Analysis of operational risks in container shipping under the impact of blockchain application
Creators: name: Nguyen, S
Publisher: name: University Of Tasmania
Year: 2023

description: Container shipping is a crucial component of the global supply chain. Container shipping service providers face various operational risks, negatively affecting their capacity, service quality and profitability. Blockchain, an emerging technology in the digitalisation frontier of supply chain management, has been trialled and implemented in container shipping with a prospect of improving operations in areas such as communication security and efficiency, simplifying procedures, and risk mitigation and prevention. However, the technology immaturity and potential disruption to legacy systems and business practices create an environment for new risk scenarios. Despite such criticality, research into this area is virtually non-existent. This study investigates the situation of container shipping operational risks (CSORs) upon the integration of blockchain applications.<br>This study adopts a sequential exploratory mixed-methods research methodology to identify and assess potential operational risks in container shipping blockchain-integrated systems (BISs). In the first phase, qualitative research focused on establishing a solid foundation for quantitative risk analyses for the second phase. Utilising literature review results and thirty-two (32) semi-structured interviews with experts from container terminal operators, shipping companies, and freight forwarders in Australia, this study establishes a risk network of twenty-five (25) risks and fifty-four (54) causal connections between them. The second phase concentrated on quantitatively assessing the risk situation. Risk Network Analysis (RNA) and Bayesian Network (BN) analysis were applied to a database of 126 completed web-based surveys. The analyses were designed taking into consideration the possibilities of multi-event risk scenarios (MESs). The aim was to account for the potential pervasiveness of the consequences of information operational risks to physical and payment operations.<br>The results indicate various possibilities of CSORs in container shipping BISs. The identified risks and causal connections highlight the importance of multiple components and factors in a BIS, not only the blockchain and its applications, but also the interfaces and communications with other operating systems. The resultant risk network reveals a significantly complex risk situation with various possible MESs. Most MESs were assessed as unlikely, and their likelihood decreased as the complexity of the scenarios increased. However, it was found that information operational risks are strongly connected to physical and payment operations in container shipping BISs, threatening accumulative and highly uncertain consequences. Meanwhile, potential risk underestimation and overconfidence were detected in direct assessments through risk parameters, especially with information operational risks. Risks were prioritised multidimensionally, yielding unique and comprehensive profiles for individual risks that consist of magnitude, uncertainty, critical connections, involvement in MESs, and contribution to the overall complexity of the risk situation.<br>The comprehensiveness of the risk assessment results allows risk mitigation and prevention strategies to be recommended. Risk management in BISs requires container shipping service providers to apply a cautious approach to resilient system design, contingency planning, progressive technology deployment, and the necessity of continuous improvement to the risk-analysis knowledge base. Furthermore, the collaboration between industry stakeholders is required to establish a standardised and decentralised data communication and management model. Meanwhile, governmental and intergovernmental frameworks to recognise, guide, and regulate BISs are essential for their feasibility and justiciability. Utilising the qualitative database, this study also differentiates between the approaches of container shipping companies, terminal operators, and freight forwarders to blockchain application, together with five barriers of financial, technological, legal, managerial, and cultural. This result depicts a larger picture of blockchain adoption in container shipping and contributes to a solid knowledge base of the risk situation.<br>Methodologically, this study reveals the limitation of traditional risk analysis models in analysing complex risk situations and novel cyber-physical systems. The newly proposed methods of risk network analysis and the combination of parameter-based and event-based BNs investigate risks with active handling of complexity, uncertainty, and ambiguity. Insights and foresight into the risk situation of BIS were derived with consideration of MESs and addressing the potential subjective bias of domain experts. The constructed risk network in this study enables multiple risk prioritisation approaches with additional analyses (e.g., uncertainty analysis), which strengthen the validity of the analysis.<br>This study has made academic and managerial contributions. It is the first to analyse CSORs with the presence of BISs. It contributes to filling the knowledge gaps of risks in blockchain applications, information operational risks, and their potential impacts on container shipping operations. This study proposes, demonstrates, and validates a comprehensive framework to take MESs prudently and comprehensively into risk assessments. It showcases the feasibility and informativeness of risk analysis beyond individual and single-dimensional risk prioritisations. To the container shipping industry, this study provides a comprehensive view of the potential failure modes of BISs, confirming operational risk as an adoption barrier. The research outcomes, including the risk network and quantitative analysis models, could be used in risk management activities (e.g., screening blockchain applications, developing risk management plans, and assessing and monitoring operational risks). Finally, this study suggests a more prominent role of information operations in the future with the adoption of blockchain applications, concentrating on data availability, integrity, and security.