6 Risks Logistics Providers Face: Operational, Legal, Financial, & More - Essay Sample

Introduction

Freight transporters and logistics providers are faced with various challenges and risks caused by many factors, such as conflicts, instability, terrorism, and economic downfalls. The many risks faced by logistics providers are classified into six main categories. These categories which will be discussed in this paper include operational risks, legal risks, financial risks, environmental risks, socio-political risks, and others

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Operational risks usually refer to the probability of cargo damage, cargo loss, injuries of drivers, and liability for delays of the goods being transported. Logistics providers face these risks almost daily.

Legal risks result from logistic providers not meeting contractual obligations, which lead to disputes over terms and conditions set by the government. These contractual obligations include confidentiality, severability, provisions on indemnification, claims procedures, and the relationship between the parties involved (Choudhary et al., 2019). If the logistics providers misconstrue the contractual clauses, it leads to lawsuits that may result in penalties.

The freight transporters also face financial risks, which results from a shortage of financing, unexpected cost overruns as well as budget overruns (Staznik et al., 2017). Additionally, financial risks can also result from exchange rates fluctuation and the bankruptcy of suppliers.

Environmental risk results for logistics providers result from natural calamities such as earthquakes and floods, Extreme hot and cold temperatures that increase the probability of cargo being damaged (Staznik et al., 2017). Excess rains and frost can also result in delays in the transportation of freight in all modes of transportation.

Freight transporters also face the socio-political risks, especially in unstable nations like Russia and Ukraine. Social risks result from the country's intervention of the nation's affairs, demographic pressures, as well as refugees, and people who may be displaced within the country (Staznik et al., 2017). Political risks are due to strict state legitimacy, the weak rule of law and human rights, and the unavailability of public services.

Other risks that affect logistics providers are products' regulatory risks, supply chain unreliability, and increased prices of fuels and energy like petroleum and diesel (Choudhary et al., 2019).

Logistic risks usually affect the operations of the supply chain, and therefore, it essential to manage them and even avoid them if possible as this would assist in the reduction of costs and enhance the quality of services hence improved customer satisfaction.

References

Choudhary, D., Shankar, R., & Choudhary, A. (2019). An integrated approach for modeling sustainability risks in freight transportation systems. Risk Analysis.

Staznik, A., Babic, D., & Bajor, I. (2017). Identification and analysis of risks in transport chains. Journal of Applied Engineering Science, 15(1), 61-70. https://scindeks-clanci.ceon.rs/data/pdf/1451-4117/2017/1451-41171701061S.pdf