Page 53: of Maritime Logistics Professional Magazine (Q2 2012)

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Unmanaged Risk: “It Won’t Happen to Us.”

Last year a crew member working on a major cruise line was caught smuggling drugs into a Caribbean island. His primary method of delivery was his workplace – the ship. By using his vessel as both a hiding place, and a delivery vehicle, this crew member was able to smuggle hundreds of thousands of dollars worth of illicit material into a foreign country.

The cost of maritime piracy is conservatively estimated to be somewhere between $5 and $10 billion per year. $238 million in ransoms were paid in 2011. Hundreds of merchant sail- ors are currently being held as human shields and bargaining chips. A Middle Eastern tanker company recently paid $12 million to get a single pirated ship back in the gulf of Aden.

Piracy is the ultimate low probability, high consequence risk. Yet some shipping lines are still willing to leave much of this to process chance. Ships continue to sail directly into high risk piracy areas with little or no information support regarding the risk. Does it make sense to carefully consider weather data for a particular transit area but ignore analytics related to criminal activity in that same area?

In 2006 a container ship was nearly lost in the Indian Ocean. After a mass confl agration broke out onboard, the crew had to abandon ship and was rescued by the Dutch Navy. Inves- tigators determined that the cause of this catastrophic event ($300 million single day loss) was mis-declared freight. Fireworks were manifested as some other cargo and unknowingly stowed on the ship in a way that caused this fi re. Visibility in the supply chain is a critical component of effective risk management. This event highlighted a classic maritime risk management challenge: Should sailing with unknown cargo be considered an acceptable level of risk?

We know that terrorists and criminals are determined to use the global supply chain to transport threat objects and illicit material. A few months ago an illegal shipment of surface to air missiles was discovered on a ship by offi cials in Finland. 69 missiles (labeled as “fi re- works”) were discovered on the ship. The captain was not aware that he was piloting 160 tons of illegal weapons to an unknown recipient. Effective risk management measures in- cluded an effort to deny adversaries the opportunity to use legitimate commercial maritime commerce as a pathway for destruction. www.maritimeprofessional.com | Maritime Professional | 53

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