Managing Global Shipping Risks

Presented by

Greg J. Kritz, CICVice President

SCTIC May 27, 2008 www.roanoketrade.com

USA England Ireland China Singapore UAE Germany

How Does One Manage Risk?

Follow a 4 Step Risk Management Process

1. Identify the Potential Problems

2. Analyze the Size of the Potential Problem

* Probability * Maximum Financial Exposure * Frequency

3. Control the Risk

*Avoid It *Prevent It *Reduce It

U.S. Cargo Losses Exceed $18 Billion Annual Impact on U.S Economy

4. Finance the Risk [how you’ll pay for bad stuff when it happens to you]

* Transfer the risk to an Insurance Company* Retain the risk [self-insure]

Examples of Today’s Shipping Risks

CyclonesDelayProduct Recall Non-paymentEarthquakesInclement WeatherTariff Retaliation

Currency ValuationCargo TheftRegulatory SeizureEnvironmental Hurricane/MonsoonPolitical (Nationalization)

Extremes in Temperature

5 Commonly Overlooked Supply Chain Risks

Knowing The Total Aggregate Financial Exposure at Any One Place At Any One Time

3rd Party Limited Liability

Not Knowing Whose Responsible for What

and Where.

Ocean Carrier/NVOCC

Subject to terms of Carriage Of Goods by Sea Act (COGSA)

$500 per Customary Shipping Unit as described on OBL

Unit can be the container, a pallet, a crate, carton

International Air & Indirect Air Carriers

Subject to terms of the “Warsaw Convention”

$9.07 pound/$20 Kilo or 17 SDR Kilo if Montreal Protocol ($25 kilo)

Distribution Centers & 3PL Facilities

• Warehouseman’s Terms & Conditions

Rule Unless Changed by Contract

• Liability Typically a multiple of base rate

• 3PL’s and Forwarding Operations Often Limit Liability on Warehouse Receipts

• Reasonable Care Standard Applies

Loss of Profit & Business Income

Freight is insured for only landed cost

LOSS of BUSINESS INCOME:

IMPORTERS NIGHTMARE

A Property Insurance Policy Doesn’t Cover Loss of Business Income for Cargo Claims

What if these wereYours’ at Peak Season? $30M

Haphazard Entry Into

Logistic and Carrier Contracts

Clearly Defined Control & Security Procedures at

Each & Every Link in The Supply Chain

CARGO CRIME SOARING

Theft & Unexplained Shortages (shrinkage/Leakage)

4 Easy Ways to AccessAn Ocean ContainerWithout Leaving a Trace

30% of Cargo Losses NOT Preventable

273 Hurricanes Hit USA1851-2005

92 Were Major Category 3,4 & 5

Thank You For Letting Me

Be With You Today !