Assurance of Security in Maritime Supply Chains: Conceptual Issues of Vulnerability and Crisis Management Dr Paul Barnes & Mr Richard Oloruntoba School of International Business Queensland University of Technology, Brisbane, Australia
Overview of Presentation
Aspects of Maritime Security - Old & New
Supply Chain Threats - Economic Impacts
A Conceptual Framework Systemic & Organisational Vulnerability
Options for Crisis Management & Vulnerability reduction
Issues for further Research and Inquiry
In October 2001, authorities in the southern Italian port of Gioia Tauro discovered an unusually well-equipped and neatly dressed stowaway locked inside a shipping container.
Italian police named the stowaway as Rizik Amid Farid, 43, and said he was born in Egypt but carried a Canadian passport.
He was found to be carrying:
two mobile phones,
a satellite phone,
a laptop computer,
several cameras, batteries,
airport security passes and,
an airline mechanic’s certificate valid for four major American airports.
What are the Challenges ?
Approx. 90% of world trade moves in shipping containers
- Any reduction of throughput is likely to have a significant impact on regional and national economies.
Global business enterprise, and trading systems in particular, are vulnerable to terrorist incidents
- Perturbation of maritime supply chains will impact on movements of material across large sections of the network.
The asymmetry of approach in modern terrorism can make use of systems of commerce
- Maritime trade as a vector for terrorism.
Security in Maritime Trading Systems
The Management of Crises (including prevention) is critical
Crises have become Normal : o ften suddenly emergent
With major consequences across many sectors
Further issues of Importance
Why does do these issues matter?
Could the incidents have been prevented or deflected?
Could their consequences have been better mitigated?
Could they have been anticipated?
Attacking the ship to provoke human casualties.
Using the cover of seafarer identities to
insert terrorist operatives.
Using cargo to smuggle people and/or weapons.
Using cargo to transport conventional,
nuclear, chemical or biological
Using the vessel as a weapon
Using the vessel to launch an attack.
Sinking the vessel to disrupt infrastructure
Using revenue from shipping to fund terrorist activities.
Using ships to launder illicit funds for terrorist organisations.
Loss of life and damage to property.
Disruption to trade flows.
Additional cost of transport due to additional security measures
External Impacts Maritime Security - Issues of Complexity
Estimated ISPS Code Costings Maritime Security
Maritime carrier companies
Initial Cost (million USD) $1170.6
Yearly Costs (million USD) $725.6
Initial Cost (million USD) $757.4
Yearly Costs (million USD) $4.3
Initial Cost (million USD) $55.8
Yearly Costs (million USD) $1.6
Participants are expected to:
Establish security criteria to identify high-risk containers.
Pre-screen those containers prior to arrival at US ports
- Involving the deployment of American Customs staff in foreign ports.
Develop and use of ICT enabled and secure containers
Maritime Security Container Security Initiative
Participants are expected to:
Conduct a comprehensive self-assessment of supply chain security using the C-TPAT security guidelines jointly developed by U.S. Customs and the trade community.
The guidelines encompass:
Procedural Security , Physical Security ,
Personnel Security , Education and Training ,
Access Controls , Manifest Procedures , and
Maritime Security Customs-Trade Partnership Against Terrorism
Buyer Trans Security Initiatives across Supply Chains Maritime Trans Producer Composition Decomposition Customs (Port) Customs (Port) ISPS CSI C-TPAT
An industrial dispute (late 2002) impacting 29 US West Coast ports involved > 200 ships.
A total of 300,000 containers remained unloaded and rail and other inter-modal shipments were delayed across large sections of the transport network.
Resulting in filled warehouses, freezers and grain elevators on both sides of the Pacific Ocean, costly mid-ocean diversions of maritime traffic to other ports and businesses, laid-off workers and/or reduced production.
Estimated loss from this disruption on Hong Kong, Malaysia and Singapore alone was estimated to be as high as 1.1 % of nominal GDP.
Supply Chain Impacts – Reduced Continuity
Up to 152,508 jobs are in some way related to the Seaway;
192 million tonnes of cargo moving on the US side of the great lakes seaway system in the previous calendar year (2000);
USD$1.3 billion of purchases were made by firms providing transportation services and cargo handling services in the great lakes region (supporting approx. 26,757 indirect j obs)
SCI – Regional Economies A 2001 EIS covering the St. Lawrence Seaway and related waterways, ports and their inter-modal connections, vessels, vehicles and system users demonstrated the importance of an efficient maritime trading system on regional competitiveness.
USD$3.4 billion of business revenues generated for firms providing transportation and cargo handling services - on the U.S. side of the great lakes seaway system (excluding the value of the commodities moved);
The generation of USD$1.3 billion in federal, state and local tax revenue (2000);
USD$1.3 billion spent on purchases for a range of service-related deliverables (i.e. diesel fuel, utilities, maintenance and repair services) by firms providing the cargo handling and transportation services.
SCT - Economic Impacts - St. Lawrence Seaway
A systems approach to understanding incident causation examines relationships between all aspects of events and provides a means to look more deeply at why the events occurred by focusing on the interactions among system components . Such an approach takes a broader view of what went wrong with the system’s operation or organisation thus contributing to an incident. The emphasis differs to that of industrial/occupational safety models (unsafe acts or conditions) and reliability engineering emphasising failure events and the direct relationships among these events. A Framework Systemic & Organisational Vulnerability
Crisis Prone organisations
Cultural beliefs about invulnerability
Non-existent or ineffective internal control mechanisms
Senior managers not trained in decision making under crisis situations
Type 1 The operational complexity within a port: encompassing the transport node infrastructure and onsite operators Type 2 An attribute of the maritime movements themselves (with ports as nodes of the system) and global logistics management practices that underpin supply chains . Vulnerability A susceptibility to change or loss as a result of existing functional or organisational or practices or conditions.
Type 1 and Type 2 Vulnerability A conceptual Frame Type 1 Type 2
The National Oil and Hazardous Substances Pollution Contingency Plan
The Coast Guard’s Captain of the Port Prince William Sound Pollution Action Plan
The Alaska Regional Oil and Hazardous Substances Pollution Contingency Plan
The State of Alaska’s Oil and Hazardous Substances Pollution Contingency Plan
The Alyeska Pipeline Service Company’s Oil Spill Contingency Plan for Prince William Sound
The National Oil and Hazardous Substances Pollution Contingency Plan
Contingency Planning Type 1 or Type 2 ? – The Exxon Valdez
The current Mandated and voluntary Maritime Security initiatives are more suited to preventing marine vectored terrorism rather than resolving the consequences or improving the resilience of supply chains and port infrastructure and thus sustainability of trade.
What is needed?
A robust Crisis Management capability and capacity includes skills:
(Detection of weak signals)
Emergency Management Escalation Triggers
(Incident or issue recognition) leading to rapid consequence analyses (in the context of high uncertainty)
Crisis Management Decision-making Capacity
(Separate to routine business decision making structures)
Enhanced capacities for Crisis Recognition
A capability in applying foresight (via interdisciplinary teams) to issues that can limit achievement of organisational and business goals.
Robust analytical and conceptual frameworks of security risk management and corporate governance appropriate to the functions and purpose of an organisation.
Prevention - recognition systems for emerging crises;
Preparation - planning for the unknown;
Response - making effective decisions and having them implemented;
Recovery - restoring normality and learning.
Both preventing and preparing for crisis-situations presumes a deep and effective understanding of the way in which the ‘unknown’ factors and conditions can manifest.
Development of Crisis Management skill-sets
Additional corporate strategies would logically include ensuring transparency and trust amongst stakeholders, employees and especially government(s)
The Secure Trade in the APEC Region (STAR) Initiative for example, seeks to strengthen maritime security against terrorism while boosting trade efficiency (including) :
implementation of the ISPS Code and encouraging implementation of common standards for electronic customs reporting
common standards for the collection and transmission of advanced passenger information to prevent the fraudulent use of travel documents
partnerships between government and business at the national and international level to mitigate terrorist or criminal threat throughout the supply and logistics chain.
Other Management Options & Strategies
Higher Order Issues:
How might the variable implementation of the CSI and C-TPAT program impact on global sourcing strategies in particular:
reliance on single-source or geographical location suppliers?
Would more complete implementation of the CSI and C-TPAT programs separate countries unable to afford the cost of implementation from access to trade opportunities and thus affect the notion of the benign and equitable benefits of globalisation?
Issues for Research & Inquiry .1
Analysis of the capacity for interactive complexity within critical infrastructure at hub ports - including interface zones
Details of the nature and organisation of current security risk management functions and governance systems in place in a sample of hub ports
Evaluation of the variation across ‘high frequency low consequence’ and ‘low frequency high consequence’ incident scales at major ports (thus facilitating a mapping of the Type 1 and Type 2 vulnerability)
Appraisal of the potential impact of full integration of port and trade route crisis management capacities on maritime insurance premiums;
Identification and allocation of costs/benefits of the provision of crisis management capacities across industry/client stakeholders .
Issues for Research & Inquiry .2
Critical Network Events
Because of the cascading nature of these events, institutions within marine trading would be unlikely to face single incidents but rather systemic failures appearing concurrently.
Unexpected convergence of factors impacting on human-systems can generate effect propagation via connectedness and interoperability of these same systems.
Issues for Research & Inquiry .3
How might interdependencies and linkages - across Type 1 & Type 2 vulnerability – generate tendencies to create or propagate major discontinuities within maritime trading systems?
What forms of investigation or analyses would provide enhanced understanding that extends beyond the grasp of competent managerial authority?