A Cypriot Game: Risk Mgmt. and Shifting Cargo
As a top executive of a Cyprus-based shipping company that manages or owns hundreds of vessels that constantly crisscross the globe carrying everything from volatile gas to toys, Arthur R.T. McWhinnie knows something about managing global risks.
On a daily basis, the general manager of fleet management at Hanseatic Shipping Co. Ltd. must be ready for any of the contemporary risks--from terrorism to computer viruses to oil spills--that can defy any risk manager's best laid plans for his global company.
But as an executive of a firm in an industry that dates back to ancient times, McWhinnie also grapples with the age-old, unpredictable risks--volatile weather, piracy and seaman safety--found in the maritime industry.
"That's what makes this job challenging. There are always new risks popping up," says McWhinnie. "It's also what makes it exciting. It's an industry that is always on the move."
Operating from Limassol, Cyprus, perched only 150 miles from Beirut at the crossroads of Europe and the Middle East, Hanseatic was created in 1972 by the Schulte Group of Companies, a German maritime firm that traces its roots back to a traditional 19th century Hamburg shipping family.
Hanseatic Shipping Co. remains a privately owned, independent member of the Schulte Group with a staff of more than 200 employees spread in four other countries: Germany, Singapore, the United Kingdom and Greece. As a ship management company, Hanseatic handles daily operating headaches that accompany moving hundreds of vessels through thousands of ports each year for ship-owning clients or Schulte.
"We provide an owner with our expertise in the day-to-day operational requirements. When you look at all the risks associated with this, you have to understand that this is not an easy task. Risk to people, risk to the environment, but to name a few," says McWhinnie, a British national who brought more than two decades of seagoing experience to Hanseatic when he joined in 2000.
And in an industry scrambling to find properly trained crew members and officers equipped to safely move volatile cargo like methane gas through treacherous waters, one of Hanseatic's strongest calling cards is a database of 7,000 experienced seafarers who meet its rigorous recruiting standards. Shipowners depend upon Hanseatic because "we have the expertise and good reputation," says McWhinnie, adding that finding qualified crew is one of the ship management industry's toughest challenges.
"The demand is increasing due to the added tonnage to the world fleet, and the development of personnel cannot follow at the same pace," says McWhinnie, an engineer whose career has taken him around the globe working everything from refrigerated cargo vessels to passenger ferries carrying thousands of people. "You need 10 to 12 months to build a vessel, and you need 10 to 12 years to build up a senior officer."
And as more shipowners turn to ship management companies to cut costs by tapping into their large-scale purchasing power and management expertise, the industry's personnel squeeze has spread to its shore-based operations. This envelops the essential safety and technical superintendents who help insure the safe and efficient operation of a vessel.
A CARIBBEAN CONNECTION
"We've worked hard to overcome these issues by training and upgrading current staff members," says McWhinnie, who grew up on a banana plantation in Jamaica and began his seagoing career in 1978 as a junior engineer on a vessel carrying bananas through the Panama Canal. Of his experience of landing on a banana boat for his first professional post, he says: "I must say it did seem that I was destined to live around the banana industry. I could not eat bananas for at least five years. And I won't mention those 'hairy things with eight legs' that always seem to be in the holds of the ship on first loading."
With its expertise and reputation, Hanseatic keeps growing and has become noted for its proficiency in handling gas, chemical and oil tankers--the most difficult, expensive and time-consuming category of vessels to manage. "They're difficult to run due to the shortage of personnel, stricter regulations and major oil requirements," he says. About half of the fleet under the company's management are tankers, known as wet cargo ships, while the remaining are dry cargo ships, such as container vessels. McWhinnie declined to disclose the company's annual revenues or the portion gleaned from ship management.
In its role as a third-party service provider, Hanseatic can offer a shipowner simply a crew, as it does for nearly 200 vessels, or full management, as it does for about another 100 vessels. That might include crew, equipment, provisions and maintenance for the shipowner, who is actually sourcing the cargo and wants it moved from one locale to another.
Either way, Hanseatic has to finely tune its own risk-assessment capabilities as it considers taking on new clients or the shifting risks, like vessels, cargo, and loss history, of existing customers. Its assessment includes investigating the age and accident history of a vessel, the type of cargo it will carry, the transportation routes and the shipowner's record in handling everything from credit to safety.
"If it's a type of cargo we haven't handled before, then we have to assess if we can manage it," says McWhinnie.
Hanseatic purchases separate insurance policies for the vessels it owns and the vessels it manages, but all vessels must be insured with a "good name" provider.
The Cypriot company secures its Hull and Machinery cover, which insures against damage to the vessel, in the London and Scandinavian markets. Factors such as the insured value, age and condition of the vessel influence the premium price.
"A new building would be more expensive than a secondhand vessel, but for sure, a more safe and lucrative project for the underwriter," says McWhinnie. "Underwriters have their set of criteria, and in this respect we need to be flexible to accommodate their requirements as well as our clients' needs for insurance."
For its liability coverage to third parties, such as an injured crew member or a fishing company whose business is damaged by an oil spill, Hanseatic turns to the Protection and Indemnity clubs, the remote descendants of the many small hull insurance clubs created by British shipowners in the 18th century.
Hanseatic is a member of the U.K. and Norwegian Gard clubs. Premiums hinge on ratings assigned to a vessel's risk, as well as competition between the two P&I clubs, McWhinnie says.
The collision and fixed and floating objects liability can be covered through either the H&M cover, the P&I club or a combination of both, he says. These are all covers that most financial institutions and port authorities would require of any vessel calling at its port.
And to better handle any type of pollution incident, Hanseatic has agreements in place with each client that let it turn to experts equipped to deal with an accident and subsequent mop-up operations. It also has an emergency team on 24-hour call back in Cyprus, ready to tackle any situation.
"This team drives the incident to conclusion in cooperation with all interested parties, including governments," he says.
The specter of serious illnesses, such as SARS or the emerging drug-resistant strains of tuberculosis, which can spread quickly in close quarters, are not a significant risk for a maritime company whose vessels, unlike the cruise industry, don't carry passengers and run with relatively few crew members. Each vessel is staffed by less than two dozen people, he says.
McWhinnie also keeps his eye on the technological end of operations and the damage that could be wrought by a computer virus. But in an industry that has existed for centuries, shipping companies have other sources to fall back on.
"If we lose all communications with a ship because of a virus, then we have the satellite system," says McWhinnie. "And then there's always the telex."
While piracy is always a threat for a company that sends ships and crews through the notorious Strait of Malacca, a 550-mile, narrow sea-lane tucked between Malaysia, Singapore and Indonesia, McWhinnie is holding any pirate incidents involving his ships close to the vest for now.
"I would have to be sitting round the pub with a pint in my hand to give this justice!" says McWhinnie. "Capt. Sparrow has nothing on me."
PAULA L. GREEN lives in New York City.
May 1, 2007
Copyright 2007© LRP Publications