrum supply chain risk factors and attributes. Practical implications – The model can help the stakeholders to prioritize the potential supply chain threat factors and conditional seaport risk attributes toward potential revenue loss. Furthermore, risk tolerance can also help the stakeholders to balance effective risk management and their preferred level of risk exposure. Originality/value – Instead of using surveys and simple statistical calculations, this study considers the interdependency of conditional seaport risk in computation. This makes the risk tolerance of conditional seaport risk attributes correlated directly with the potential supply chain threat factors.