New Risk On 10-Year Shipping Horizon

Last year, the number one risk for the maritime industry was the barrelling-down threat of a global economic crisis according to the Global Maritime Issues Monitor. This year, that risk is vying for pole position with a lack of preparedness for a future pandemic, which was added as a risk to the joint Global Maritime Forum, Marsh and International Union of Marine Insurance (IUMI) report for the first time this year.

 

While the industry grapples with the current pandemic, research among senior maritime stakeholders around the world found that horizon scanning for the next pandemic is already taking place.

 

“There is a significant risk of another pandemic,” said Professor Ian Goldin of the University of Oxford in his response. “The root causes of the current pandemic have not been stopped. Far from the World Health Organization (WHO) and other organisations that are vital to stopping future pandemics being reinforced, they are being undermined.”

 

This year’s Monitor worked to ten-year horizon and included a special focus on Covid-19. Respondents reported that the pandemic has revealed weaknesses in the maritime value chain, including the inability to protect seafarers’ wellbeing.

 

“It will be critical for the industry to consider health impacts as it evaluates its response to Covid-19, particularly issues of physical and mental wellbeing for seafarers,” said Marcus Baker, global specialty head of marine and cargo at Marsh JLT Specialty. “There is a range of workforce issues for the industry to tackle in developing resilience against the next pandemic, including seafarers being unable to join their families.”

 

While the industry grapples with the current pandemic, research among senior maritime stakeholders around the world found that horizon scanning for the next pandemic is already taking place

 

Respondents placed pandemics third for impact, and at the bottom for preparedness. On likelihood, although it ranked as likely to occur, pandemics sit in tenth place compared with other issues. Experts commented that the middle-of-the-pack ranking for likelihood should “flash a warning”, said the report, adding that it is critical for the maritime industry to learn from Covid-19.

 

The pandemic also increases the likelihood of a global economic crisis, respondents said, with 93% stating that they believe that Covid-19 makes a global economic crisis more likely. This is confirmed in a ‘likelihood ranking’ where ‘global economic crisis’ jumped from number 10 in 2019 to number two this year. “A global economic crisis has moved from ‘likely’ in our survey to a harsh reality and, for the third year in a row, it is the issue that respondents believe can have the greatest impact on the maritime industry in the next 10 years,” said Mr Baker.

Climate risks

 

Other risks climbing on maritime’s agenda include climate and environmental issues, which have risen on the rankings of impact, likelihood, and preparedness. “The coronavirus pandemic is rightfully given high priority, but the industry cannot afford to lose track of the long-term threats posed by climate change. It is crucial that we stay alert,” commented Peter Stokes, chairman of the Global Maritime Forum. Decarbonisation of shipping takes the second position in the impact ranking; its impact is only perceived as slightly lower than the one of a global economic crisis.

 

“Shipping needs to make a radical shift to zero carbon energy sources to meet decarbonisation targets. This transition represents a large-scale systemic challenge. At the same time, it represents a trillion-dollar market opportunity for suppliers of zero emission fuels,” commented Mr Stokes.

 

Meanwhile, digitalisation – being propelled by the Covid-19 response – is highlighted for its potential to improve resilience in supply chains, but it is also flagged as a shortcoming in the maritime industry over the 10-year window. Respondents said that they considered the industry unprepared for issues such as autonomy technology, cyber-attacks and data theft, and big data and artificial intelligence. “We need updated digital technologies in order to improve transparency, traceability and resilience in supply chains. Those who already had that in place before the coronavirus pandemic, operated more smoothly in the course of it,” said Richard Turner, president of IUMI.

 

Industry experts agree that improving the use of technology should be a top agenda item and could lead to benefits in areas such as efficiencies from data optimization, improved risk management, improved environmental performance, and more.

 

To take advantage of the new opportunities, said Richard Smith-Bingham, executive director at Marsh & McLennan Advantage, shipping companies will need to enter into new technology-based partnerships. Without those, the industry could be open to disruption from major technology firms, particularly e-commerce and transportation firms with existing capabilities in the application of data for transportation and land-based supply chains, said the report.

 

Politics at play

 

Geopolitical threats remain on the risk register, but the pandemic has moved that threat from likely to a “harsh reality”, said the report. According to 93% of respondents, the pandemic makes geopolitical threats more likely, with 45% citing insufficient access to finance as more likely due to Covid-19.

 

“The virus is set to accelerate an uptick in protectionism, de-globalisation, and decoupling pressures that existed prior to the outbreak,” said Meredith Sumpter, head of research, strategy and operations at Eurasia Group. In the coming years, Sumpter added that the shipping industry and others will face mounting political interference in trade, alongside increased nationalism. “The maritime shipping industry will need to consider how to optimise their global footprint in this more challenging, fragmented environment,” she said. “This may mean more of a shortening or rationalisation of shipping routes than planned to capitalise on the trend toward intra-regional trade. With global companies moving to diversify away from overreliance on single-source manufacturing exporters, maritime shippers may also need to consider building out new routes and readying fleets commensurate with overlapping trade patterns.”

 

Several experts, including Bjørn Højgaard, CEO of Anglo-Eastern Univan Group, noted that globalisation itself is under threat. “Nations are increasingly inwards looking, and xenophobia and nationalism are on the rise,” he said. “The ability for the shipping industry to be part of the solution and prosper on the way is contingent on us all stemming the tide of geopolitical tension so the world can get together in finding solutions to these existential threats.”

 

Source: The Baltic Exchange