Maritime emerging risks

The international shipping industry has an undisputed, major contribution to

global transportation & logistics. The shipping industry has historically been
highly cyclical, experiencing significant volatility in vessel values, freight rates
and shareholder returns. It is highly affected by changes in the international
economic and political environment. Increasing regulation, volatility in financial
markets, risk of piracy, technological breakthroughs and environmental concerns
have added to a very challenging business environment that puts even
experienced shipping executives to the test.
Types of risk that pose the greatest challenges for companies:

Uncertainty and volatility (economic, political, social):

Volatile vessel price, fuel price
Threat like terrorism, virus attack like ebola lead to personnel risk and an
interruption of normal business operations leading to a loss of revenue.
Political risks affect business processes
Government regulation and impact of public policy initiatives;
Legal and regulatory compliance
Tight margins-Shipping is a volatile industry with business of tight
margins. When supply and demand is not in balance, it can be challenging
to make a decent profit.
Corruption an international issue that requires action by governments and
businesses.
Operational risk/control environment;
Fuel efficiency of ships is a complicated matter, influenced not only by a
vessels design characteristics, but also by size and the speed they travel.
Piracy Attacks
From 1 January 2015 new legal requirements will come into force in the
Emission Control Areas (ECA) in North Europe (Including the Baltic Sea,
North Sea and English Channel) and North America (200 nautical miles
from American and Canadian shore). This legal requirement will lower the
maximum allowed content of sulphur in fuel burned in the ECAs to 0.1%
sulphur from todays 1.0%.
Managing third party integrity risk is one of the priority risks facing
shipping companies as the regulators get tougher and the impacts of the
global financial crisis spread financial vulnerabilities deeper across the
supply chain, making companies more likely to cut corners and increasing
integrity risks.

Technology (including data privacy, protection of intellectual property and

pace of technology change)

Financial reporting risk

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Constant change in IFRS standards and accounting principles

Emerging markets
Companies operating in emerging markets are at a crossroads in their
development and are facing numerous strategic questions. Should they
expand or try new niches? Should they make acquisitions? Should they
aim for a stock-exchange float? Should they allow themselves to be
acquired? Should they forge an alliance? Should they invest in new
technology? Should they aim to optimise their cost base to counteract the
trend towards smaller margins?
Diversity in customer requests- increasing number of customers use
sustainability in their buying decisions.

Policies

Development of models to estimate an individual ships performance and

fuel consumption while at sea.

New ships with high technical efficiency as promoted by the EEDI(Energy

Efficiency Design Index) standards are translating to more efficient
vessels in real-world operating conditions. Considerations include: low
carbon fuels (e.g. LNG); renewable energy; power and propulsion systems;
hull and superstructure; and speed and capability design.

Ship Energy Efficiency Management Plan (SEEMP) requiring existing ships

to have in place management systems to improve and monitor energy
management, cargo handling, fleet management, ship ballast/trim/rudder
optimized usage, speed and power optimization, and improved voyage
planning.

To offset the additional cost incurred because of new regulation, Line can
incorporate the higher average fuel costs into standard bunker surcharge
(SBF). Additional cost to customers in affected trades to and from main
ports, depends on transit time inside ECA areas and whether touching ECA
areas at both origin and destination.

Developing a concept of a Sustainable Development, which includes a set

of goals and actions, to highlight the importance of maritime
transportation by focusing on:

Safety Culture and Environmental Stewardship

Education and training in maritime professions, and support for seafarers
Energy efficiency and ship-port interface
Energy supply for ships
Maritime traffic support and advisory systems
Maritime Security
Technical co-operation
New technology and innovation
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Finance, liability and insurance mechanisms

IFRS standards and accounting principles are under constant change. It

will be imperative for management to have a clear understanding of how
upcoming accounting changes will impact many facets of the
transportation and logistics business. This will include areas such as short
to medium-term strategic plans for the business, current and future
commercial activities, stakeholder communication, financial reporting
processes and controls, operational structures, existing IT systems and
processes and employee training and development.

The dynamic economic development of the so-called emerging markets

will fundamentally change world trade in the future. Globally operating
providers have already targeted the growing markets in these emerging
countries
Following strategies are needed to operate successfully in emerging
markets:
Strategic planning
Growth strategy
Financial & acquisition strategy
Customer strategy
Business & technology design
Organisational strategy

Allow better strategic decisions by discovering and framing uncertainties

and better understanding of risks prior to making substantial, irreversible
commitments.

Raise awareness of the external environment by helping business

communities understand the complex interplay of underlying drivers and
critical uncertainties while increasing sensitivity to weak signals that
precede a significant change in direction, but often go unnoticed.

Increase response speed to unexpected events by visualizing possible

futures and mentally rehearsing responses, thereby raising the degree of
preparedness and agility.

A centralised, transparent workflow that tracks end-to-end due diligence

requests in real-time and tracks the handover of responsibilities across
various roles (for example, the business sponsor for the third party, the
third party representative, procurement, compliance, legal and risk teams)

Framework for Information Security Management best practice that helps

organisations:
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protect clients and employee information

manage risks to information security effectively
achieve compliance
protects the company's brand image.

Assess how political risks impact global expansion plans, existing

investments, and ongoing operational performance. Develop a process to
take timely action in cases where political risks provide opportunities
and/or challenges.

Managing political risk improves global business performance in two

fundamental ways. First, it protects new and existing global investments
and operations by helping management anticipate the implications of
political change or instability on business risk. Second, for a company
constantly on the lookout for new opportunities, monitoring political risk
within target regions or across continents can help management hone in
on political developments that foretell a business boom, beating
competitors to the punch.

Training employees in anticorruption, and consistently reporting incidents

where requested to pay facilitation payments.

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