Engaging and advising your C-Suite
Maritime incidents present complex challenges for any organisation in the shipping value chain. Multiple parties and jurisdictions can create a bewildering set of stakeholders and an overlap in roles and responsibilities. Incidents can also take place in remote, hostile environments, creating significant risks. This unique mix of risks and environments combines to make maritime incidents some of the most complex an organisation can face.
Executive management teams and boards, however, are often unaware of the complexity they will face.
Admiral Sir James Burnell-Nugent, senior maritime advisor at Regester Larkin by Deloitte applies his extensive experience in the maritime environment to recommend how companies can best engage and advise their Board and c-suite to prepare for a maritime incident.
The challenge of maritime preparedness
Over the last 25 years, the maritime industry has steadily improved its approach to safety. Implementation and enforcement of the SOLAS convention (Safety of Life at Sea), the adoption of the International Safety Management Code, MARPOL (International Convention for the Prevention of Pollution from Ships) and other major regulations have done a great deal to improve safety for mariners, the marine environment and the coastal communities which may be affected by a maritime incident.
Despite this, maritime operations remain hazardous.
The International Maritime Organisation (IMO) incident database recorded 149 incidents in 2015, 97 of which were classed as ‘very serious’. There were also 303 incidents of piracy over the same period. And these are only the reported incidents. No doubt some mariners apply the adage of ‘what happens at sea, stays at sea’ so the actual number may be significantly higher.
Companies must, therefore, be prepared for a range of possible crisis scenarios in the event of a serious event.
At Regester Larkin by Deloitte we define crisis preparedness as having the right people, processes and infrastructure in place to respond to a crisis effectively. This is achieved by thorough crisis planning, training and exercises.
These basic principles apply on land and at sea. There are two key crisis response challenges to address for maritime crises: firstly, identifying and engaging the correct stakeholders in a complex spread of ownership, management and jurisdictions; and secondly diagnosing and resolving the critical issues when multiple decision makers are involved.
Today’s stakeholders, may not be tomorrow’s
Stakeholder management is key to any crisis response to ensure issues are resolved and reputational, operational and commercial impact is minimised. This can be complicated in the maritime environment due to the large number of parties in a shipping value chain.
For example, an onshore manufacturing facility is likely to have a relatively static list of suppliers, customers, workers and communities to work with.
By comparison, a maritime operator can find its stakeholders changing frequently. Vessels move from charter to charter and cargo owners work with different shipping companies depending on route and availability. Ports and terminals have dozens of different clients in a single day and cruise ships will have hundreds of different stakeholders aboard each week.
One event can lead to multiple incidents
Maritime events can often be more complex, remote and dangerous than land-based incidents.
A single event at sea usually results in several different interfaces occurring simultaneously, as each party has different concerns, issues and problems to manage. Each of these interfaces needs to be managed simultaneously.
If an oil tanker runs aground, for example, the vessel manager might focus on vessel damage and crew casualties, a national authority on the containment of any spilt cargo, and the cargo owner on the status of the cargo and the impact on customers.
These different perspectives can result in competing priorities.
Before we look at how companies can better prepare for maritime incidents, we need to ask how big an issue this actually is. Every sector has its challenges, so why does the maritime industry require additional levels of preparation?
The worst case scenario or business as usual?
Imagine a crisis exercise scenario in which a cargo ship starts to break up and needs to be grounded for safety. Now imagine the grounding takes place on a beach, which is also a world heritage site and nature reserve. And that cargo containers, five per cent of which are classed as hazardous, are lost overboard and begin to wash up onshore. Meanwhile, the vessel is leaking fuel oil and over 200 tonnes pollutes the beach. The vessel is Swiss owned, operated by a British, French and Israeli company, transiting between two European countries and runs aground in a third, which coincidentally is also the flag state.
By this point, most people would feel they had moved from realism to a far-fetched scenario, too unlikely to plan for. This, however, is exactly what happened in 2007 when the MSC Napoli grounded on the English coast. It was also not the only major event that year, similar complex incidents happen regularly, as shown by the IMO data.
Rather than assume incidents like the MSC Napoli are unusual, maritime organisations should rethink what a normal incident looks like and prepare accordingly.
We suggest six considerations for helping organisations refine or focus their response plans to ensure they are better prepared for future maritime incidents.
1. Understand your responsibilities
Each party must understand its responsibilities during an incident.
A party’s responsibility will depend on its role at the time, for example ship owner, operator, charterer, cargo owner, terminal operator and so on.
It will also depend on the jurisdiction in which the incident occurs.
While companies will be aware of their compliance responsibilities under the supranational maritime conventions, they must also be aware of any national procedures that may apply in the territorial waters of a country within which a ship may be operating.
Additionally, in some cases organisations can feel obliged to respond to an incident that involves them, but where they have no obligation or ability to do so.
This key concept is not always appreciated, particularly in international oil and gas companies (IOCs) where the c-suite is used to being hands-on and ‘owning’ the crisis. Sometimes companies find they have to take a back seat in a major event, even if they face significant penalties.
This can be particularly difficult when an IOC’s name is the most recognisable of those involved in an incident and the media incorrectly describes it as theirs. This poses a set of issues in its own right, as the IOC has to correct the media narrative and speak to its own stakeholders without straying into response management.
Maritime organisations must develop clear internal guidance to ensure they understand their responsibilities for each area in which they operate. Port and terminal operators must also remember that vessels travel from jurisdiction to jurisdiction and might have different preconceptions of their responsibility if an accident were to happen.
2. Stakeholders – charting the knowns
Companies must identify their key stakeholders.
The MSC Napoli example shows how complex these relationships can be and how critical they are to an effective response.
Stakeholder management should not be underestimated and significant time and effort should be invested in it. Mapping stakeholders before an event means a company knows who to coordinate with during an incident, and building relationships with them in ‘peacetime’ means a crisis is not the first time contact is made.
Internal stakeholders should not be forgotten in this, particularly any senior management not exclusively involved in maritime operations. Senior stakeholders need to understand what the company can and cannot do in a response.
In our experience, senior executives of the cargo owner tend to think their company has more control in a shipping incident than is actually the case.
During an incident they can incorrectly expect to tell the ship owner how to resolve the issue and this can be a hard preconception to break.
Educating executives on the company’s responsibilities and abilities, and their role in a maritime crisis should be a key part of their crisis training.
Once stakeholder relationships are understood, organisations can plan how they will work together and where different parties will lead. For example, who takes the lead with the media, who liaises with the authorities, what information will be shared and how?
Agreed responsibilities between parties can be laid out in a clear bridging document or adaptable framework document which can form the basis of future testing and exercising. It is also wise to draft holding statements with key likely partners in advance.
Clear, practised response plans make it easier to respond to a real crisis and more likely that each party sticks to its agreed responsibilities, which becomes harder as media and public attention grows.
3. Stakeholders – identifying the unknowns
In a maritime incident there will also be unknown stakeholders requiring attention.
Vessels might transit several national waters in a single voyage. Terminals and ports might handle dozens of vessels and cargoes daily. And energy companies often work with a range of vessels as cargoes move through their supply chain.
It is not unusual for an energy commodity to be transported on a ship whose operator has a long term relationship with the commodity owner, but then for the cargo to be subsequently transferred to a spot vessel where no such relationship exists.” In such a case, the IOC switches from a long-standing relationship with a trusted partner, to a vessel with no established relationship or mutual understanding.
Although the time, location and parties to an incident cannot be known in advance, companies can still prepare. Likely stakeholder groups can be identified and relationships developed. This might mean IOCs working with the ship management company rather than the vessel master, developing an internal registry of Flag states or speaking to the coastguard in waters where transit is most common. It could even be as simple as dedicating members of the response team to researching and contacting relevant stakeholders depending on the situation.
Mapping out less obvious stakeholders in advance is difficult but doing so will prove invaluable if an actual incident occurs.
4. Understanding all parties’ response capabilities
Organisations must also consider how effective and competent other parties are likely to be.
Many maritime regulations, for example, will direct that the flag state has certain obligations, such as ensuring SOLAS safety measures are followed on all vessels registered to that state. A quick comparison of the condition of vessels flying different flags, however, makes it clear there are varying interpretations of what is considered compliant.
Governments can also have very different maritime response capabilities. Some may have robust spill and response capabilities, and others have nothing in place. Similarly, response capabilities and safety cultures differ across companies.
If there are shortfalls in partners or suppliers capabilities, companies should plan how these can be bridged.
IOCs, for example, have significant leverage over vessel operators transporting their product. At the contract level they can stipulate that safety measures meet or even exceed the basic requirements and how incidents should be reported, managed and coordinated. These improvements are for the benefit of the IOC but the vessel crew and owners will also derive a benefit from improved safety.
Where companies have little or no influence on their partners, they will need to implement additional internal mitigation measures. For example, a cargo owner might retain its own spill response company.
Companies should, however, ensure their actions do not delay or inhibit a more effective response by a state.
We observed this while facilitating a crisis exercise in Australia, when we noticed significant time being spent planning the mobilisation of a spill response team from Asia. Several hours into the exercise, the response team realised Australian quarantine regulations would prevent any material entering the country without significant delays, meaning this valuable planning time had been lost. The best option would have been to entrust the spill response to the Australian authorities from the start.
A thorough assessment and preparedness programme will help companies determine if capability gaps, political uncertainties and other risks are too high, and they can then look for different partners, adjust operations or engage the relevant nation state.
5. Understanding different perspectives
Effective crisis management requires organisations to consider both the immediate and longer term commercial and reputational impacts of an event. The large number of parties involved in a maritime incident means there are multiple perspectives of the same event, leading to different interpretations of what the actual crisis is.
In the MSC Napoli example, BMW, one of the cargo owners, had to manage the immediate loss of inventory and negative press coverage of BMW motorcycles being ridden up and down the beach by local looters. BMW’s view of the incident would have been different to the owner of the hazardous cargo, for which it would have been a much more serious incident.
This was a relatively short-lived event for the cargo owners when compared to the weeks it took to clean up the 200 tonnes of fuel spilt in the nature reserve. This 30 month-long recovery effort involved multiple salvage companies, spill response teams, local and national responders and culminated in an enquiry by the British government. Each of these parties responded to the same initial event, but each dealt with very different problems.
Each single event causes multiple, separate incidents: each organisation involved determines its own concerns and issues while it develops its individual response to the event.
It is also too easy to consider ‘the crew’ as a single homogenous entity, as anyone involved in the maritime industry will tell you, they are often a complex set of individuals with varying backgrounds, education, culture and most importantly languages. The crew’s understanding of an appropriate response will therefore vary from master to master and even amongst individuals. This can have particularly challenging consequences around the control of external messages and the use of social media during a crisis.
6. Practice makes better
Practice won’t make things perfect but it can make things better.
Robust plans with clear responsibilities can catalyse a successful response. Testing and exercising plans with key internal and external stakeholders can ensure they are understood and fit for purpose. It is also an excellent way to build and strengthen relationships, confirm each parties’ understanding of responsibilities and identify overlaps or shortfalls that might arise.
Where there are deficiencies, companies should not be afraid to set and enforce strong minimum standards. This can be as basic as setting a good example or using KPIs to ensure that partners are acting safely and responsibly. Companies can also take an active role in auditing the ship owner’s incident management procedures and recommending improvements.
It is also wise to draft holding statements that can be prepared with likely partners in advance.
Senior leaders are critical to any crisis response and maritime incidents are no different. The complexity of the maritime environment can pose a steep learning curve for executives so training is necessary to prepare them for an event at sea.
Maritime incidents will always pose great challenges but they are far from insurmountable. Despite elements that might be outside our control – even Lord Nelson lamented “I cannot command winds and weather” – and inherent complexity, our experience has strengthened our belief in preparation and planning. Understanding stakeholders, responsibilities and the abilities of the other parties is key to overcoming the inherent challenges and the difficulty posed by the unknowns. Ensuring that plans are developed and practised regularly with external stakeholders and senior leadership will embed this capability in the organisation to ensure you are genuinely prepared for a maritime event.
To discuss any of the issues raised in this thought piece or how your organisation prepares to respond to maritime incidents, please contact Tim Johnson or Admiral Sir James Burnell-Nugent using the contact details below.
Admiral Sir James Burnell-Nugent
Senior Maritime Advisor, Regester Larkin by Deloitte