Risk Mitigation Strategies for Doing Terminal and Warehousing Businesses: Russian Case Study

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MAGAZINE №3 (74) June 2016

AUTHOR PANOVA Y.N., HILMOLA O.-P.

CATEGORY Logistics infrastructure Warehouse Logistics Uncertainty and risk in the supply chain Logistics services market 

ABSTRACT

Research work considers the application of modern methods of simulation that create preconditions for controlling the process of dry port development, i.e. making managerial changes and identifying the most stable parameters of the system for the purpose of choosing the optimal alternative scenarios of the project realization in the uncertainty and risks. Based on the systems dynamics simulation, the model is developed, with the help of which the analysis of the reactive, proactive alternatives, as well as their combination for solving the task of the risk mitigation, can be conducted. The outcome of the experiments with the model, such as net present value, discounted payback period, and coefficient of variance, allows identifying the scenario that reduces the impact of risks on these decision-making criteria of investment project efficiency. Additionally, a computer simulation guarantees the capital appraisal of the scenario of the project realization on the ground of the distributed rather than the point estimation of the project performance criteria. This approach complies with the world of project planning and development, where the events occur with a certain probability and rarely turn in a deterministic manner, and, therefore, can be accurately described by the non-deterministic model than from the formula-based point of view. The proposed theoretical and practical implications for the management of risks can help analysts and planning managers in budget decision-making, avoiding unnecessary cost overruns in dry port projects. 

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