CRICOS No. 000213J

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  • It was furnished as a makeshift home with a bed, water, supplies for a long journey and a bucket for a toilet. Unlike most stowaways, he was smartly dressed, clean-shaven and rested as he emerged.
  • Certain economies within the Asia-Pacific Economic Cooperation (APEC) region have also been affected with decreased Foreign Direct Investment
  • 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. It was furnished as a makeshift home with a bed, water, supplies for a long journey and a bucket for a toilet. Italian police named the stowaway as Rizik Amid Farid, 43, and said he was born in Egypt but carried a Canadian passport. Unlike most stowaways, he was smartly dressed, clean-shaven and rested as he emerged. 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.
  • General expectations in these plans assumed that rescue and response equipment would be at the ready and that this material would be deployed in a carefully coordinated manner, with an efficient and effective division of labour among organisations being instituted almost immediately. A further expectation was that clear, open and honest communication channels would be established readily among previously competitive or even adversarial organizations and that each responding organisation would take precisely the right step at precisely the right time to fit the need of other organizations (Freudenburg, 1992). The reality was that confusion seems to have been far more commonplace than communication. Rather than coordinating their activities the various organizations with a stake in the spill and the clean-up often seemed to have more interest in blaming one another than in working with one another (Freudenburg, 1992). Lack of decision readiness and unrealistic assumptions about roles and actions to be carried out by relevant actors can lead to a state of operational gridlock. The contingency planning in place at Prince William Sound has been described as reflecting organizational perceptions regarding possible catastrophes and their nature, and belief that the likelihood of oil spills had been thoroughly considered. Such plans were intended to convey that the organisations were in control of a potentially uncontrollable situation (Clarke,1993). When informed of the incident with the Exxon Valdez U.S. Coast Guard Vice-Admiral Clyde E. Robins is reported to have said this was impossible as we have the perfect preventive and contingency (italics added) system (Egan, 1989
  • Decision making, and even providing reasoned advice, is extremely difficult is circumstances where organisations are surprised by internal or externally sourced failure. Given the convergence of information, actors and factors within crisis situations a critical question is how officials make sense of the complexity surrounding them and how such developed awareness influences decision making (Weick, 1988). Learning is also a form sense making which, in retrospect, illuminates how decisions were and were not made. The reaction of Winston Churchill after the fall of Singapore in WWII is an interesting consideration. Allison (1993) notes that he asked four questions in his role as leader: “why didn’t I Know,” “why wasn’t I told,” “why didn’t I ask,” “why didn’t I tell what I knew?” By logic, no one person could ask these questions and by extension it would take organisational knowledge to answer them. It may be that organisational learning starts with ensuring the presence of internal capacities to ask such questions in advance of being surprised and then determining if organisational policies and functional systems support the effective and timely delivery of the answers.
  • This level of understanding presumes a means by which people can make sense of confusing circumstances. Equally important is the capacity to effectively generate an organisational response in crisis situations. This can be difficult because due to differences between international judicial and regulatory systems, the cascading effects of crises can manifest over varying time scales with different primary, secondary and tertiary consequences. Management skills such as the ability to analyse security and political risk or the ability to gather information and business intelligence as well as the ability to bring effective leadership and decision making abilities to bear during crisis situations enhances the reduction of organisational losses and confusion during crises.
  • Other efforts by industry participants involve participation in recent ASEAN Regional Forum (ARF) activity as it moves from traditional attention to inter-state power relations towards commonly perceived threats such as international terrorism, piracy at sea, arms smuggling and other trans-national crime. Greater cooperation has been pledged by ARF members on these areas of concern, in particular, threats to maritime security Dialogue on these broader issues including trans-national crime is also being progressed through the activities of the Council for Security Cooperation [in the] Asia Pacific (CSCAP, 2003 ).
  • While concern about the security at U.S. ports existed before September 11 (Fritelli, 2003) the extent of full threat environment including fragility of supply chain continuity and the interactive vulnerability of port and trade route may not yet be fully appreciated. The interactive complexity of the ‘systems of systems,’ as it manifests across the two vulnerability regimes, requires careful and full analysis. It is recognised that other emergent phenomena such as climate change, public and animal health crises and the increasing hyper-complexity of embedded information-communications-technology (ICT) also impact on global and regional trade and business practice. Failure or instability from any of these sources can trigger cascading impacts, often through unexpected pathways and fault lines, throughout wider supply chain and trading systems.
  • While the conceptual bases for crisis management and related capability defined here are well grounded in historical instances of major institutional systems failure and post-crisis learning, there is a need to confirm the fit of the task specifications and operational framework presented above to port and maritime trade settings. An equally important issue for consideration is the impact of implementing both the treaty mandated ISPS code and voluntary CSI and C-TPAT initiatives at operational ports. A question of particular interest is whether these developments have simplified or increased operational complexity within ports and among the port-based businesses and, across supply chain networks. How these programs are implemented and applied are at the nexus of ensuring security in global supply chains while pursuing business efficiencies. It is arguable that as the post-modern world evolves achieving the former may at the expense of the latter .
  • CRICOS No. 000213J

    1. 1. 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
    2. 2. Overview of Presentation <ul><li>Aspects of Maritime Security - Old & New </li></ul><ul><li>Supply Chain Threats - Economic Impacts </li></ul><ul><li>A Conceptual Framework Systemic & Organisational Vulnerability </li></ul><ul><li>Options for Crisis Management & Vulnerability reduction </li></ul><ul><li>Issues for further Research and Inquiry </li></ul>
    3. 3. <ul><li>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. </li></ul><ul><li>Italian police named the stowaway as Rizik Amid Farid, 43, and said he was born in Egypt but carried a Canadian passport. </li></ul><ul><li>He was found to be carrying: </li></ul><ul><ul><li>two mobile phones, </li></ul></ul><ul><ul><li>a satellite phone, </li></ul></ul><ul><ul><li>a laptop computer, </li></ul></ul><ul><ul><li>several cameras, batteries, </li></ul></ul><ul><ul><li>airport security passes and, </li></ul></ul><ul><ul><li>an airline mechanic’s certificate valid for four major American airports. </li></ul></ul>
    4. 4. What are the Challenges ? <ul><li>Approx. 90% of world trade moves in shipping containers </li></ul><ul><li>- Any reduction of throughput is likely to have a significant impact on regional and national economies. </li></ul><ul><li>Global business enterprise, and trading systems in particular, are vulnerable to terrorist incidents </li></ul><ul><li>- Perturbation of maritime supply chains will impact on movements of material across large sections of the network. </li></ul><ul><li>The asymmetry of approach in modern terrorism can make use of systems of commerce </li></ul><ul><li>- Maritime trade as a vector for terrorism. </li></ul>Security in Maritime Trading Systems
    5. 5. The Management of Crises (including prevention) is critical <ul><li>Crises have become Normal : o ften suddenly emergent </li></ul><ul><li>With major consequences across many sectors </li></ul><ul><ul><ul><li>Exxon Valdez </li></ul></ul></ul><ul><ul><ul><li>Barings Bank </li></ul></ul></ul><ul><ul><ul><li>Enron </li></ul></ul></ul><ul><ul><ul><li>9/11 </li></ul></ul></ul><ul><ul><ul><li>Bali bombing </li></ul></ul></ul><ul><ul><ul><li>Madrid bombing </li></ul></ul></ul>Further issues of Importance
    6. 6. Why does do these issues matter? <ul><li>Could the incidents have been prevented or deflected? </li></ul><ul><li>Could their consequences have been better mitigated? </li></ul><ul><li>Could they have been anticipated? </li></ul>
    7. 7. <ul><li>Attacking the ship to provoke human casualties. </li></ul><ul><li>Using the cover of seafarer identities to </li></ul><ul><li>insert terrorist operatives. </li></ul>People <ul><li>Using cargo to smuggle people and/or weapons. </li></ul><ul><li>Using cargo to transport conventional, </li></ul><ul><li>nuclear, chemical or biological </li></ul><ul><li>weapons. </li></ul>Cargo <ul><li>Using the vessel as a weapon </li></ul><ul><li>Using the vessel to launch an attack. </li></ul><ul><li>Sinking the vessel to disrupt infrastructure </li></ul>Vessels <ul><li>Using revenue from shipping to fund terrorist activities. </li></ul><ul><li>Using ships to launder illicit funds for terrorist organisations. </li></ul>Money <ul><li>Loss of life and damage to property. </li></ul><ul><li>Disruption to trade flows. </li></ul><ul><li>Additional cost of transport due to additional security measures </li></ul>External Impacts Maritime Security - Issues of Complexity
    8. 8. Estimated ISPS Code Costings Maritime Security <ul><li>Maritime carrier companies </li></ul><ul><li>Initial Cost (million USD) $1170.6 </li></ul><ul><li>Yearly Costs (million USD) $725.6 </li></ul><ul><li>Ships (requirements) </li></ul><ul><li>Initial Cost (million USD) $757.4 </li></ul><ul><li>Yearly Costs (million USD) $4.3 </li></ul><ul><li>Ports </li></ul><ul><li>Initial Cost (million USD) $55.8 </li></ul><ul><li>Yearly Costs (million USD) $1.6 </li></ul>
    9. 9. <ul><li>Participants are expected to: </li></ul><ul><li>Establish security criteria to identify high-risk containers. </li></ul><ul><li>Pre-screen those containers prior to arrival at US ports </li></ul><ul><li>- Involving the deployment of American Customs staff in foreign ports. </li></ul><ul><li>Develop and use of ICT enabled and secure containers </li></ul>Maritime Security Container Security Initiative
    10. 10. <ul><li>Participants are expected to: </li></ul><ul><li>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. </li></ul><ul><li>The guidelines encompass: </li></ul><ul><ul><li>Procedural Security , Physical Security , </li></ul></ul><ul><ul><li>Personnel Security , Education and Training , </li></ul></ul><ul><ul><li>Access Controls , Manifest Procedures , and </li></ul></ul><ul><ul><li>Conveyance Security </li></ul></ul>Maritime Security Customs-Trade Partnership Against Terrorism
    11. 11. Buyer Trans Security Initiatives across Supply Chains Maritime Trans Producer Composition Decomposition Customs (Port) Customs (Port) ISPS CSI C-TPAT
    12. 12. <ul><li>An industrial dispute (late 2002) impacting 29 US West Coast ports involved > 200 ships. </li></ul><ul><li>A total of 300,000 containers remained unloaded and rail and other inter-modal shipments were delayed across large sections of the transport network. </li></ul><ul><li>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. </li></ul><ul><li>Estimated loss from this disruption on Hong Kong, Malaysia and Singapore alone was estimated to be as high as 1.1 % of nominal GDP. </li></ul>Supply Chain Impacts – Reduced Continuity
    13. 13. <ul><li>Up to 152,508 jobs are in some way related to the Seaway; </li></ul><ul><li>192 million tonnes of cargo moving on the US side of the great lakes seaway system in the previous calendar year (2000); </li></ul><ul><li>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) </li></ul>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.
    14. 14. <ul><li>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); </li></ul><ul><li>The generation of USD$1.3 billion in federal, state and local tax revenue (2000); </li></ul><ul><li>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. </li></ul>SCT - Economic Impacts - St. Lawrence Seaway
    15. 15. 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
    16. 16. <ul><li>Crisis Prone organisations </li></ul><ul><li>Cultural beliefs about invulnerability </li></ul><ul><li>Non-existent or ineffective internal control mechanisms </li></ul><ul><li>Senior managers not trained in decision making under crisis situations </li></ul><ul><li>Contingency planning inadequate or non-existent </li></ul><ul><li>Accidents in highly complex systems </li></ul><ul><li>‘ Cook’ slowly </li></ul><ul><li>Occur suddenly </li></ul><ul><li>Often Warning signs existed </li></ul>Empirical Findings Systemic & Organisational Vulnerability
    17. 17. Smart C. & Vertinsky, I. (1977) <ul><li>Rigidity in thinking - Restricted expectation about contingencies and their consequences - Inflexibility in considering alternative options & choices for mitigation </li></ul><ul><li>Lack of Decision Readiness Key decision makers not practiced in emergency decision making </li></ul><ul><li>Information Distortion Attenuation and filtering of information to key decision makers </li></ul>Systemic & Organisational Vulnerability Application of the Concept Organisational Complexity
    18. 18. Network Complexity The Globalised Economy <ul><li>Transport Systems Road, Rail, Air, Maritime </li></ul><ul><li>System of Systems Supply Chains </li></ul>Systemic & Organisational Vulnerability
    19. 19. Decision making in Crises ( Assumptions) They will be impacted by the presence of: - Uncertainty / Ignorance - High Decision Stakes - Extreme Systems Complexity Systemic & Organisational Vulnerability
    20. 20. <ul><li>Loss of interoperability & interconnectivity (data, networks) </li></ul><ul><li>Interdependency of Infrastructure </li></ul><ul><li>Power supply (Generation & transmission) </li></ul><ul><li>Telecommunications (Soft & hard) </li></ul><ul><li>Transport systems (Road, rail, air, water) </li></ul>Critical Infrastructure Protection Systemic & Organisational Vulnerability
    21. 21. 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.
    22. 22. Type 1 and Type 2 Vulnerability A conceptual Frame Type 1 Type 2
    23. 23. <ul><li>The National Oil and Hazardous Substances Pollution Contingency Plan </li></ul><ul><li>The Coast Guard’s Captain of the Port Prince William Sound Pollution Action Plan </li></ul><ul><li>The Alaska Regional Oil and Hazardous Substances Pollution Contingency Plan </li></ul><ul><li>The State of Alaska’s Oil and Hazardous Substances Pollution Contingency Plan </li></ul><ul><li>The Alyeska Pipeline Service Company’s Oil Spill Contingency Plan for Prince William Sound </li></ul><ul><li>The National Oil and Hazardous Substances Pollution Contingency Plan </li></ul>Contingency Planning Type 1 or Type 2 ? – The Exxon Valdez
    24. 24. <ul><li>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. </li></ul><ul><li>What is needed? </li></ul>Assertion:
    25. 25. <ul><li>A robust Crisis Management capability and capacity includes skills: </li></ul><ul><li>Environmental Scanning </li></ul><ul><li>(Detection of weak signals) </li></ul><ul><li>Emergency Management Escalation Triggers </li></ul><ul><li>(Incident or issue recognition) leading to rapid consequence analyses (in the context of high uncertainty) </li></ul><ul><li>Crisis Management Decision-making Capacity </li></ul><ul><li>(Separate to routine business decision making structures) </li></ul>Enhanced capacities for Crisis Recognition
    26. 26. <ul><li>A capability in applying foresight (via interdisciplinary teams) to issues that can limit achievement of organisational and business goals. </li></ul><ul><li>Robust analytical and conceptual frameworks of security risk management and corporate governance appropriate to the functions and purpose of an organisation. </li></ul><ul><ul><li>Prevention - recognition systems for emerging crises; </li></ul></ul><ul><ul><li>Preparation - planning for the unknown; </li></ul></ul><ul><ul><li>Response - making effective decisions and having them implemented; </li></ul></ul><ul><ul><li>Recovery - restoring normality and learning. </li></ul></ul><ul><li>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. </li></ul>Development of Crisis Management skill-sets
    27. 27. <ul><li>Additional corporate strategies would logically include ensuring transparency and trust amongst stakeholders, employees and especially government(s) </li></ul><ul><li>The Secure Trade in the APEC Region (STAR) Initiative for example, seeks to strengthen maritime security against terrorism while boosting trade efficiency (including) : </li></ul><ul><ul><li>implementation of the ISPS Code and encouraging implementation of common standards for electronic customs reporting </li></ul></ul><ul><ul><li>common standards for the collection and transmission of advanced passenger information to prevent the fraudulent use of travel documents </li></ul></ul><ul><ul><li>partnerships between government and business at the national and international level to mitigate terrorist or criminal threat throughout the supply and logistics chain. </li></ul></ul>Other Management Options & Strategies
    28. 28. <ul><li>Higher Order Issues: </li></ul><ul><li>How might the variable implementation of the CSI and C-TPAT program impact on global sourcing strategies in particular: </li></ul><ul><ul><li>time-sensitive supply; </li></ul></ul><ul><ul><li>reliance on single-source or geographical location suppliers? </li></ul></ul><ul><li>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? </li></ul>Issues for Research & Inquiry .1
    29. 29. <ul><li>Analysis of the capacity for interactive complexity within critical infrastructure at hub ports - including interface zones </li></ul><ul><li>Details of the nature and organisation of current security risk management functions and governance systems in place in a sample of hub ports </li></ul><ul><li>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) </li></ul><ul><li>Appraisal of the potential impact of full integration of port and trade route crisis management capacities on maritime insurance premiums; </li></ul><ul><li>Identification and allocation of costs/benefits of the provision of crisis management capacities across industry/client stakeholders . </li></ul>Issues for Research & Inquiry .2
    30. 30. <ul><li>Critical Network Events </li></ul><ul><li>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. </li></ul><ul><li>Unexpected convergence of factors impacting on human-systems can generate effect propagation via connectedness and interoperability of these same systems. </li></ul>Issues for Research & Inquiry .3 <ul><li>How might interdependencies and linkages - across Type 1 & Type 2 vulnerability – generate tendencies to create or propagate major discontinuities within maritime trading systems? </li></ul><ul><li>What forms of investigation or analyses would provide enhanced understanding that extends beyond the grasp of competent managerial authority? </li></ul>
    31. 31. Closing thoughts

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