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How Does One Manage Risk?

Managing Global Shipping Risks Presented by Greg J. Kritz, CIC Vice President SCTIC May 27, 2008 www.roanoketrade.com USA England Ireland China Singapore UAE Germany. How Does One Manage Risk?. Follow a 4 Step Risk Management Process. 1. Identify the Potential Problems.

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How Does One Manage Risk?

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  1. Managing Global Shipping Risks Presented by Greg J. Kritz, CICVice PresidentSCTIC May 27, 2008www.roanoketrade.comUSA England Ireland China Singapore UAE Germany

  2. How Does One Manage Risk?

  3. Follow a 4 Step Risk Management Process • 1. Identify the Potential Problems

  4. 2. Analyze the Size of the Potential Problem * Probability * Maximum Financial Exposure * Frequency

  5. 3. Control the Risk *Avoid It • *Prevent It • *Reduce ItU.S. Cargo Losses Exceed $18 Billion Annual Impact on U.S Economy

  6. 4.Finance the Risk [how you’ll pay for bad stuff when it happens to you]* Transfer the risk to an Insurance Company* Retain the risk [self-insure]

  7. Cyclones Delay Product Recall Non-payment Earthquakes Inclement Weather Tariff Retaliation Currency Valuation Cargo Theft Regulatory Seizure Environmental Hurricane/Monsoon Political (Nationalization) Extremes in Temperature Examples of Today’s Shipping Risks

  8. 5 Commonly Overlooked Supply Chain Risks

  9. Knowing The Total Aggregate Financial Exposure at Any One Place At Any One Time

  10. 3rd Party Limited Liability • Not Knowing Whose Responsible for What • and Where.

  11. Ocean Carrier/NVOCC • Subject to terms of Carriage Of Goods by Sea Act (COGSA) • $500 per Customary Shipping Unit as described on OBL • Unit can be the container, a pallet, a crate, carton

  12. International Air & Indirect Air Carriers • Subject to terms of the “Warsaw Convention” • $9.07 pound/$20 Kilo or 17 SDR Kilo if Montreal Protocol ($25 kilo)

  13. Distribution Centers & 3PL Facilities • Warehouseman’s Terms & Conditions Rule Unless Changed by Contract • Liability Typically a multiple of base rate • 3PL’s and Forwarding Operations Often Limit Liability on Warehouse Receipts • Reasonable Care Standard Applies

  14. Loss of Profit & • Business Income • Freight is insured for • only landed cost

  15. LOSS of BUSINESS INCOME:IMPORTERS NIGHTMARE • A Property Insurance Policy Doesn’t Cover Loss of Business Income for Cargo Claims What if these were Yours’ at Peak Season? $30M

  16. Haphazard Entry Into Logistic and Carrier Contracts

  17. Clearly Defined Control & Security Procedures at • Each & Every Link in • The Supply Chain

  18. CARGO CRIME SOARING • Theft & Unexplained Shortages (shrinkage/Leakage) • 4 Easy Ways to Access • An Ocean Container • Without Leaving a Trace

  19. 30% of Cargo Losses • NOT Preventable

  20. 273 Hurricanes Hit USA • 1851-2005 • 92 Were Major • Category 3,4 & 5

  21. Thank You • For Letting Me Be With You Today !

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