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Cargo Risk &Cargo Risk &

Management;Management;

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Risk management is

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Problems.what problems?

The practical management of modern day marine risk can neither beclassified as rocket science nor pure common sense.

Cargo crime continues to grow and evolve at every level of operation

global, local, organised, ad-hoc.

State initiatives and legislation designed to improve or enforcecorporate governance and protect the global supply chain from thethreat of terrorism are changing cargo and transportation practises.

Identity crisis?

New priorities?

Some things never change?

As risks, priorities and players change, the traditional, specialist marinerisk 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 theassociated perils : poor handling, inadequate stowage, heavy weather,pilferage and non-delivery. These exposures still exist today but havebeen overshadowed by modern cargo risk factors such as the steadyescalation of commercial crime and the by the automation of

many cargo handling functions.The potential business impact of suffering a loss in todays volatile riskenvironment is intensified by the growing demands of the globalconsumer market and modern trade concepts such as just in time.

Whilst the conventional insurance policy provides the necessaryfinancial security to protect the balance sheet, there is an equally

important commercial need to prevent loss and protect traderelationships.Alongside the traditional association and interaction with insurance, thepractical management of cargo and transportation risks is becoming akey component of Corporate Governance guidelines on riskmanagement, and growing state legislation designed to protect the

global supply chain from the threat of terrorism.

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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 current trends and facts

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Cargo risk management - a dynamic businessprocess

Cargo risk management is the identification, analysis and control ofrisk within the transportation environment. Knowledge andunderstanding of the multiple exposures experienced by cargothroughout the transit chain is converted into effective practicalmeasures to reduce exposure to risk and to positively impact theoperational business.The risk management process is as much about analysis, co-ordinationand culture as it is about practical surveys and fact finding. An effectiverisk management programme is both pro-active and interactive anddepends upon successful development of teamwork, shared goals andaccountability and a modern approach to the sharing of

experience and knowledge.Cargo risk management is a dynamic process that evolves withthe changing needs and circumstances of the business, andcontinuously improves both risk exposure and risk awareness.

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Create a new level ofawareness and control.

Identify, analyse and improve cargo risk.

Develop and implement effective preventative strategies.

Expand awareness and proven successful actions through the transit chain.

Deliver 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-ordinationand culture asit is about practical surveys and investigation. Successfuldelivery and outcome isachieved by working with clients, their partnersand other stakeholders to develop and implement business-impactingrisk management programmes. The key objective is to encourage,

assist and 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 industryas 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 partof their consultancy-based services?

Non-insurance related requirements will cause risk managementactivities in the marine sector to become more structured anddefined. and identifiable?

Your on-line, tick box / drop down menu marine risk management

programme is just around the corner?

Identity Outcomes and Solutions?

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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) Cod

Maritime Transportation Security Act

http://www.tsa.gov/public/index.jsp

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Terrorism Outcomes and Solutions?

The current emphasis on protecting the global supply chain (and allassociated elements and activities) from the threat of terrorism willcontinue to grow?

There is a high risk that too many laws, codes, programmes, regimes

and conventions will not compliment each other..potentially causingconfusion 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 heavypenalties for the responsible / liable parties?

Increased attention and focus on the global supply chain will improve

marine risks?

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

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

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

Increased collaboration between state security forces will improveinternational criminal intelligence and facilitate quicker action?

Commitment (of money and resources), corporate culture and aprogramme of continued security diligence will remain the mosteffective deterrent?

Crime Outcomes and Solutions?

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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 theinternet

Transferability of information,

experience, knowledge and solutions

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There is a growing shortage of suitably qualified candidates forsome specialised posts (e.g. Marine Surveyors) largely as aresult of the decreasing number of potential applicants withsea-going experience. OECD / MCA Oct 2004

Evidence from recent maritime exams shows that standardshave dropped. Will an increasing demand for officers to manthe growing world fleet mean a dilution of the experience pooland less competence at sea?

Traditionally, many key vacancies in the UK's shore-based,maritime-related sector have been filled by ex-Merchant Navypersonnel. This 'natural' process is now endangered by thereduction in Britain's merchant fleet and its manpower.

What about the former seafarers ?

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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 seafarers?

Worldwide population of seafarers serving on internationallytrading merchant ships is estimated to be in the order of:400,000 officers and 825,000 ratings.

0 000 000 000 000

Indian sub-continent

Far East

Africa/ Latin America

Eastern Europe

OECD countries

Officers

Ratings

thousands

Bimco/ISF 2000

Manpower Update

Seafarers by area

of domicile, 2000

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Surveyors of the future.?

Surveyor tobase..

Surveyor tobase..

Hi Surveyor One; this is base

reading you loud and clear.

What happened to the cargo?

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Risk management isSuccessful all about