Difficult markets put risk management in focus for shipping

K Murali Pany, a partner at law firm Joseph Tan Jude Benny (JTJB), said there needed to be a re-evaluation of business models with a view to risk assessment.

“There has to be a fundamental rethink of how business is going to be done in terms of managing the risk. All businesses have risk, but it’s a question about whether to take on the risk blindly, or taking it on in a measured way, where you’re prepared for when things go wrong,” said Pany, who is a speaker at Sea Asia 2017.

For example, he pointed to the need for proper contracts. Too many times, he said, millions of dollars have been at stake over contracts that were too vague or not set up appropriately. He also highlighted the need to make considered agreements, encouraging companies to take a hard look at the credit-worthiness of who they were supplying to.

“Rather than chasing every dollar, businesses should be chasing the good dollars. Don’t just focus on volumes; focus on creating a more solid business.”

However, not all risks can be guarded against as the bankruptcy of Hanjin Shipping, which had government backing showed.

“Nobody could have expected Hanjin to collapse like that. That’s just bad luck really, no amount of risk management can overcome that,” he said.

Tan Beng Tee, assistant chief executive (Development) of the Maritime and Port Authority of Singapore (MPA), noted that risk was part of the transaction and that even big names could fail.

René Piil Pedersen, chairman for the International Committee of the Singapore Shipping Association, explained shippers were now much more focused on the financial health of shipping companies they did business with in an effort to avoid a scenario like Hanjin where cargo was left stranded for weeks if not months on end.

“What we see in dialogue with our customers is that financial stability on shipping lines is on the agenda in a completely different way than we saw in the past. So in the procurement process this is a part of the discussion,” said Pedersen who is also group representative Asia Pacific and managing director for Maersk Group.

Sea Asia, the premier maritime and offshore conference and exhibition in Asia is returning for the 6th edition on 25 - 27 April 2017 at the Marina Bay Sands, Singapore and co-organised by Seatrade and the Singapore Maritime Foundation.