Theme: Minimizing Shipping Risk:
What Levers to Pull to Achieve Financial Benefits
Theme and Topics to be Explored:
Minimizing costs in shipping is achieved in part by minimizing risk. Mitigating risk and securing the lowest possible insurance costs, in turn, is accomplished by successfully achieving a high standard of safety, seamanship competency, cyber defense and internal corruption controls. Minimizing risk and reaping the financial benefits requires the attention and focus of senior management. But when Moore Stephens reported recently that 20% of survey respondents report that managers only get involved if risks materialise, that 10% show only passing interest in risk management, and 1% have no involvement at all, it is clear that there is unrealized upside for shipowners through more proactive focus on managing risk on all its manifestations. The objective of this forum is to provide shipowners with comprehensive, big-picture guidance on strategy to achieve best in class risk mitigation within their organizations.
Risk Mitigation in Crewing
It is often said that the standard of today's seafarers is not as high as in previous years. Is this correct? If so, what can be done to raise standards of competency, professionalism and a safety culture, and how will this reduce incidents, minimise risk, and cut unnecessary expense?
With vessels becoming ever more complex and shipping firms looking to reduce the number of crew on board, are crews being asked to carry out an ever wider range of tasks and are shipowners doing enough to train crews in safety and risk management techniques? In an effort to utilise experience crews, are owners carrying out the necessary medical and fitness tests before crews are allowed on board?
Low-level corruption: a heightened risk for shipping companies
Bribes, backhanders and facilitation payments have always been part of the shipping industry. What is new is that regulators have tightened up. In years gone by, 200 cigarettes and a couple of bottles of whisky could settle fines, jump a queue, and speed up cargo handling. No longer. It's now a usually a criminal offence to benefit from facilitation payments. Companies that allow facilitation payments open themselves up to unnecessary risk and cost. Is there a legal alternative, or will companies have to suffer financially as unethical competitors win business? What can be done to reduce exposure in this area?
Regulatory Risk: Complying with Greatly Expanded Demands
Installing ballast water treatment kit is only the latest regulatory cost; meeting bunker quality, safety appliance, and recycling guidelines are others, and shipowners need to be in compliance or risk fines. Shipping is a low-margin activity; any additional cost imposed by external forces can push companies to the edge. Given the mass of regulatory expectation, how can shipping companies fit ballast water treatment facilities, install scrubbers or burn distillate fuel, reduce NOx, SOx, CO2, and PM, and still make a profit? Regulators are demanding that shipping fits all sorts of emissions-defeating devices. No one is arguing you should only protect the environment when the money is available, but to take the ballast water regulation as an example, a USD1.5 million installation on a ship worth USD3-4 million would incentivize owners to scrap their ships.
Cyber, Little Understood But a Very Real Risk
The risk of cyber attacks on shipping is real. According to a recent Fairplay survey, 21% of shipping companies acknowledged they had been hacked; 57% claimed to know they had not been attacked; 22% did not respond, possibly with some of them unwilling to discuss having been the subject of an attack Of those acknowledging an attack, 77% said it was malware, and 57% phishing. The vulnerabilities take different forms. Ships for example are increasingly connected via satellite to shore centres. While this presents known risks from hackers, unsecure USB sticks and DVDs can be even more dangerous. It is not an exaggeration to say that cyber crime has the potential to destroy maritime companies. Insurance brokers and underwriters have little idea how to respond but they are concerned. What is best practice in minimizing the risk of cyber attack, and what are the financial consequences of failing to act?
Insurers: Facing Both Internal and External Risk
Marine and P&I insurers are facing a continued battle to deliver profits in an ever more deflated market. With global marine premiums falling by 10.5% in 2015, underwriters have to justify their performance at a time when their clients are struggling in a flat maritime market. With increased competition putting more pressure on pricing is the marine insurance sector at breaking point and what will prove to be the catalyst to change the pricing cycle? Increased talk of M&A coupled with growing fears over the scale of aggregated exposures have focused the minds of insurers. However, what can insurers control in the current market? Is greater emphasis on risk prevention the answer in an environment where premium increases are unobtainable?