Moore Stephens: Manage Risk or Pay a High Price

Companies which fail to embed effective risk management procedures into their daily activities are likely to pay a high price in today’s tightly regulated and highly competitive shipping industry, the international accountant and shipping adviser Moore Stephens warns.

Respondents to the inaugural Moore Stephens Shipping Risk Survey rated the extent to which enterprise and business risk management is contributing to the success of their organisation at an average 6.9 out of a possible score of 10. Over a quarter of respondents returned a rating of 8, while almost three-quarters put the figure at more than 5 out of 10.

A third of respondents felt that enterprise and business risk was being managed effectively by their organisations, while 37% confirmed that such risk was managed by means of discussion without formal documentation.

Demand trends were deemed by the greatest number of respondents (19%) to pose the highest level of risk to their organisation over the next 12 months, closely followed by competition (18%). The cost and availability of finance featured in third place, at 13%, while operating costs and tonnage supply each figured at 10%.

Other factors cited as posing a high level of risk included political and economic developments and international sanctions, cyber security, counter-party creditworthiness, and technical breakdown. One respondent was convinced that demand for shipping would increase, but another was far less confident about the availability of competent crews to man the ships.

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 demand trends, the supply of competent crew and tonnage supply, which were perceived to have the potential for increased risk. Issues beyond the control of shipping also figured in the replies from respondents, one of whom emphasised: ”Geopolitical issues will keep influencing the market economy, which will make business unstable and lead to lack of sustainability.”

”Risk is only likely to increase in the shipping industry. Some of the risks are well-recognised and traditionally well-handled, such as those arising from competitive pressures. But other risks are of an emerging nature, such as cyber-security, while others still, for example the financial stability of counterparties, fraud and money-laundering, tend to fluctuate in their level of severity with market conditions and geographic location,” Michael Simms, a partner at Moore Stephens, said.

”Given the level of accumulated knowledge within the industry, and the continued increase in technological innovation, there is no excuse for shipping not to manage its exposure to risk. Companies which fail to monitor risk intelligently and systematically, to oversee the effectiveness of risk controls, and to embed risk management into their daily activities, are likely to pay a high price.”

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