This document discusses the role of ship operators in managing risks in the shipping business. It outlines the complex process involved and risks operators take on, such as market risks, counterparty risks, and financial risks. It then describes various risk management elements operators implement, including vetting counterparties, conducting vessel checks, voyage planning, and hedge management. The conclusion recommends strategies for operators, owners, and charterers to survive difficult market conditions, such as cost reduction, risk management, relationship building, and hedging underlying freight risks.

1. Ship Operating business
Survival in difficult times

2. 1) OPERATORS ROLE IN SHIPPING
2) RISKS UNDERTAKEN BY OPERATORS
3) RISK MANAGEMENT
4) CONCLUSION

3. OPERATORS ROLE IN SHIPPING

4. Ship Operating Business
• Operating Business is nothing but providing a commercial freight
solution by an owner/operator encapsulating all underlying risks in a
shipment . Mainly engaging an owner and a charterer.
• Complex Process involving various counter parties and a very
knowledge intensive business – No room for short cuts.
• Operators neither own assets nor any cargo hence are completely
exposed to the external factors which are by and large outside his
control thus risking his investment purely against the adverse
forces prevailing in the market.

5. RISKS UNDERTAKEN BY OPERATORS

6. Underlying risks- Pre-Fixture Risks
• Market Risk- Supply and Demand
• Counter Party Risks – Right Owners and right Charterers
• Risk arising due to NYPE CP & Gencon CP.
• Managing “assumptions” risks – Hedge management -
Bunker and Charter Hire
• Human Risks- Constantly recruiting , training and building up
a right trusted team
• Escalation effect – Miners/traders default / owners default
• Financial risks- Credit and Cash flow management

7. Underlying risks- Post Fixture Risks
• Operational excellence with SOP in managing
communication with vessel, owners, charterers , agents ,
shippers and receivers from delivery until re-delivery.
• Managing errors committed in Pre-fixture –Technical and
legal expertise , if reqd
• Hire payment and no overpayment – Strict policy and
procedure / checks
• PDA payment and collection
• Lay time calculation, agreement and collection

8. • Bunker stem – Credit withT & C
• Escalation effect – Miners/traders default / owners default
• Finalization – FHS and FFI
• Transparency – IT Solution like softmar/shipnet/danaos etc
• Financial risks- Credit and Cash flow management

9. RISK MANAGEMENT

10. Risk Management Elements
• Client/Charterers/ General details:
• -Sound Background? Financially stable?/ Bimco checked/
known authority ? Comfort level?
• - Is due diligence done and approval received from BOD?
• -Is the cargo firm/ sub sale /tender/ probability of sub ?
• -Cargo spec/ grade checked ?
• -Draft CP seen ? Any lifeboat/ escape clause ?

11. • Port info
- Load port / discharge port details / prevailing weather
checked ?
- Any draft / loa/ beam / special requirement checked ?
- Any discussion needed with port agent for further
details or congestions / facilities etc

12. Owner/vessel related checks:
Owners ref/sound financial trustworthy –background check
done?
- Officers/Crew nationality permitting the business ?*
- Vessel has required grab/sufficient power/number of mooring
ropes?
- WLTHC/ De ballasting capacity suitable ?
- Standard warranty clauses accepted by owners?
- Laycan with owners/charterers/margin between two laycan
- Cancellation clause with owners and charterers
- Itinerary received from owners/Doubly checked from own
source of agents including congestion/weather.
- Last cargo on board along with quantity/discharge rate/when to
be free

13. - Hold condition/checkout the ventilation (if necessary)
- Owners bank account details and PIC name
- Owners P & I Club, H & MValue
- GA/Arbitration place/law? Certs valid/any PSC/COC pending?
- LOI/Switch B/L (if required) /force majeure clause
- Right ship approval checked (if required) /COFR on board if
calling USA

14. Voyage planning/Calculations:
-Route Planning done/Safest/Shortest route considered ?
-Loadline zone/Cargo intake ascertained-Summer/tropical/winter
-Water density lp/dp and stowage factor of cargo checked in respect of
available cbm
-Any restrictions of LOA /Beam/Air draft/tide/pilotage/waiting /hugging
the coast line/HRA
-Loads/disport stay /Delays causing bottom cleaning/polishing/time/cost
-D/A bends cross checked? Any latest revision?

15. -Demurrage sufficient to cover standing charge including idle bunker?
-LatestTax clause including service tax checked?
-Weather conditions checked/How many rough days/sufficient safety
margin kept?
-CP Holidays considered at LP/DP?
-Other factors i.e AGM/Piracy zone(Additional cost)/GOA/Ice breakers/Canal
crossing and delays incorporated in calculation?

16. Bunkers:
- Bunker prices crosschecked/Source?
-Vessel BOD sufficient to proceed to plan bunker port? ISM
compliant quantity always on board?
- SECA zone bunker any requirement?
- In case onTBN/fwd booking – Bunker cost taken as
paper/swaps in calculation?
- Is the bunker cost and bunker hedging program
discussed with the bunker hedging PIC?

17. CoastalVoyages:
- INSA NOC been obtained by the sub charterer?
- Is GTL on board?
- All documents/certs as per SVL requirement with
annual endorsement.
- Sufficient time taken to obtain SVL ?
- Check if last voyage of the vessel was a coastal voyage
- Check vessel flag/crew/P & I before fixing
- Check for holidays

18. Cargo specific checks (quick checks)
a)Iron ore fines/concentrates/pellets:
- Check cargo density especially fines of 2.8 cbm PMT and the vessel
gears/grab suitability.
- CheckTML/FMPClause with owners/Is CAN test report available?
- P & I survey charges considered in the voyage cost sheet?
- Check with port/agents regarding any cargo condition(Cargo covered
or not in monsoon)? How long cargo lying ?
b)Steam coal/coking coal/met coke/pet coke:
- Cargo density/SF specially for met coke/pet coke
- For Indonesian coal , find out how long cargo stayed in open/Water
sprinkled/any hidden fire expected?
- Sufficient ILOHC taken?
- Cleaning chemical available on board?

19. c)Cement clinker/limestone/furnace slag/gypsum:
- Check cargo density with charterer and the loading/discharging
process
- Gears/Grabs suitable for the business?
- Is the slag likely to de-colourise? Check with agent.
d)Similar cargo sets viz bulk grain/wheat/SBM
(Slack hold/ Healing moment to be checked to avoid
bagging/strapping) likewise
• HBI/DRI/Steel pipes/billets/HRC grouping and
• fertilizer grade Urea/MOP/DAP/Rock phos etc and another group
of
• salt/sulphur where lime washing cost and timing to be checked.

20. e)Market Evaluation (TBNCall etc):
- Trend and seasonality forTBN Call
- Area/Cargo specific seasonality checked.
- Historical data on load/discharge rate.
- Vessel availability?
- BDI/Spot/Forward index
- Any hedging plan
- As a stand by two LL considered?
- (A summary of the expected returns from the business
is noted at the end)

21. Risk Management – Classic Examples
• Owners related –
• ParticularVessel – Chinese vessel called at Chittagong – Local navy
on board and cant allow discharge despite two times vessel been in
chartered with us …. Allegation that it has got some north Korean
connection
• What to do ???
• One vessel stuck at Zhoushan due to owners have no money –
Vessel fixed with us two times in past.

22. Risk Management – Pre-fixture
Counter Party Risk – Charterers related
• Escalated Risks- Miner default/Traders default – One
vessel at Indonesia – Miner can’t get export clearance due
to royalty payment
• Goa Loading – Indian Charterer-Vessel cant load ,TML
issue
• One charterer – Don’t have cargo while vessel arrived load
port – RBCT

23. Risk Management – Pre-fixture
Hedge Management
• Swap/ Options- Call & Put / Collar – Bunker
• FFA – Charter Hire
( Requires a clearing bank, Clearing House and a Broker with
margin management )

24. Risk Management- Pre-Fixture
Human Risks- (No Assumptions within Assumptions )
• To have a good P & I Club with good solicitors team to defend
• PDA
• Bunker estimate vs Stem – Cancellation /Unavailability – RBCT /
Colombo despite hedge management
• Shex eiu vs Shinc
• BadWx
• Sea Margin
• CP holidays / Local Holidays
• CP clause – Mutual in Nype for off hire settlement or for
underperformance
• Deductibles and LMAA cost

25. Risk Management- Pre-Fixture
Credit and Cash Flow Management
- Depending on duration of voyage , counter party and CP
terms on collection

26. Risk Management - NYPE and Gencon CP –Comparison
• GENCON(1922/76/94)
• Payment of freight(14)
• Laytime(16)
• Cancelling clause(9)
• Owners responsibility/Warrant
clause.(2)
• General strike clause(16)
• IFVESSEL IS LOST - Freight
deemed earned upon completion of
loading discountless and non
returnable vessel and or cargo lost
or not lost(4)
• General Ice clause(18)
• Stevedore clause
• NYPE(1913/21/31/46/81/93)
• Hire payment terms(11)
• Delivery/redelivery(2,10)
• Delivery/Cancelling(16)
• Owners responsibility/Charterers to
provide.(Line 64,1981)
• No such clause is found in preamble
• IFVESSEL IS LOST- Owner to return
the paid charter hire to charterer for
the period vessel lost when the
advance hire is already paid
• Ice clause(33)
• Stevedore damage clause(35)

27. CONCLUSION

28. Conclusion – Survival Strategy for Head owners
 Reduce operating costs and increase efficiency.
 Seeking creditor leniency as market seems to be re-bounding .
 Restructuring loans, credits with banks and lenders on.
 Acquire 2nd hand vessel as a means to average out their cost and
also broaden market share.
 Balance undelying risk taking some cargo contracts Take vessel out
from pool as market imporves to take advantage of market
 Scrapping of older tonnages, usually older tonnages cost more to
operate because of high maintenance, new ballast requirment and
sox/nox reqts.

29. Conclusion –Strategy for Charterers
To Hedge their long term underlying freight risk
with COA prior market can get really high
Manage their cash flow and use FFA as hedge
management

30. Conclusion- Survival Strategy for Operator
• Detail Risk Management Check List
• Hedge management
• Strict Counter party checks and Diligence Cum
approval system
• Authority matrix
• Oprerators not to Just jump in the fray for the sake
of volume generation.
• Company culture-constant care
• Strong technical, commercial and legal
understanding and implementation
• Forming pool among interested parties to reduce
competition

31. • Opting for super eco tonnages on short/long term
period and parallel do the profitable spot business.
• Good Club and Solicitors to advise onW/P basis
• Changing gears as per market-Taking position on
vessel
• Trust and Confidence based on performance and
delivery- Relationship
• Diversify into allied business like tankers, RO-RO etc
to balance the cash flow and riding the experience
curve
• Branding-delivering values and creating an impact
• PWSL – Last but not the least - PWSL -As a freight
partner

32. ThankYou !