Seeking & Finding the

RightShipSHIP VETTING

In a digital world, controlling the physical risks associated with oceanshipping is no longer a subjective task. An increasingly sophisticatedand affordable tool at the cutting edge of technology is available fortanker and Drybulk charterers alike. Finding the right ship has never been this easy. by Joseph Keefe

The prequalification of tonnage, oth-erwise known as vetting, has come ofage. Ship inspection reports on theworld’s fleet of chemical and LPGtankers can be had from the ChemicalData Institute (CDI). The OilCompanies International Marine Forum(OCIMF) system is known simply asSIRE. That standardized inspection sys-tem – based primarily on safety issues –evolved to the point where it arguablybecame the standard against which alltankers were judged for suitability forhire. For both systems, vetting person-nel had to possess minimum qualifica-tions and undergo a certain amount oftraining before being allowed to inspecttonnage to assess risk.

By the mid-1990’s, some charterersand receivers – unsatisfied with rigidvetting protocols that either ignored thecommercial aspects of a vessel’s suit-ability or simply did not meet theirinternal criteria – branched out and cre-

ated their own third party rating sys-tems. These systems, although unso-phisticated and largely paper driven atfirst, also melded the commercial con-cerns of traders with the safety consid-erations of risk professionals. The newapproach recognized that the safest shipin the world that can’t perform on char-ter is as much of a loser as a substan-dard, poorly manned and maintainedvessel. Culling information from a myr-iad of sources, far beyond the simplephysical vetting itself, it was realizedthat risk management for oceangoingtonnage could be much more than “vet-ting.” At the forefront of that effort wasa company named RightShip.

VETTING GROWS UPFormed in 2001 as a boutique ship

vetting company, aiming to lift stan-dards in dry bulk vetting, RightShip PtyLtd has since changed the shape of theglobal vetting scene forever. Started as a

partnership between BHP Billiton andRio Tinto, RightShip was to provideservices to two organizations that want-ed to roll out vetting as a company-wideand indeed, a global initiative.Eventually, and responding to outsiderequests, RightShip began to providethird party services to others.

Speaking from his headquarters inAustralia, RightShip CEO WarwickNorman described the RightShip sys-tem by saying, “We operate on a differ-ent system and understanding of wherethe tanker vetting has come to – andSIRE has come a long way in the last 40years. We started as a primarily drycargo vetting system – there was noSIRE, no industry database from whichto tap into. We had to devise a differentplatform from which to access the silosof information – some of which wasuntapped, uncoordinated, focusing allof it around a single platform. Usingthat information, we put together a risk

MP #1 (34-49):MP #1 (34-49) 2/24/2011 3:55 PM Page 44

Warwick Norman, CEO, Rightship, “A vessel, operated properly and maintained to a high

standard over its lifetime can be characterized as a goodrisk. The owner can’t change the fact that the ship was

involved in casualties or detained in the past, or has hadthree name, flag & class changes, etc. What he can

demonstrate is current performance.”

SHIP VETTING

algorithm based on those safety param-eters to come up with our vetting sys-tem.” Cargill came to the party 4 yearslater. Significantly, RightShip is nowowned in equal shares between threeorganizations, who represent less than50 percent of RightShip’s vetting activ-ity. Says RightShip CEO WarwickNorman, “We have a healthy spread ofthird party clients.”

ECONOMY OF SCALERightShip offers online evaluations

that support business decisions aboutthe charter of ships. For an annual fee,clients get unlimited 24-hour access tothe web-based system. Beyond theobvious advantages of a system thatincorporates the largest swath of marinedata available on the market today, theRightShip platform gives clients thecompetitive and risk managementadvantages of an in-house vetting serv-ice, without the associated costs.

Speaking to RightShip’s businessmodel, Norman explains, “We bill on asubscription basis, based on historicalvetting numbers, built around theclient’s particular requirements; vettingcriteria, volume of work, etc. For small-er clients, they are using the system, ofcourse, but also tapping into in-house

expertise. So, when we look at a partic-ular company’s prospective vessel, weare also wearing that customer’s hat. Weare unique in addition to being a Web-based service, there’s also a humanbeing that comes as a part of that serv-ice. The more the client uses the humanside, the more that variable comprisesof the vetting cost.”

When every business decision ulti-mately comes down to price, the pro-hibitive cost of running a standalone, in-house vetting system drives many char-terers to look for better value elsewhere.An internal system involves IT costsand the overhead of employing dozensof technical personnel. For smaller mid-size trading houses, the corporate budg-et can be even tighter. Nevertheless,RightShip’s CEO says that there ismore to the decision than just costalone. Echoing that sentiment,RightShip client and Manager ofInternational Marine Logistics forHuntsman Corporation Amy Hark says,“RightShip was instrumental in helpingus to implement a robust and thoroughvetting practice, globally, through theuse of their web based applicationwhich facilitates the process but evenmore importantly, is supported by expe-rienced Ship Captains reviewing each

vessel.”In-house data can become stovepiped

instead of becoming part of a widerpool of data. Within the RightShip serv-er, a customer has the ability to storeinformation that can be accessed enter-prise-wide. Properly genericized, data(using strict protocols) can be sharedfrom a thousand different places, andwith a full range of clients. In this way,the charterer fixing just ten ships annu-ally gets virtually the same quality (andbreadth) of information available toanother client doing 300 times that vol-ume. Warwick Norman insists, “Vettingis an experienced based system, so ifyou are only doing ten per year, it isgoing to take a long time to get the kidof data you need to make the propercomparisons.

QUALITY EVOLVING A typical vetting report takes the form

of a 1 to 5 “star” rating system. Three ormore tables, each with multiple criteria,are used with points given for variousbenchmarks. As one of the world’slargest users of port state control data,RightShip can rate a vessel based oncompany, operator, high risk flag, thirdparty bloc, age, Class Society, P&I Cluband a myriad of other variables. The

MP #1 (34-49):MP #1 (34-49) 2/24/2011 3:55 PM Page 45

information system is continuallyupdated – weekly and daily – to capturenew sources and automatically updatethat which they already possessed.RightShip personnel don’t necessarilyhave to go out looking for it. The hardpart is ensuring information coming inis accurate and correcting the data, ifneed be. Norman cautions, “This comeswith responsibility. The system is deal-ing with a lot of variables.”

The quest to improve the process isaptly demonstrated in the increasinglysophisticated nature of the RightShipalgorithm. A new feature of the soft-ware allows technical personnel to ratea vessel by using filters to compare

owner to owner, flag to flag, to its rep-resentative class of ship, classificationsociety, type of service and the vessel tothe entire fleet within its owner pool.Norman explains, “This allows us todrill down to sort out the problemagainst what you are trying to use thevessel for and, more importantly, theclient’s risk tolerance.”

THE HUMAN ELEMENTThe RightShip vetting method effec-

tively eliminates the chance of a 4:30Friday afternoon decision being differ-ent from the Monday decision. Normanexplains, “By applying data in a uni-form standard as opposed to a subjec-

tive human interpretation, the client canmake a commercial decision based onthat systematic approach.” That’s not tosay that there isn’t room for analysiswithin each piece of RightShip vettingadvice. There is.

Lots of 2-star vessels get approved.For example, a vessel otherwise havingan excellent rating except for a portstate deficiency might end up with a “2”but that deficiency might not disqualifythe vessel. Norman explains further,“To a certain extent, vetting involveschanging behavior; the carrot and thestick. Downgrading the vessel until itrepairs the deficiency incentivizes theowner to do better.” On the other hand,it may have to go through a manual vet-ting process, each and every time. Headds, “That can delay a vessel from get-ting approved and that delay comeswith risk for all parties.”

Norman runs a pragmatic shop. Thatsavvy runs the full gamut of avoidingblanket decisions based on stovepipeddata. “That discussion usually revolves

SHIP VETTING

MP #1 (34-49):MP #1 (34-49) 2/24/2011 3:56 PM Page 46

Ahead of the Curve

Green RatingsLike every other aspect of the RightShip system, the groundbreaking environmental risk ratingincorporates a raft of variables. The shipowner and the vessel itself can be rewarded for perform-ance where it has gone beyond what is required by the regulations. For example, Section 5 of therating system awards ten points of credit for a vessel certified to ISO 14001. Similar incentivesawait those affiliated with Green Marine in the Great Lakes, certification to class environmentalstandards, the presence of a ship’s energy management plan and other similar protocols.Standalone at the moment, the module allows RightShip – for those who want it – to provide a toolthat can benchmark environmental performance including but not limited to identifying hazardousmaterials on board before recycling. For shipowners, it is a good news/bad news proposition. Forthose ships involved with a Marpol deficiency / oily-water separation violation prosecution, theGreen rating won’t look so good. While encouraging poor performers to improve, the RightShipapproach goes even further. Norman says, “We’ve developed a rating system where charterersand owners are going to start having to look at and reduce their emissions along the lines of cor-porate requirements. For example, a charterer might charter one “dirty” vessel but then have tomake up for it on the next three so that the overall average is within compliance. So, while youmight be looking at individual vessels, the target for a charter or owner might be an overall tenpercent reduction in emissions over time.”

around age – the old adage of an oldervessel can’t be a good ship.” Not neces-sarily, insists the RightShip CEO. “Avessel, operated properly and main-tained to a high standard over its life-time can be characterized as a goodrisk. The owner can’t change the factthat the ship was involved in casualtiesor detained in the past, or has had threename, flag & class changes, etc. Whathe can demonstrate is current perform-ance.” Finally, the software can be con-figured to produce flags that say,“Vessel Needs Senior ManagementApproval.” Another charterer might say“we don’t period vessels from a compa-ny which has a deficiency rate greaterthan 3 or something similar.” “Thesesorts of caveats are very common,” saysNorman.

ONE SIZE DOES NOT FIT ALLIncreasingly, it is not just charterers

who are interested in vetting evalua-tions. For RightShip, a number of ter-minal and “receiver” clients have comeinto the fold. Because some customershave specific mooring requirements,suitability to terminal considerationsfor incoming tonnage is an importantfactor. And, just because the terminalisn’t chartering the vessel doesn’t meanthat they don’t share in at least some ifnot all of the risk associated with thatvessel’s port call. A vetting servicedesigned for terminal operators is longoverdue and RightShip has stepped intothe breach to provide a customized plat-form for just that purpose.

RightShip vets dry bulk, petroleum,gas and liner ships worldwide for amyriad of clients. That’s not to say thereisn’t competition. Warwick Normanknows it. “We think we have a prettygood system. The oil majors have somegood systems, too. I do think we have

the best third party system. Our earlygoal of creating the best possible vet-ting system continues today unrelentingwith substantial capital rollover into theequipment.” As risk changes, so toodoes the RightShip system.

Norman continues, “Vetting was for-merly focused on detentions and nowwe’re looking at individual deficiencies.We see what we call community risk orindustry expectations shifting signifi-cantly over time. Therefore, your vet-ting system must be able to reflect thatchange.”

For all its technology, algorithms andease of use, the RightShip vetting sys-tem can be boiled down to a simplecommon denominator: WarwickNorman insists, “We want the client tohave a good commercial result from thevessel it does charter.” In other words, itall comes down to finding the RightShip.

SHIP VETTING

MP #1 (34-49):MP #1 (34-49) 2/24/2011 3:57 PM Page 47