Jin, Kite-Powell, and Hoagland (2005) emphasize
the importance of risk management in this business as
it is in a high level of uncertainty regulation,
technology, and many more. Thus, to ensure a
successful business of offshore aquaculture, sound
knowledge, and understanding of any potential risk
that could impede this business should be well
managed accordingly by taking appropriate actions.
2.2 Risk Management
Risk can be defined as “the possible occurrence of an
event that produces adverse effects on man and his
environment. The degree of risk is related to both the
probability of the event’s occurrence and also to the
estimated outcome in terms of the nature, intensity,
and duration of the adverse effects” (Wasserman and
Wasserman's, 1979) in (Gratt, 1987). As risk could
influence the goal of an activity/project and may lead
to potential losses, managing risk is essential for any
business. To manage risk, we should understand
what, how, where, and when it could be happened and
build an appropriate mitigation plan.
Risk management focuses on assessing most if not
all potential and significant risks, then implementing
effective risk response (Airmic, Alarm and Irm, 2010;
Kayis and Karningsih, 2012). Several references have
proposed a diverse risk management process/stages.
Thomas, Kalidindi, and Ganesh (2006) suggest three
steps in managing risk, and they are (1) risk
identification, (2) risk assessment/measurement, (3)
risk prioritization and response. Scavarda et al. (2006)
suggest similar steps but with an additional one step
that is communicating and consulting with
stakeholders. International Organisation for
Standardisation (ISO) provides a generic framework
for risk management in 2009, which is called ISO
31000. It offers a common standard as well as a
comprehensive guide that integrates risk management
into an organization strategy with full support from
senior management. It consists of five main
processes, and they are: (1) establishing the context,
(2) risk assessment (i.e., risk identification, analysis,
and evaluation), (3) risk treatment, (4)
communication and consultation, (5) monitoring and
review.
The study of risk has been applied broadly in
many areas, including aquaculture. According to Risk
Management AS/NZS 4360 (1999) and Haring
(2015), risks can be classified based on various
attributes such as risk source, risk consequences,
time, location, and related person/factor/activity.
Arthur et al. (2009) examine potential risks in
aquaculture that are categorized according to their
source. This study shows that there are potential risks
that originated from aquaculture operations in
society. There are environmental, biological,
financial, social, and human health risks. For
example, environment risks could be occurred due to
pollution from excess feeds and water flow changing
or financial risks due to the bankruptcy of farming
operations. On the contrary, this study also identifies
that there are potential risks coming from society and
environment to aquacultures, such as the
environmental risk that is happened as a result of
pollution from inland agriculture or sea transportation
(ships) activities, or social risk which is due to lack of
skilled human resource for aquaculture operators.
While Jin, Kite-Powell, and Hoagland (2005) conduct
a risk assessment study to assist the investor in
making the decision in relation to aquaculture
business. They propose a firm-level investment-
production model. Moreover, as open water
(offshore) aquaculture is operated under uncertainty
from market demands, biological factors, and
regulations, thus they suggest the traditional rule of
Net Present Value should be altered.
There are some approaches/tools that could be
utilized for supporting risk management process, to
name a few: brainstorming, flow chart, structured
interview and questionnaire, fault tree, structured
interview, expert judgment, event tree, fault tree,
statistical and numerical analysis, simulation and
computer modeling (Ahmed, Kayis and
Amornsawadwatana, 2007; Grimaldi, Rafele and
Cagliano, 2012). Another tool, such as risk matrices,
has broadly utilized to measure and rank risks
according to its likelihood and consequences (Ristic,
2013).
Pujawan and Geraldin (2009) propose House of
Risk (HOR), a tool for managing risks in the supply
chain context, which is developed by integrating
Failure Mode and Effect Analysis (FMEA) and
House of Quality (HOQ). HOR consists of two main
matrices. The first matrix, HOR stage 1 (table 1), for
identifying and classifying risk events and their
associated causes (risk agents) based on five SC
processes of SCOR (i.e., Plan, Source, Make, Deliver,
Return) framework.