Watchkeeper - BIMCO Bulletin


WATCHKEEPER Watchkeeper November 2017 The changing nature of risk The emergence of blockchain technology as a major efficiency driver is likely to be hugely dramatic Y ou might sometimes wonder how ship operators in the past, or even marine insurers, reacted to some of the really earth-shaking technical developments that came along. What would have been the response of a shipowner at the beginning of the 19th century to a shipwright they didnt call themselves naval architects in those days suggesting that he could build a far better ship out of iron, rather than wood? Would it have been utter disbelief? And just a few years later there were engineers offering mechanical propulsion rather than the sails which had driven ships for a millennium! That would have been a very big step into the unknown. Imagine the questions that required answering before an owner or underwriter felt disposed to commission such revolutionary craft. Would an iron ship actually float? Where on earth is the fuel going to come from, and who might be persuaded to pay for it. The fact was that there were owners and underwriters brave enough to take on these fundamentally unknown maritime risks. It is worth recalling their courage whenever some seer, invariably with something to sell, accuses the shipping industry of conservatism, because of their lack of immediate enthusiasm for some new technological development. The Changing Face of Risk study is an interesting take on the industry Fast forward a couple of centuries for some of the dramatic technical changes facing the industry in the coming years. The major global insurer, Marsh, crosses every field of risk, but has recently focussed its attention on the maritime world with a study entitled The Changing Face of Risk. It is an interesting take on the industry from its periphery that helps those on the inside gain better perspectives. It cannot be denied that emerging technologies are likely to involve the industry in all sorts of major changes, whether they appear as revolution or evolution. The emergence of blockchain technology as a major efficiency driver is likely to be hugely dramatic, connecting the whole supply chain with interconnected systems and establishing new partnerships seems, on the face of it, to be very positive indeed. But might there be unforeseen consequences that could rebound on people taking financial risks? We need to trust those developing the algorithms and the models, we are told. They probably said the same about mechanical propulsion, which had to be tested in practice before the build-up of trust. The development of autonomous technology, robots and the sheer scale of much of modern shipping are clearly exercising insurers minds. A cruise ship with 6000 souls embarked or even a single mega container ship with more than 20,000 teu aboard represents a scale of risk that has never been seen before. The sheer pace of this scaling up, resembling that in the oil trades in the 1970s, is arguably a destabilising influence on all, with smaller ships becoming technically redundant years before their owners might have anticipated. So business risk, as we have seen from the destruction of the values of the displaced and possibly unemployable smaller vessels, becomes a real issue. Developing regulation is accelerating fast on the environmental front The industry is entering a digital age, one in which the industry will see growing dependence upon massive data flows, bringing huge opportunities but a number of major vulnerabilities A looming cloud that is increasingly in the 21st century is that from developing regulation, arguably accelerating fast on the environmental front. Mandatory regulations imposed on the industry and overturning old ideas about grandfathering, driven by public and media pressure and fuelled by an upsurge in environmental activism, once again can hasten good ships to a premature retirement. Regional pressures threaten the universality of international maritime regulation, adding to the risk. Can a ship operator, who once might have invested in a new ship that would have an expected life of perhaps a quarter century, approach any investment today calmly? When a change of the regulations can require an investment of several million dollars just to keep a ship compliant, this might be described as an unquantifiable risk. There can be no objection to cleaner and greener maritime transport with the industry playing its part, but it sometimes seems that the practical problems of regulatory implementation are ignored by those piling on the pressure. The industry is entering a digital age, very different from its analogue predecessor, one in which the industry will see growing dependence upon massive data flows, bringing huge opportunities but a number of major vulnerabilities, some of which we are still barely able to grasp. How does the human component deal with these changing risks? Already people in classification societies have suggested that the increasing sophistication of modern ships is leaving the maritime workforce behind and struggling to cope. The answer, according to many practical operators, would be to produce ship systems that were more robust, simpler and acknowledged the limitations of those who had to look after them. This tends to go against the grain of current development. The Marsh report suggests that if these emerging technologies are to be adequately harnessed, present and future shortages of talent, ashore and afloat, need to be addressed. There are implications for the industrys training regime, the sort of skills that might be required in the future, and how the people with this expertise are to be identified, recruited, developed and retained. There is not an undiscovered pool of talent and the industry all around the world has to compete for what there is available, while training hard. One element in the mitigation of risk is that the right training for the anticipated technology is provided, whether it is in the recruitment of potential leaders or the upskilling of those within the ranks. The insurer comments on the issue of gender diversity, a matter that tends to leave the industry, still male dominated, on the defensive. It takes time to alter the perceptions of generations that shipping is not for women. Denying the industry of half the available talent does leave it somewhat disadvantaged. Photo: iStock / a-image What about the risk represented by the shipping industrys over-optimism? Marcus Baker, chairman of Marshs Marine Practice, in his introduction to the report, points to the historical reality of a sector that periodically mistimes the delicate balancing of supply and demand, with sometimes disastrous results. Is it possible to anticipate more accurately the demand for ships? It is not easy, in a sector so aware of derived demand. Some risks we have to live with! Certifiably clean A happy ship tends to be one where the crew is wellfed and the contribution made by a catering staff to its efficiency should never be under-estimated. It is a harder job too, with the multinational mix of seafarers requiring different diets, along with a demand that the diet is healthy and nutritious and pays due attention to current concerns about obesity, exercise and lifestyle. Good cooks make all the difference. It also matters rather more than it might have done in the past, with the Maritime Labour Convention and its specific requirements. So, it is encouraging to learn that catering training for the shipping industry is developing fast and recognised as important by the P&I clubs, which have a strong vested interest in healthy crews. Steamship Mutual, for instance, is cooperating with the Marine Catering Consultancy MCTC to facilitate the launch of an upgraded training course which helps catering staff upgrade their skills with a range of theoretical modules. Training on the job using the course provides for a practical improvement of the cooks skills, to be evaluated by the master of the ship on a weekly basis, after the trainee has created a menu to be cooked for the crew that day. An expert consultant from MCTC also reviews the masters report. The course covers safe handling of food, nutritional knowledge, menu planning and food optimisation. Quite what can be done when the crew demands chips with everything or will only eat pizza would clearly be a problem, but being able to offer some healthier alternatives may keep waistlines under control. Its a big responsibility. The Captain says your beef wellington was a trifle underdone but your profiteroles were to die for! Connect with BIMCO Facebook Twitter Linkedin YouTube