JUNE 2017 BUSINESS RESILIENCE PLAN IN THE MARITIME SECTOR

Introduction

This article is not a pedagogical guide or a scientific method for carrying out Business Resilience Plans (BRP). Rather, its objective is to highlight elements specific to the maritime sector.

Readers interested in acquiring further knowledge may refer to several excellent documents. (ex. Community Resilience Planning Guide )

This article is divided into two parts. The first provides a definition of a BRP. The second, focuses on a BRP in the maritime sector.

 

Part 1: Business Resilience Plan in General

1.1 What is a Business Resilience Plan (BRP)

A BRP’s goal is to ensure resumption and continuity of an organization’s activities following an event that disrupts its normal operation. It must allow an organization to meet legislative, regulatory or contractual obligations as well as economic requirements (risks of losing market share, survival of the company, image, etc.) following a particular event. Building BRP also includes identifying potential threats to an organization and applying a framework to ensure the organization’s resilience.

This type of plan has become, over time, an industrial standard rather than an exception. Increasing criminal and terrorist acts, transportation of dangerous products, risks of accidents damaging environment and health are among the causes. Most large and medium sized companies currently have some plan developed, to respond to a major situation. Many of them would face closures if their services were interrupted for any period without such a plan.

A BRP can forsee compliance control measures and an higher frequency of controls. Howerver, its main purpose is not to predict the nature of such measures to be implemented in order to prevent them. The is rather identified as a prevention plan, generally subject to a set of standards or regulations.

It should be noted that losses due to natural or man-made disasters are becoming increasingly important in the world and can generate significant social costs. These costs are composed of their destructive effect (eg, a criminal act, an explosion, an accident or natural destruction) but also of economic loss caused by the duration of a disruptive service.

 

The costs of setting up a BRP are generally lower than the costs of an disruptive event.  A BRP specific cost-benefit analysis model appears in the box below (see diagram on next page).

MODEL ANALYSIS COST / BENEFIT OF A BRP

The diagram in the figure below illustrates a BRP cost / benefit analysis method. The figure shows that the activity interrupted consequences costs (CIA) grows exponentially for the duration of the interruption. This means that the longer the response time in solving a problem, the higher the interruption costs will be. These costs can be direct but also indirect and are measured in terms of loss of market share or loss of economic spin-offs. There can also be social costs or environmental costs.

The costs of a BRP is evolving in the opposite direction. A lower amount of resources used to respond to an interruption will imply a longer period of time to solve the problem. This curve is thus inversely proportional to the duration. PCA and ICA can therefore meet at a point where costs are equivalent.

The benefit of a BRP is determined by the Maximum Acceptable Interruption Duration (DMIA). This is an acceptable time to return to normal or to an operational state. The DMIA is indicated by the horizontal line at C1 which intercepts the CIA curve. This is the cost of the consequences, but this time according to the acceptable duration of a service interruption. Interception between C1 and CIA refers to this cost and period.

Analyse Coûts/bénéfices d'un PCA
Source: Guide to Achieving a Continuity Plan (2013) “, carried out by the General Secretariat of Defense and National Security (SGDSN) of the Government of France.

1.2 Method of elaboration of a BRP

The models we have analyzed differ from one another with only a few variants. The most important components can be described in the following three steps:

The Context

Context analysis is used to map the organization’s activities and identify those that are essential in the event of service disruptions. The description of activity process is accompanied by an analysis of threats, opportunities, strengths and weaknesses. This analysis makes it possible to see and understand the vulnerabilities of the system and to find solutions to the weaknesses. On the other hand, the analysis of the political, economic, social and environmental environment makes it possible to consider strategic activities for the economy and for society.

Identification, Evaluation and Risks Management

Risk analysis is at the heart of all approaches in developing a BRP. Risks can be of different nature and linked to the specific activities : environmental, health, economic, disruption of social peace, deconstruction or demolition. Frequency and severity criteria will make it possible to prioritize risks. Their consequences should also be documented. Risks identification and analysis is normally carried out in the office with experts and people involved in such operations.

Implementing the Business Resilience Plan

Implementation of the plan is a team effort that requires support of top management of an organization.Implementation of BRP implies granting means of action and identifying critical resources. The team should be composed of key people from  organization and,  in some cases, outside the organisation. Implementation responds accordingly to the diagnosis made in the description of the context and the risk analysis.

PART 2  Business Resilience Plan in Maritime Sector

This section discusses of the three main elements of the BRP method with the particularities of the maritime sector. BCP models have generally been designed for companies or organizations with more or less impact on society in general. However, the commercial maritime sector reveals additional complexities that need to be emphasized because of it strategic importance on the economy and society.

2.1 Description of Context for a Port Authority

The strategic importance of a port infrastructure

Port operations must be taken into account in a global economic context, where the environment is competitive and access to infrastructure by land is essential for economic development. For example, supply disruption could easily become catastrophic on the economy without a resilience plan because of the importance of procurement of food, energy and bulk.  Maritime infrastructures are therefore strategic not only for the maritime sector but for the entire economy of a country.

With this consideration, governing structure of a modern port site is not the same as that of a company. In several countries, the port authority is not responsible for the operational activities taking place on the port site itself (Landlord Model). 5 The logistical and operational activities (securing, unloading and loading, transhipment, chartering, warehousing and other value-added services) are the responsibility of private companies. The administration is limited to the leasing of space, compliance with regulations and the upgrading of infrastructures serving the users of the port.

Cooperation agreements with all private partners of the site must be concluded. This requires special coordination efforts and the involvement of government officials at the highest level. The collaboration of external partners, at times operating in other countries, remains essential.

Description of activities, supply chain and hinterland

A port site most often covers a spectrum of several sectors that have  risks of their own.

The mapping of activities to be included in a BRP should give a description of the major industrial segments of the marine services present on the site: either liquid bulk transport, oil, natural gas or chemicals, solid bulk transportation such as coal, wood and metals, chemicals, minerals, transport of persons, transport of containers, etc.  For each of these segments a detailed description of the facilities and their location is required. This description should include statistics on volumes handled, their origins and destination. These segments should be treated independently of each other.

In the maritime sector, strategic aspects of the BRP are faced with the idea of integrating key operations throughout the supply chain, from the source of production towards the distribution center and consumers. In the context of a BRP, all types of service interruption can be linked to one or another stakeholder of the chain. In order to achieve this goal, it is necessary to consider port operations, hinterland and also other transportation services such as trains and trucks.

The diagram on the following illustrate a description of logistics chain for a port site (Michael Porter) . This diagram is useful in that it identifies which vulnerabilities could lead to a reduction of logistic chain performance. It also identifies primary and secondary activities.

Representation of the maritime supply chain

maritime logistic chain

Translation of the diagram: Maritime Logistic System, Maritime Logistics, page 77, Dong Wook Song

The business relationship between these people: freight forwarders, shipowners, shippers, port sites is supported by a series of logistics-related activities: inventory management, packaging, storage or land transport, information systems, Tracing or assembling, etc.

Global logistic services are managed on a door-to-door delivery basis. In such a case, a break on either link of the chain may result in an interruption of service for the entire chain. In the hinterland, different combinations of transport modes should be considered. A failure on a mode of transport will result in the transfer of goods in another mode in order to secure the supplies. The multimodal approach must be flexible and secure.

2.2 Risk analysis in the maritime and port sectors

Identifying risks, measuring their consequences and prioritizing them. Analysis of issues, threats, opportunities, strengths and weaknesses helps identify vulnerabilities across different segments. These vulnerabilities can be of different types :  obsolescence of facilities, weakeness in structures, lack of maintenance, economic threats such as competition, loss of supplier (s), potential for criminal acts, lack of warehousing infrastructure or specialized services, etc. Vulnerabilities are used to identify risks. The table in the Annex shows a  classification of risks according to the activity structure of a port site.

Each of these segments has its own type of risks, such as spills, explosions or gas leaks for the bulk liquid segment, atmospheric, land and sea pollution for solid bulk, congestion risks, bottleneck in the intermodal transport of containers, interruption of service in the hinterland goods distribution system.

Each risk is associated with an estimate cost of its consequence. The frequency determines the likelihood of the risk. Moreover, the determination of an acceptable interruption period will make it possible to adjust the levels of stocks or warehousing of goods in order to secure supply. Beyond this interruption period, economic costs inherent in the risk will be important, such as share of market loss, lost of clients or providers, etc.

The human factor

In the maritime sector, some risks remain more frequent. Particular attention must be paid to the human factor which imposes itself as a source of major accidents. Marine sector shows highest number of accidents when compared to other industrial sectors. For example, the handling of goods in ports is still considered to be one of the most dangerous occupations. Mortality among seafarers remains among the highest in the trades.

Several factors can explain the causes of accidents. It is usually poor working conditions, the lack of education and training of the maritime labor force that are the causes. The competence of seafarers is often sacrificed for the benefit of cheap labor. Other factors can cause accidents, including fatigue, communication, decision-making errors, health and stress.

2.3 The development of a business resilience plan in the maritime and port sector

The continuity objectives are fixed in advance both in terms of time and level of services. They will differ according to the segments (liquid, bulk, people, container, etc.) and they will depend on the potential damage of an interruption.

Different categories of action can be considered. Among these, are the following :

  • Increased storage capacity which ensures just in time procurement for the clients. The quantities stored will be calculated by the clienteles themselves and according to their supply needs;
  • The development of alternatives. The alternatives and their costs are analyzed at different levels of the supply chain;
  • Reduction of service. When costs are lower than other possibilities (storage capacity or the option of different alternatives) reduction in the pace of treatment and of capacity can be considered on a temporary basis;
  • Technological solutions (capacity, technical compatibility, ease of access, work equipment, computer resources, activation device, etc.). Buffer installation to offer the services temporarily. This solution is often seen in the IT sector, but is also feasible in maritime sector, with the installation of temporary infrastructure;
  • Frequency of controls Increased frequency of controls ensures continuity in compliance

Resources and partnerships

Critical resources are identified inside the organisation and also in partnerships with external stakeholders due to the strategic aspect of a port site.

These critcal ressources are identifiable throughout the supply chain. These resources are generally categorized into the following three categories:

  • Human resources: people essential to the continuity of activities;.
  • Systems of information and communication: architecture to meet the demand for information and to prevent loss of data;
  • Infrastructure: identifiation of protected zones, redundancy of critical sites, emergency arrangements.

Conclusion

The development of business continuity plans in the maritime sector presents specific challenges due to the strategic importance of port infrastructure for the economic development of a region or country. The impact of a supply disruption could quickly become catastrophic if no management measures are taken to maintain operations.

Governance of the port authorities remain one of the mean challenges. Several operational activities are carried out by private companies, often located outside the country. This involves the negotiation of agreements and significant coordination efforts.

The description of the activities of a port site takes into account the logistics chain of each of the major segments of the industries, namely liquid and solid bulk, container transport, passenger transport, etc. Logistics management involves an integrated view of activities from shippers towards hinterland. An interruption of operations of the entire chain may be due to a breakage of one of the links. This management also involves the flexible use of multimodal transport services. Continuity mechanisms can be developed using alternative transport services.

In the maritime sector, the human factor is a major source of accidents. This sector shows highest number of accidents when compared to other industrial sectors. Poor working conditions, lack of education and training of the maritime labor force that are often the cause.

The development of a resilience plan implies the identification of specific action plans to ensure continuity of activities in industrial segments.  This is achieved by identifying the resources necessary for the implementation of the plan. Partnerships with other entities and the involvement of governments at the highest level are necessary due to the strategic aspect of the sector and its international scope.

 

Louis Bellemare

New Maritime World

 

References :

1 Community Reference Guide

Guide to Achieving a Continuity Plan (2013) “, carried out by the General Secretariat of Defense and National Security (SGDSN) of the Government of France.

2 Note: In this text, the distinction between Safety and Security is the following: the area of transport security aims to protect the transportation of goods or persons from criminal maneuver. Transportation safety is about protection against accidents due to failures or environmental causes.

3  Department of Safety, Ottawa

Ottawa. https://www.securitepublique.gc.ca/cnt/rsrcs/pblctns/bsnss-cntnt-plnnng/index-fr.aspx

4 Ministry of Economy, Innovation, Quebec Ministry of Economy, Science and Innovation

5 Maritime Logistics, chp. 14 Port-Centric Logistics in Concept and Practice

6 Human Elements in Maritime Logistics, c. 6, Maritime Logistics

 

ANNEXE

CLASSIFICATION OF RISKS IN DIFFERENT MARITIME INDUSTRIES

COSTS, FREQUENCY, SEVERITY AND DELAY

IndustriesRisks:Costs and consequencesFrequency and severityAcceptable Interruption Delay and Minimum Service Level Required
Transport of liquid bulk, energy, oil, natural gasSpill, pollution, explosion, supply problems (presence of refinery, distribution network, pipeline connection,

Transportation accidents (collisions)

Strike,

Bankruptcy of a partner

Regulatory change

Loss of customers

Cost of cleaning, ecology

Loss of production value.

Out of Stock Supply

Loss of market share,

According to the statistics on the sectorDepending on storage levels and the presence of certain industries (eg petroleum refineries, metallurgy, etc.).

Existence of a supply alternative

Transport in bulk (ores, metals)Spills, air pollution,

Inventory shortages, supply problems

Strike,

Bankruptcy of a partner,

Amendment to the Regulations

Loss of customers

Cost cleaning, health.Inventory disruptions, economic impacts, loss of market share, competitivenessAccording to industry statisticsBased on storage levels, types of supply, presence of selected processing industries and degree of processing

Existence of a supply alternative

Transport in bulk (cereals, food, basic needs)Spills, accidents, stock-outs, supply,

Strike, bankruptcy, regulation,

Loss of customers

Economic slowdown, rising food prices, inflation, famine,According to industry statisticsDepending on the acceptable level of supply, food self-sufficiency, alternative supply
Container transportAccidents, Interruption or modification of a route of a shipping line,

Out of Stock

pirates

Strike

Congestion or dysfunction of the intermodal network., Bankruptcy, regulation

Loss of customers

Transaction and coordination costs with the intermodal network (trains, trucks)

Cost of storage

And costs associated with delays

According to industry statisticsDepending on contractual commitments and level of service acceptable to shippers.Depending on delivery time costs
Transport of persons (tourism, sleepers)Accidents, collision, mortality, terrorist acts, bankruptcyCosts of accidents, insurance, potential loss of clienteles, social costsAccording to sector statisticsAccording to contractual agreements and insurance
Fisheries and Related IndustriesMoratoriums, reduction of quotas, accidents, temperature, natural incidents (stunami, floods)Resource, competitionLoss of economic benefits, supply shortagesAccording to sector statisticsDepending on socio-economic conditions and agreements with processors

 

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