Effective Risk Management in Transoceanic Trade

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The risks undertaken by maritime logistics can be staggering. The costs of collisions, lost cargo, and piracy all weigh heavily on ship owners and charterers alike. Besides hedging against liabilities, companies should also invest in actively managing day-to-day risks tied to human error.

Transoceanic maritime vessels carry massive amounts of goods to markets across the globe, carrying with it the hopes of retail enterprises and investors and the expectations of international consumers. Although modern innovations in maritime travel have improved the safety and speed of cargo vessels, maritime logistics remains a high-risk affair with a huge potential for disastrous losses in the event of an adverse event.

High stakes at the High Seas

Despite their rarity, many of the adverse conditions occasionally encountered by ships and their charterers come with a high cost. To counter the inevitable expenses of liabilities and losses during transit, charterers and shipping companies alike have relied on insurance coverage.

Ship owners usually have protection and indemnity (P&I) insurance to cover for liabilities claimed by third parties in the wake of collisions, property damage, environmental damage, and the removal of wrecks.  Charterers, meanwhile, have the option to rely on liability insurance to safeguard against indemnities against them.

Preventive Measures

Several risks in maritime logistics have more manageable components and can be alleviated through best practices. Regular maintenance, for instance, addresses potential risks for hardware malfunctions that could cause accidents at sea. Ships must maintain a policy where no ship could travel in the event of adverse weather reported on the route. Ship management should also maintain non-hazardous working environments to minimise the likelihood of workplace accidents that could turn life-threatening.

At the heart of many maritime risks is the element of human error. Sailors are especially prone to poor decision making when deprived of adequate rest. Hazardous working environments, when left unaddressed by the crew or their superiors, can increase the likelihood of freak accidents. Other potential errors in human judgment include lax maintenance schedules and distracted or poorly utilised staff.

Narrowing the window of human error is a key element in effective day-to-day risk management in transoceanic shipping. Clear communication and strict adherence to standard operational practices and safety protocols is vital to ensuring safety on long oceanic voyages. The crew members of ships must be given adequate time to rest and be sufficiently trained to follow best practices during times of emergencies. Staff in charge of managing

The Challenges at Hand

maritime logistics

Hedging against losses is one way of coping with the unpredictability of risk in transoceanic shipping. Today’s technology had made some threats easier to avoid or manage, while others have resurfaced with no easy answers to addressing them.

In recent years, international piracy—a scourge once thought to be a relic of the past—has become a clear and present danger in sea lanes such as those in the Indian Ocean. The formidable armaments of these pirates and terrorists can subdue crew and hold them and their cargo hostage. Some transoceanic routes require passage to a territory where piracy is common. Proposed solutions to safeguard the crew include providing firearms or having armed escorts.

The danger of things getting lost at sea is still a huge threat to many shipping companies, although these risks are relatively rare. With the advent of modern meteorology and mapping, ships rarely venture when adverse weather conditions are imminent and are usually warned of incoming dangers like collisions.  Today’s best practices can allow ship captains to take sufficient measures to secure cargo and the lives of personnel in the event of sudden changes in travel conditions.

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