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Thursday, 31 August 2017

Moore Stephens says shipping must beware exposure to changing risk landscape

The third annual Shipping Risk Survey from international accountant and shipping adviser Moore Stephens confirms that the effective management of risk within the industry has improved slightly over the past 12 months. But shipping still needs to up its game in terms of managing its exposure to risk, which is increasing and changing in nature, not least in terms of the threat posed by cyber security.

Respondents to the survey rated the extent to which enterprise and business risk management is contributing to the success of their organisation at an average 6.8 out of a possible score of 10.0, compared to 6.6 last time. Charterers returned the highest rating (8.8) in this regard, followed by owners (6.9) and ship managers (6.8). Brokers returned the lowest rating at 6.3. Geographically, Europe (7.0) was ahead of Asia (6.6), but it was the Middle East which returned the highest figure, at 7.8.

Overall, respondents rated the extent to which enterprise and business risk was being managed effectively by their organisations at 7.1 out of 10.0, up from the rating of 7.0 recorded last time and indeed in the inaugural survey in August 2015. Charterers (8.8) expressed the highest level of confidence in this regard, followed by owners (7.3) and managers (6.9). In the previous survey, charterers recorded the lowest rating (6.5) of the main respondent types.

Demand trends were deemed by the greatest number of respondents to pose the highest level of risk, closely followed by competition and the cost and availability of finance. Demand trends were thought to pose the highest level of risk for owners, charterers and brokers, while for managers it was competition that topped the list.

Geographically, demand trends were the number one concern in Europe, Asia and the Middle East, while respondents in Latin America and North America identified competition as posing the highest level of risk.

Respondents to the survey felt that the level of risk posed by most of the factors which impacted their business would remain largely unchanged over the next 12 months, with the exception of ballast water management legislation, cyber security, geopolitics, operating costs and other changes to laws and regulations, which were all perceived to have the potential for increased risk.

Overall, 69% of respondents (unchanged from last time) felt that the senior managers in their organisations had a high degree of involvement in enterprise and business risk management. Meanwhile, 22% (up from 20% previously) said that senior management’s involvement was limited to “periodic interest if risks materialise”, while 7% (down from 10% last time) noted that senior management “acknowledged but had a limited involvement in” enterprise / risk management. Just 2% (marginally up on the 2016 figure) said that senior management had no involvement whatsoever.

Overall, 30% of respondents (compared to 35 % in the previous survey) confirmed that such risk was managed by means of discussion without formal documentation, while 45% noted that risk was documented by the use of spreadsheets or written reports, compared to 41% previously. Internally developed software was employed by 10% of respondents (17% last time) to manage and document risk, while 14% used third-party software, as opposed to just 5% at the time of the previous survey.

On a scale of 1.0 to 10.0, estimates of claims and provisions (up from 4.2 to 4.3) were deemed the factor most likely to result in a material misstatement in companies’ period-end financial statements. Next came impairment involving vessels in use (up from 4.0 to 4.1), changes to legislation (down from 4.2 to 4.1), and reliance on spreadsheets for financial reporting (up from 4.0 to 4.1). Loan covenant non-compliance, meanwhile, was up from 3.8 to 4.0.

A stand-alone survey question addressed only to publicly traded companies revealed that 80% of such organisations had a dedicated audit committee in place. Respondents in two-thirds of those companies, meanwhile, confirmed that their audit committees met on a quarterly basis to discuss risks, while 22% reported that such meetings were held annually.

Michael Simms, Moore Stephens partner, Shipping Industry Group, says: “Embedding proper and effective risk management controls into daily operating procedures is a huge challenge for companies in the shipping sector, where high risk levels are an accepted and fundamental part of the industry. This is particularly the case, as is now, when the industry is ultra-competitive and grappling with an imbalance in tonnage supply and demand, and when wider global economic conditions remain extremely tough.

“In such a scenario, it may be tempting for companies to take their eye off their exposure to risk in pursuit of retaining or securing new business. And although the survey suggests that is not the case, it also reveals that the standard of risk awareness and response capability in many shipping companies is below the required levels.

“The good news is that there is greater acknowledgement that sound enterprise and business risk management is contributing to the success of those shipping organisations which responded to our survey. More companies are now formally documenting the way in which such risk is managed, with a healthy level of involvement by senior management. Moreover, there has been a noticeable increase in the deployment of third-party software to manage exposure to risk.

“But the survey results show that there is still room for improvement. As the level of risk is not only increasing but also changing in nature, there is a need for companies engaged in the shipping industry to up their game in terms of implementing effective corporate governance systems, monitoring procedures and maintaining controls throughout their organisations.

“The factors identified by respondents to the survey as being most likely to result in a material misstatement in their accounts were unsurprising – particularly claims estimates and impairment. The same is true of factors posing an increased level of risk to business over the next 12 months, including operating costs, ballast water management legislation, and cyber security.

“There is nothing new about the challenge posed by operating costs, which are as old as shipping itself. Such costs may have fallen over the past four recorded years, but it is unlikely that this will continue, particularly given the need to meet increasingly onerous legislative and regulatory demands, and continually escalating crew costs. But the need to invest heavily in measures to preserve the environment, and to protect against the threat of cyber-attack, are more recent developments which change the risk landscape for the shipping industry.

“IMO recently approved an extension to the implementation date for the Ballast Water Management Convention, but it is a delay rather than a reprieve for owners and operators. Meeting the cost of compliance over the coming decade represents an enormous challenge.

“The threat to cyber security within the shipping industry, meanwhile, grows apace. Ship operation is becoming an increasingly digitalised business, calling for cyber risk management both on board and ashore. IT systems and onboard operational technology are increasingly being networked and connected to the internet, resulting in a heightened risk of unauthorised access to ships’ systems and networks.

“The effective management of risk is fundamental to both safety and commercial success in the shipping industry. The level of effective management of risk must continue to improve. The challenge for companies operating in the shipping sector is to balance risk awareness and risk management with the pursuit of commercial success in an industry which traditionally rewards success commensurate with the informed and acceptable taking of risk. Those who fail to meet this challenge may pay a heavy price in terms of performance, and even survival.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 of $2.7 billion. www.moorestephens.co.uk

For more information:
Michael Simms
Moore Stephens LLP
Tel: +44 (0)20 7334 9191

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Monday, 21 August 2017

German ship agent wins ITIC-sponsored FONASBA Award

The FONASBA Young Ship Agent or Broker Award 2017, co-sponsored by International Transport Intermediaries Club (ITIC), has been awarded to Niklas Soltow of SCA Logistics GmbH of Kiel, Germany. Katy Aldrick of Seaforth (Kenya) Ltd also received a special ‘highly commended’ award for her paper on the threats and opportunities facing small independent shipping agents in East Africa.

The award was introduced in 2015 and entries were reviewed and judged by a committee headed by former FONASBA President Gunnar J Heinonen which also included ITIC director Charlotte Kirk. Mr Heinonen, expressing FONASBA’s gratitude to ITIC and fellow sponsor BIMCO, said the winning paper provided an excellent picture of the present situation of the market and much food for thought for what is likely to be a challenging future. It is FONASBA’s intention to develop the award still further to create even more interest among the growing number of young ship brokers and agents who represent the future of the profession.

Niklas Soltow said the award was a wonderful way to sustainably encourage the professionalism of young people who want to take up the challenge of the industry

Charlotte Kirk says, “ITIC is proud to be a sponsor of these FONASBA awards, which will be of enormous benefit to the industry as a whole in helping to identify the outstanding ship brokers and ship agents of the future.”

ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com

FONASBA (The Federation of National Ship Brokers and Agents) provides a united voice for the world’s shipbrokers and agents. Founded in 1969, the organisation promotes fair and equitable practices and ensures that the needs of its members are understood at both a governmental level and across the maritime industry. www.fonasba.com

For more information:
Charlotte Kirk
Tel. +44 (0)20 7338 0150

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Friday, 4 August 2017

Multraship strengthens Black Sea presence with Multratug switch to Bourgas

Leading towage and salvage specialist Multraship is further strengthening its prominent position in the Black Sea region by transferring its state-of-the-art Damen-built tugboat Multratug 26 to the Bulgarian port of Bourgas for operation by its 100-percent owned subsidiary, Bourgas Tug Service.

Pepijn Nuijten, joint-managing director of Multraship, says, “Multraship believes very strongly in the strategic importance of the Black Sea region, and its prospects for commercial and economic growth. It is committed to expanding its fleet in the area to provide the quality services which the industry needs, both now and in the future.

“We have seen a significant growth in our Black Sea operations, mainly in harbour towage and in offshore work, not least that involving the Turkish Stream Project (and its predecessor the South Stream project) to build a natural gas pipeline from Southern Russia to Turkey.”

The 63-ton bollard pull, ASD FiFi Multratug 26 will significantly strengthen the Bourgas Tug Service fleet, which consists of six tugboats, including ASD and Voith-powered units.

Pepijn Nuijten says, “Multraship acquired Bourgas Tug Service in 2005, since when it has continued to enhance its reputation as a quality provider of harbour towage, salvage and line-handling services in and around the port of Bourgas. We believe Multratug 26 will be the best-equipped tugboat in Bulgaria, and its deployment in Bourgas is part of Multraship’s commitment to provide specialist equipment and services in those parts of the world where they are most needed.”

Multraship is a leading Dutch towage and salvage company. It is a division of the Muller Maritime Group, which has been engaged in the shipping industry for more than 230 years. The company's core activities include harbour towage, salvage & wreck removal, ocean towage and support to offshore energy & dredging industries. Multraship operates and manages a large fleet of tugs, salvage vessels, floating sheerlegs and other craft equipped with modern towage, salvage and fire-fighting equipment and manned by experienced and highly-trained masters and crew. www.multraship.com

For more information contact:
Pepijn Nuijten
Multraship B.V.
+31 (0) 115 645 000

Kalin Borissov
Bourgas Tug Service
+359 88 5120766

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