Shaanxi Normal University International Business School Baolai Wei A Cost Analysis for Navigation Risk.

Shaanxi Normal University

International Business School

Baolai Wei

A Cost Analysis for Navigation Risk A Cost Analysis for Navigation Risk

I. Research BackgroundI. Research Background

1.Transportation industry is the link that connects 1.Transportation industry is the link that connects production, distribution, exchange and consumption production, distribution, exchange and consumption in the national economy, the bridge of international in the national economy, the bridge of international communication, and also an important part of communication, and also an important part of national defense construction.national defense construction.

I. Research BackgroundI. Research Background

2.As a transportation industry, navigation has such 2.As a transportation industry, navigation has such advantages as large capacity, low cost, low energy coadvantages as large capacity, low cost, low energy consumption and making use of natural waters.nsumption and making use of natural waters.3.Developing navigation can improve national 3.Developing navigation can improve national industrial structure and technical structure.industrial structure and technical structure.4.Navigation has such disadvantages as high debt 4.Navigation has such disadvantages as high debt management, high cost expenditure and changeable management, high cost expenditure and changeable market. market.

II. Purpose and SignificanceII. Purpose and Significance

1. To prevent and control navigation risk and reali1. To prevent and control navigation risk and realize system securityze system security

2.To strengthen the navigation risk cost analysis a2.To strengthen the navigation risk cost analysis and realize the effective management of navigation nd realize the effective management of navigation risk cost risk cost

III. Navigation Risk CostIII. Navigation Risk Cost

The relevant expenses and fees to keep safety operaThe relevant expenses and fees to keep safety operation, prevent or reduce the occurrence of dangers ition, prevent or reduce the occurrence of dangers in the navigation process, or the lost monetary measn the navigation process, or the lost monetary measurement in case of failing to reach expected risk maurement in case of failing to reach expected risk management objectives, is the cost expenditure to redunagement objectives, is the cost expenditure to reduce the uncertainty of navigation, and it can be dividce the uncertainty of navigation, and it can be divided into navigation risk control cost and navigation ed into navigation risk control cost and navigation risk loss cost.risk loss cost.

III. Navigation Risk CostIII. Navigation Risk Cost

One One importantimportant goal of navigation risk management is t goal of navigation risk management is to evaluate the overall acceptable risk level of shipping co evaluate the overall acceptable risk level of shipping companies during stable operation.ompanies during stable operation.

TThe traditional navigation risk management he traditional navigation risk management methods:methods:

1. Conservation: the risk consequences are smaller or less i1. Conservation: the risk consequences are smaller or less important, and have mild effect on shipping companies.mportant, and have mild effect on shipping companies.2. Circumvention: the risk consequences and severity are u2. Circumvention: the risk consequences and severity are unbearable for shipping companies and affect the operation nbearable for shipping companies and affect the operation of shipping companies.of shipping companies.3. Minimization: most of the risk consequences are within t3. Minimization: most of the risk consequences are within the acceptable range of shipping companies and preventive he acceptable range of shipping companies and preventive measures are taken to reduce the risk possibility according measures are taken to reduce the risk possibility according to the risk tolerance of shipping companies.to the risk tolerance of shipping companies.

IV. Characteristics and Composition of Navigation Risk IV. Characteristics and Composition of Navigation Risk CostCost

Navigation risk cost can be divided into: Navigation risk cost can be divided into: 1.Execution cost of safety standards of navigation (input 1.Execution cost of safety standards of navigation (input cost of safety facilities, personnel management and traincost of safety facilities, personnel management and training costs); ing costs); 2.Preventive maintenance cost (technical risk cost); 2.Preventive maintenance cost (technical risk cost); 3.Voyage risk cost (risk loss cost); 3.Voyage risk cost (risk loss cost); 4. Environmental risk cost.4. Environmental risk cost.

Navigation risk loss cost can be divided into:Navigation risk loss cost can be divided into: 1. Internal loss cost; 1. Internal loss cost; 2. External loss cost.2. External loss cost.

V. Navigation Risk Cost ControlV. Navigation Risk Cost Control

Navigation risk cost management:Navigation risk cost management:

1. Target cost management;1. Target cost management;2. Determination of target cost: 2. Determination of target cost: a. raise of problems; a. raise of problems; b. determination of main influence factors;b. determination of main influence factors;3. Breakdown and control of target cost.3. Breakdown and control of target cost.

Benefit Indexes of Navigation Risk Cost ManagementBenefit Indexes of Navigation Risk Cost Management

QQ(Benefit rate of navigation risk management) (Benefit rate of navigation risk management) = = NBNB (net risk benefit) / (net risk benefit) /CC (risk control cost) (risk control cost)

NB NB stands for the net benefit of navigation risk management in stands for the net benefit of navigation risk management in report period, i.e. the cost reduction of risk loss;report period, i.e. the cost reduction of risk loss;CCtt stands for the risk control cost during the operation of shipping stands for the risk control cost during the operation of shipping companies in report period;companies in report period;K K stands for the investment expenditure of navigation risk cost in stands for the investment expenditure of navigation risk cost in base year.base year.

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Risk Benefit Produced by Reducing Loss CostRisk Benefit Produced by Reducing Loss Cost

The occurrence frequency of loss cost is random and the The occurrence frequency of loss cost is random and the occurrence probability is:occurrence probability is:

The expected value of loss cost is:The expected value of loss cost is:

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Risk Benefit Produced by Reducing Loss CostRisk Benefit Produced by Reducing Loss Cost

E1E1(CK)(CK) stands for the expected value of loss cost of navigation risk stands for the expected value of loss cost of navigation risk management in base period;management in base period;E0E0(CK)(CK) stands for the expected value of loss cost of navigation risk stands for the expected value of loss cost of navigation risk management in report period.management in report period.

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VI. Matters Needing Attention in Navigation VI. Matters Needing Attention in Navigation Cost Analysis Management Cost Analysis Management

1.Establish scientific and reasonable crew1.Establish scientific and reasonable crew management management and training system;and training system;2.Establish scientific ship repair and maintenance 2.Establish scientific ship repair and maintenance system;system;3.Improve the organizational system of navigation risk 3.Improve the organizational system of navigation risk cost management.cost management.

Thank you！

A Cost Analysis for Navigation Risk A Cost Analysis for Navigation Risk