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Global Risk Management;Global Risk Management;
Problems and SolutionsProblems and Solutions A presentation for the A presentation for the
Houston Marine Insurance Seminar 2006Houston Marine Insurance Seminar 2006
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Risk management is
(Sophisticated audience version)
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Risk management is
(Common audience version)
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Risk management is
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Risk management isSuccessful al
l about
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Problems«««««.what problems?
The practical management of modern day marine risk can neither be classified as rocket
science nor pure common sense.
Cargo crime continues to grow and evolve at every level of operation ² global, local,
organised, ad-hoc.
State initiatives and legislation designed to improve or enforce corporate governance andprotect the global supply chain from the threat of terrorism are changing cargo andtransportation practises.
Identity crisis?
New priorities?
Some things never change?
As risks, priorities and players change, the traditional, specialist marine risk management
workforce is facing new challenges.
Resourcing the future?
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The global cargo risk environment
Copyright © 2000 Cargo Solutions Limited. All Rights Reserved.
Traditional cargo exposures typically relate to an ocean voyage and the associated perils :
poor handling, inadequate stowage, heavy weather, pilferage and non-delivery. Theseexposures still exist today but have been overshadowed by modern cargo risk factors such
as the steady escalation of commercial crime and the de-skilling or 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 tradeconcepts such as ´just in timeµ.
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 toprotect the global supply chain from the threat of terrorism.
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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 exposuresexperienced 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 isabout practical surveys and fact finding. An effective risk management programme is bothpro-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 andrisk awareness.
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� Create a new level of awareness and control.
� Identify, analyse and improve cargo risk.
� Develop and implement effective preventative strategies.
� Expand awareness and proven successful actions through the transit chain.
� D
eliver tangible improvements / measurable results.
� Retain, share and utilise knowledge and experience.
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, assistand work with clients to:
� Take ownership and control of the risk management process.
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� 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 ² the need/demand for specialisation
Service standards ² use of IT, the internet, standardisation, automation Risk management and claims ² 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?
� Y our on-line, tick box / drop down menu marine risk management programme is just
around the corner?
Identity ² Outcomes and Solutions?
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Cargo and the threat of terrorism
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Operation Safe Commerce
Customs-Trade Partnership Against Terrorism
«««««.improving global cargo risk?
Improving global cargo security««««..
Container Security Initiative
International Ship and Port Facility Security (ISPS) Code
Maritime Transportation Security Act
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Terrorism ² 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 ´incidentsµ 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?
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� 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, still a growing problem
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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 overview - the negative impact
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� 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 crime ² current trends and facts
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� 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?
Crime ² Outcomes and Solutions?
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The changing shape of risk management ² the future
insurer or insured
change of driving force
impact of legislation
technical capability
experience
network and communication
who should pay?
cost control
tangibility
what is the benchmark?
technical training & resourcing
practical IT solutions
competitive cooperation
multi-line approach?
� R esponsibility
� Cost of risk management
� Competence
� Future evolution
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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
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� 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
� E vidence from recent maritime exams shows that standards have dropped. Will
an increasing demand for officers to man the growing world fleet mean a dilutionof 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 isnow endangered by the reduction in Britain's merchant fleet and its manpower.
What about the ´former seafarersµ ?
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No Captains«.no salty old seadogs??
Who is going to help us with this««.
««.and this««.
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««.and ««..
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««««««««««««««.?
««investigating incidents like this««««..
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´No former seafarersµ?
Worldwide population of seafarers serving on internationally trading
merchant ships is estimated to be in the order of: 400,000 officers and825,000 ratings.
0 100 200 300 400
Indian sub continent
Far East
frica Latin merica
Eastern Europe
E D countries
Officers
Ratings
thousands
Bim co/ISF 2000
Manpower Update
Seafarers by area
of domicile, 2000
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Resourcing ² Outcomes & Solutions?
� The merchant navy and directly related industries are no longer a sustainable (nor mostapplicable) source for providing marine surveyors to the insurance industry?
� The geographic focus or location of recognized centres of excellence for technical marinerisk management consultancy will change?
� The increase in cost of employing proven and suitably experienced personnel will accelerate?
� New specialist service providers and consultants are entering the cargo & transportation risk management sector?:
Logistics and freight management
Supply chain management
Security
� A generalist approach to providing practical risk management services is replacing the moreconventional specialist approach?
� The internet age promotes transferability of information, experience, knowledge andsolutions?
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Surveyors of the future«.?
´Surveyor to base««..
«Surveyor to base«..µ
´Hi Surveyor One; this is base
reading you loud and clear.
What happened to the cargo?µ
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Risk management isSuccessful all about
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Questions and discussion
THANK Y OU FOR Y OUR ATTENTION
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Risk management isSuccessful all about
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