Abstract: 

To achieve double-win, it’s important for logisticsoutsourcing enterprises to minimize risks and reduce risk impacts. It’s alsoimportant for the contract-issuing party and the contractor to effectively and efficientlypredict, prevent and control risks. This paper extends the traditional riskmatrix and adds an “Attention” item. We then summarize five steps for riskmatrix analysis. The third part of this paper applies the revised model toBB-HB (anonymous company names) logistics outsourcing operations. Beforebuilding up the final matrix, we also creatively filter the risk factors anddevelop a first and second-grade index system. The findings provide somesignificant hints on risk management measures for logistics-relatedenterprises. 

Key Words: Risk Matrix;Logistics Operations; Empirical Tests

1 Risk Matrix Model

     Risk Matrix is a qualitative andquantized analytic method. It often applies to a risk management project toidentify risks and their effects for project assessment. As early as 1995, riskmatrix was used in Electronic System Center (ESC) of American air force forweapon system research project.

The basic principles of risk matrix are as follows:(1) Identify and predict potential risks for a project and make them Risks item(R); (2) Evaluate the probability of each risks and make them Risk Probabilityitem (RP); (3) Assess the impacts of each risks and make them Risk Impact item(I). During risk management, people would find that some risks often happen butwith limited impacts; some seldom happen but with significant impacts.Therefore, (4) combine the effects of Risk Impact item (I) and Risk Probabilityitem (RP) to get the Risks Rating (RR). And finally, (5) calculate the Bordavalue to determine the importance of the risks..

2 Application of Risk Matrix Model in LogisticsOperations

Application of risk matrix in logistics operations forrisk analysis and management can follow the five steps:

   Step 1: Redesign Risk Matrix Model 

Risk matrix includes four basic factors /items;namely, risks item, risk probability item, risk impact item and risks ratingitem which is the combination of risk probability and risk impacts. However,the origin and formation of risks may differ because of different culturalbackground and management concepts of the contract-issuing party and thecontractor. Therefore, when applying risk matrix, one has to takecharacteristics of enterprises, industries and contract object intoconsideration and reassess the items of risk matrix. Then, one can identify themajor risks, set the risk probabilities and define the risk impacts. And it’sbetter to revise and specify the items of risk matrix so to set up a new modelfor a specific enterprise.