Not enough companies in the shipping indus[ds_preview]try are following joined-up risk management procedures, according to shipping adviser Moore Stephens. The second annual Shipping Risk Survey revealed a fall, when compared to last year.
Moore Stephens reported a fall in the overall level of satisfaction on the part of respondents that sound risk management had contributed to the success of their organisations. The involvement of senior management in managing risk at the highest level also declined against last year.
Demand trends were deemed by the greatest number of respondents to pose the highest level of risk to their organisation, closely followed by competition, with the cost and availability of finance in third place. 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 tonnage supply and competition, which were perceived to have the potential for increased risk. No-one overall expected less risk in any of the categories.
Overall, 35% of respondents (compared to 37% in the previous survey) confirmed that risk was managed by means of discussion without formal documentation, while 41% noted that risk was documented by the use of spreadsheets or written reports, compared to 42% previously. Internally developed software was employed by 17% of respondents (13% last time) to manage and document risk, as opposed to the 5% who used third-party software.
Michael Simms, Moore Stephens Partner, Shipping & Transport, says: »The shipping industry’s level of vulnerability is reflected in the diverse nature of the threats identified by respondents to the survey. Few other industries could claim to be exposed to risks arising from economic uncertainty, mis-diagnosed analyses, renegotiation of existing contracts, lack of financing, uncertainty over asset valuations, defaults on loan repayments, political sanctions, monopolistic policies, regulatory changes, falling crude oil prices, customer insolvency, fears over the Chinese economy, uncertainty in Europe (and not just as a result of Brexit), and plain old supply and demand.«
He continues: »Since the start of the worldwide economic downturn in 2008, shipping has coped, to varying degrees of success, with what might be regarded as the ‘traditional’ risks associated with operating in the industry. But there is also a growing threat from extraneous factors such as cyber-security and the increasing level of IT-related risk. The industry’s risk profile is changing, and with that the industry itself must change its approach to identifying risk. For some, outsourcing is a solution. However, managing the risk of doing this must not be overlooked. If the risk is not recognised, it cannot be controlled.«
