Risk management is crucial to prepare the industry for tomorrow’s maritime world, according to panellists at Reed Smith’s London International Shipping Week event
Global law firm Reed Smith played host to a panel of shipping industry experts on 12 September to discuss ‘Tomorrow’s Maritime World, Today’. Representatives from a cross-section of the industry each brought their unique experience to the discussion, making for a lively debate on three pressing topics in the industry: cyber risk and technical advancements; current trends in finance; and environmental impact of the industry. While each topic might present a different challenge, the overwhelming advice from our panellists was to focus on risk management.
On the second day of London International Shipping Week, attendees from across the industry convened at Reed Smith’s offices to hear the opinions of Frank Coles, CEO of Transas Marine; Mark O’Neil, president of Columbia Marlow Shipmanagement Ltd; Albert Stein, managing director of AlixPartners; Laura Bugden, company secretary and risk manager; and Reed Smith global head of shipping, Nick Shaw.
Panel moderator and Reed Smith partner Andrew Taylor introduced the first topic of discussion: cyber risk and technical advancements. In light of the recent cyber-attack on Maersk, cyber security has risen up the agenda for the industry as a whole. However, what is the scale of the risk and is the industry responding appropriately?
The panellists were in agreement that it’s about risk control. According to Mark O’Neil, president of Columbia Marlow Shipmanagement Ltd, “it’s all about education – of the crew, operators, owners and management companies”. Frank Coles, CEO of Transas Marine added that “common sense needs to prevail” although he warned, “we don’t know what we don’t know” therefore the onus must be on risk control.
The discussion then turned to vessel automation and what the role of crew might look like in the future. Mark began by informing the audience that a degree of automation is expected in the near to mid-term as the technology is “tapping at our door”. Yet, he believes there will still be a requirement for a human element. According to Frank, however, the technology for automation is here already and a number of shipowners are already controlling decisions from a shore base on information they can receive from vessels. Laura Bugden, company secretary and risk manager, said this could see the beginning of a “very different type of seafarer”.
What are the legal implications of technological changes to vessels? According to Nick Shaw, global head of shipping at Reed Smith, “lawmakers react to the marketplace, but it can be a very slow process to effect legal change in the international sphere”. Therefore, lawmakers are more likely to be asking themselves ‘what is the minimum they can do to fit the current rules to the new reality of autonomous vessels?’
The second topic of discussion centred on current trends in finance. As the traditional banks have exited, new players have filled the void. Despite the opportunities for funds and Chinese leasing agencies, according to Albert Stein, managing director of AlixPartners and a specialist in debt restructuring, the cost of capital is different for big players than it is for the smaller players. Therefore, more consolidation is expected according to all our panellists. Mark confirmed “it will be the bigger players who can ride out the market as returns become smaller than before”. Laura added that with these changes to the market players, greater emphasis must be placed on governance.
The third and final topic of the day looked at the environmental impact of the shipping industry and how the industry is responding to new regulations and the upcoming IMO 2020 global sulphur cap deadline. While environmental concern is now a reality for all market participants, unfortunately the costs associated with installing scrubbers, using new fuels or switching to LNG, are an impediment. To that end, our panellists believe that nothing will change until it has to, and that this could mean a last minute rush to compliance. As Laura summarised, “no one has the money to throw at it…therefore they’ll wait till the end”, again though, the reality of meeting the 2020 global sulphur cap set by the IMO will largely rely on risk management and training.
With all the changes required to make vessels environmentally compliant and to cater for automation, the lifespan of a vessel could look very different. With the time it takes to construct a ship, the industry needs to start considering now how to construct ships that cater for some or all of these changes. The next question will be how to ensure investments are still tenable. As Albert commented, “spreadsheet models are going to be very different”.
Reed Smith’s Shipping Group would like to thank Frank, Mark, Albert and Laura for joining the panel for an enlightening discussion on the future of the shipping industry.
Reed Smith’s next shipping event will be a webinar on 28 September: ‘Cyber Attacks – the New Pirates’. For further information, please contact firstname.lastname@example.org.