Cargo Risk &

Management;
Risk management is
 Problems…………….what problems?
Identity crisis?
The practical management of modern day marine risk can neither be classified as rocket
science nor pure common sense.
New priorities?
State initiatives and legislation designed to improve or enforce corporate governance
and protect the global supply chain from the threat of terrorism are changing cargo and
transportation practises.
Some things never change?
Cargo crime continues to grow and evolve at every level of operation – global, local,
organised, ad-hoc.
Resourcing the future?
As risks, priorities and players change, the traditional, specialist marine risk
management workforce is facing new challenges.
 The global cargo risk environment

Traditional cargo exposures typically relate to an ocean voyage and the associated perils
: poor handling, inadequate stowage, heavy weather, pilferage and non-delivery. These
exposures still exist today but have been overshadowed by modern cargo risk factors
such as the steady escalation of commercial crime and the by the automation of
many cargo handling functions.
The potential business impact of suffering a loss in today’s volatile risk environment is
intensified by the growing demands of the global consumer market and modern trade
concepts such as “just in time”.
Whilst the conventional insurance policy provides the necessary financial security to
protect the balance sheet, there is an equally important commercial need to prevent loss
and protect trade relationships.
Alongside the traditional association and interaction with insurance, the practical
management of cargo and transportation risks is becoming a key component of
Corporate Governance guidelines on risk management, and growing state legislation
designed to protect the global supply chain from the threat of terrorism.

Copyright © 2000 Cargo Solutions Limited. All Rights Reserved.

Cargo crime, still a growing problem

• Theft, pilferage and non-delivery

• Hi-jacking of entire loads

• Theft by deception

• Organised and opportunistic

• A global problem

• Not a priority issue in many parts of the world

• Lack of coordinated response

Cargo crime overview - the negative impact

Financial impact
• Interruption to cash flow
• Loss of market
• Loss of sales
• Potential increase in insurance premium
• Increased administrative costs

Operational impact
• Interruption to supply chain
• Damage to reputation (with customers and within the industry)
• Tension in relationships with customers and suppliers
• Staff frustration and loss of morale
• Loss of brand image
 Cargo crime – current trends and facts

• Accurate records on cargo theft are almost impossible to find.

• Current industry and specialist observer estimates place the
loss through cargo theft at between $25 billion and $120
billion a year
• 85% of all business security losses are attributed to the loss of
product in transit.
• Between 80% and 85% of cargo thefts involve inside
information.
• The high profit potential of high-tech cargo thefts is attracting
more sophisticated international criminals.
 Cargo risk management - a dynamic business process

Cargo risk management is the identification, analysis and control of risk within the
transportation environment. Knowledge and understanding of the multiple exposures
experienced by cargo throughout the transit chain is converted into effective practical
measures to reduce exposure to risk and to positively impact the operational business.

The risk management process is as much about analysis, co-ordination and culture as it
is about practical surveys and fact finding. An effective risk management programme is
both pro-active and interactive and depends upon successful development of teamwork,
shared goals and accountability and a modern approach to the sharing of experience
and knowledge.

Cargo risk management is a dynamic process that evolves with the changing needs
and circumstances of the business, and continuously improves both risk exposure and
risk awareness.
 The cargo risk management concept

The risk management process is as much about analysis, co-ordination and culture as it
is about practical surveys and investigation. Successful delivery and outcome is
achieved by working with clients, their partners and other stakeholders to develop and
implement business-impacting risk management programmes. The key objective is to
encourage, assist and work with clients to:
• Identify, analyse and improve cargo risk.
• Create a new level of awareness and control.
• Develop and implement effective preventative strategies.

• Deliver tangible improvements / measurable results.

• Expand awareness and proven successful actions through the transit chain.
• Retain, share and utilise knowledge and experience.
• Take ownership and control of the risk management process.
 Identity – Outcomes and Solutions?
• Practical risk management will depend less upon the insurance industry as the prime mover /
instigator?

• The insurance industry will resolve / re-set risk management priorities?

 Expertise & experience – the need/demand for specialisation
 Service standards – use of IT, the internet, standardisation, automation
 Risk management and claims – the traditional interface
 In house expertise and resources versus outsourcing

• Insurance brokers will provide practical marine risk management as part of their consultancy-based
services?

• Non-insurance related requirements will cause risk management activities in the marine sector to
become more structured and defined…. and identifiable?

• Your on-line, tick box / drop down menu marine risk management programme is just around the
corner?
 Cargo and the threat of terrorism
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Improving global cargo security…………..

Operation Safe Commerce

Customs-Trade Partnership Against Terrorism

Container Security Initiative

Maritime Transportation Security Act 

International Ship and Port Facility Security (ISPS) Code

…………….improving global cargo risk?

 Terrorism – Outcomes and Solutions?

• The current emphasis on protecting the global supply chain (and all associated elements and
activities) from the threat of terrorism will continue to grow?

• There is a high risk that too many laws, codes, programmes, regimes and conventions will
not compliment each other…..potentially causing confusion and duplication of expenditure?

• Terrorist related “incidents” are likely to continue to occur?

• The nature, location and severity of such incidents will impact the speed and scope of all
anti-terrorist initiatives?

• Non compliance with state anti-terror legislation will carry heavy penalties for the
responsible / liable parties?

• Increased attention and focus on the global supply chain will improve marine risks?
 Crime – Outcomes and Solutions?

• Smart technology will eventually start to have a more measurable impact on certain
types of cargo crime?

• Police forces around the world will be increasingly challenged to find time and resources
to tackle cargo crime?

• The international drive to improve protection of the supply chain against the threat of
global terrorism will improve the cargo crime risk?

• Increased collaboration between state security forces will improve international criminal
intelligence and facilitate quicker action?

• Commitment (of money and resources), corporate culture and a programme of continued
security diligence will remain the most effective deterrent?
The changing face of risk management - the future

 New ways of working

 Changing workforce
 Former seafarers
 Necessary?
 Available?
 Affordable?
 Multiple disciplined vs. specialisation
 Still a 24/7 job
 Standardisation, automation and the internet
 Transferability of information, experience,
knowledge and solutions
 What about the “former seafarers” ?

• There is a growing shortage of suitably qualified candidates for some

specialised posts (e.g. Marine Surveyors) largely as a result of the decreasing
number of potential applicants with sea-going experience. OECD /
MCA Oct 2004

• Evidence from recent maritime exams shows that standards have dropped.
Will an increasing demand for officers to man the growing world fleet mean a
dilution of the experience pool and less competence at sea?

• Traditionally, many key vacancies in the UK's shore-based, maritime-related

sector have been filled by ex-Merchant Navy personnel. This 'natural' process
is now endangered by the reduction in Britain's merchant fleet and its
manpower.
 No Captains….no salty old seadogs??

Who is going to help us with this…….

…….and this…….
…….and ……..
……investigating incidents like this…………..

…………………………………….?
 “No former seafarers”?
Worldwide population of seafarers serving on internationally trading
merchant ships is estimated to be in the order of: 400,000 officers and
825,000 ratings.

OECD countries

Eastern Europe
Seafarers by area
Officers
of domicile, 2000 Africa/ Latin America
Ratings

Far East

Indian sub-continent
Bimco/ISF 2000
0 100 200 300 400 Manpower Update

thousands
 Surveyors of the future….?

“Surveyor to
base……..
…Surveyor to
base…..”

“Hi Surveyor One; this is base

reading you loud and clear.
What happened to the cargo?”
SuccessfulRisk management is all about