Armed maritime robbery may be down year to date, but Nigerian waters are still called a war risk zone with 68 kidnaps recorded in Q1. Elsewhere across the MENA region dangerous road infrastructure and corruption are increasing the level and severity of threats to the logistics industry. Kurt Parry investigates.
Modern piracy has devastating effects through both the loss of lives and the loss of businesses. As the main focal point of much of the worlds cargo and shipping, the wider Middle East has been a major target for the pirates and its natural geography, trade history and developing economy have made some areas a magnet for such ruthless and desperate bandits.
The East African coast has established itself as both a prime target and a prime culprit and the instability of the nations that make up that coastline pose an ever-present threat. While the Indian Ocean has had its level of potential danger officially reduced, the Gulf of Aden continues to be defined by the IMB Piracy Reporting Centre as a High Risk Area (HRA) there have already been multiple threats and two attempted boardings this year.
Despite this and against highly professional advice and insights, some companies still try to cut corners and put costs above safety.
Jamie Smibert, Marine Broker at Aon Risks Solutions says limited success can sometimes lead to premature confidence.
He says: With the recent reduction in the HRA around the Gulf of Aden, there were industry concerns that shipping companies would become complacent and see this as a sign to reduce security presence on board vessels. Armed guards and the support of international navies have played a major part in turning the Indian Ocean into one of the safer oceans for commercial shipping and with the political instability still rife in Somalia, there is the need to stay as vigilant as ever from a security standpoint.
There are reports of shipping companies employing fewer and less professional armed guards for the protection of crew and cargo. This certainly puts them at a greater risk of opportunistic piracy activity, Smibert continues.
And even though the ships themselves may be less secure and more vulnerable to attacks, insurance is far from paramount.
It is worth noting that ship owners receive considerable discounts from insurers for having armed guards on board unfortunately, insurance is often a second thought. But the result of overlooking the need for the correct insurance can be catastrophic. Insurance is fundamental for all logistics businesses and can help to keep companies afloat following an unfortunate major incident, he adds.
Globally, International Chamber of Commerce (ICC) results show that maritime armed robbery rates have declined year-on-year by nearly a third in the first three months of 2016, but across the continent into West Africa, pirate attacks, including kidnapping from ships, make Nigerian waters a War-Risk Zone. Sixty-eight crew members were kidnapped in Q1 2016 in 10 separate incidents a 300% increase on Q4 2015 figures. Not only is the passage unsafe, its cost is becoming extortionate, with insurance premiums rising by up to 60%.
Some of the greatest threats, however, come in the vast expanse that lies between the two coastlines. It would be unfair to label the entire African continent as lacking basic infrastructure but for many countries within it, this is an unfortunate truth. The lack of world class rail, road, air and port facilities can seriously hamper supply chains and make logistics operations dangerous as well as inefficient. The ingrained and often-present factors of corruption and crime also add to the mix in some areas, which may well be the most difficult obstacles to navigate overall.
While African economies have seen massive growth in recent years, the speed of investment into its emerging market opportunities has not been matched by its infrastructure, creating an even greater strain on the supply chain and making even greater chinks in the logistics armour.
From problems as basic as a lack of regulations for the hours a driver can work to the real and terrifying threat of hijacking and armed robbery, there are many reasons why Africa poses so many threats. The volatile politics in several countries also makes insurance not only difficult, but sometimes impossible. Outbreaks and sudden resurgences of civil wars play a large part, making premiums almost prohibitive, and while some insurers may provide high price cover for northern parts of the Democratic Republic of Congo for instance, almost none will contemplate many towns in the south.
With round trips on the road taking up to 30 days with 20 border crossings, fraud and corruption have become a part of daily business for many operators. The prospect of indefinite waits at border controls compared to a bribe and a place at the front is often no contest and a larger bribe will persuade those manning the border not to investigate the cargo. The same practice at many of the continents ports is increasingly making people trafficking, drugs, illegal immigrants and contraband, much easier.
The root of the problem
Without doubt, the MENA regions political landscape has been a constant source of concern for decades, if not centuries. Trade routes have been forged and then forgotten, forced into oblivion by changes in regime or government.
Speaking from his Dubai headquarters, Stefano Pollotti, Middle East Managing Director of GEFCO, one of Europes largest auto-logistics companies, says operational success can be turned on its head in an instance.
He says: You can often see there are highly lucrative opportunities in some markets and if the status quo remained, the potential would transform into a reality. You can make all the preparations, secure all the financing, join with all the partners and then it can all fall apart through political unrest. For those that are already in those markets, the effects can be equally devastating. Most recently, we have seen companies in Libya and Egypt lose their entire operations and now Iraq and Iran both pose high risk and high gain options. You must do your research and ultimately decide if you know enough to make an informed decision.
Stigo George is QHSE manager for road transport safety at Transafe, a specialist dangerous goods transporter with branches in the UAE, Qatar, Kuwait, Egypt and Iraq.
George adds: We know that there are parts of this region which can potentially pose a risk in terms of politics and we constantly monitor the situation. We ensure that we always communicate with our clients and are totally transparent in the information we receive and the risks that we assess on their behalf. More than anything, the safety of our drivers is a priority and we would never compromise their wellbeing. Of course, its not just the political map we look at, we have some natural hazards and a significant element of human error to contend with.
Preparing for the worst
Probably the greatest cause for the logistics industry to rethink the way it prepares and assesses risk and disruption is recent terrorism activity seemingly more random and more widespread from a relatively new source. The chaos of an act of terrorism has enormous implications for transport infrastructure, airports, railroads and ports even if they are not the direct target of the act. Following the 9/11 attacks for example, an initial clampdown on much of the private and commercial traffic in and out of the USA left Ford Motor Co. assembly lines idle, as vital components were delayed coming in from Canada and Mexico Fords fourth-quarter output was down 13% compared with its production plan.
Many supply chain risk assessors and insurers liken a terrorist act to a natural disaster and advise that preparations should be along the same lines; this could include establishing secondary suppliers, alternative transportation methods and routes and an emergency communications strategy. Real-time data can also be key, in order to react and analyse a terrorist attack and mitigate its effects in the shortest possible time.
However, while this has been tried, tested and trusted advice in the past, many acts of terrorism have adopted a more random approach and contingency plans are therefore more difficult to put in place. While there were more than 2,700 attacks carried out in the MENA region, South Asia and Sub-Saharan Africa by the so-called Islamic State (IS) in the past year, the acts of terrorism in the West have brought about a new mindset and a need for new resources.
Wolfgang Lehmacher, head of supply chain and transport industries, World Economic Forum has made it clear that the first concern should be public safety, and all appropriate measures should be in place to reinforce that. He also understands that while terrorism impacts enormously on society, logistics objectives are potentially more devastating to a wider population.
The response of governments has been to increase security in public spaces and rightfully so. But what if these same terrorists would attack supply chains instead? Hitting just a few strategic targets in the energy trade, for example, could bring the entire global economy to a halt. To avoid such disaster, companies and governments should be more aware of this perceived low probability threat and develop the tools to protect their economic interests and those of the world. What matters then, is to recognise supply chains as a target, and take adequate measures to protect them, he said. The private sector should follow suit, and the first necessary step is to accept the likelihood of such attacks. That is not often enough the case.
The sentiment is echoed by Inge Vandijck, managing partner at Radar, The Risk Management Company, based in Belgium.
She says: Our society is increasingly faced with terror threats and attacks, including 9/11, Madrid, Paris, London and the Brussels attacks 22/3. Public transport, public places, public transport and recently Brussels Airport were terrorist targets and potential target organisations should review whether their security controls are adequate to counter potential terrorist attacks of the nature experienced globally in recent years. There should be some insight, for instance into how adversaries will attack, for example with explosives, when they will attack, perhaps on symbolic days or events and why do they attack the need to understand their motives. Organisations should focus on lowering the likelihood of occurrence as well as the consequences of the identified threat scenarios. And when it comes to insurance, we would strongly recommend a review of existing policy wordings. Most standard wordings exclude acts of terrorism and acts of war.
Virtual threats
While not as immediately catastrophic to the public, cyber terrorism can be equally as disruptive in the supply chain. Cert-UK, the UKs National Computer Emergency Response Team paints a grim picture in its report Cyber-Security Risks in The Supply Chain showing that many companies rarely follow their own advice.
The report reads: When managing risks to their supply chain, modern organisations follow established procedures for mitigating dependencies and vulnerabilities that could impact upon their physical supply chains. These risks are identified, tracked, and assigned owners in a way which increases their visibility and allows organisations to anticipate their impact.
However, this approach is seldom followed when dealing with cyber-security related risks to the supply chain, adds Lehmacher. Yet it is these risks that are most obscured, being several steps removed from the analysis and decision-making centre of a given organisation. As a result, they are displaced outside an organisations control and an organisation may therefore find that, despite the strong cyber-security measures it has implemented through its ICT system, it has fallen victim to deliberate targeting or collateral damage.
Breaches in Cyber-security are not only difficult to detect, they can affect any link in the supply chain of any sector or industry and are very much on the rise. Kaspersky Security Network statistics for January-March 2016 show that in the Middle East, Turkey and Africa, an average of 45% of users had security incidents related to local networks and removable media, and 15% of users faced web-related threats and the total number of cyber-incidents detected in the Middle East during the first quarter of 2016 was 15% more than in the same period of 2015.
The dangers of data breaches have attracted major attention from marine logistics organisations. Risk management has always been fundamental to safe and secure shipping operations and has traditionally focussed on physical operations, but greater reliance on digitisation, integration, automation and network-based systems has created an increasing need for cyber risk management.
In a bid to protect the marine supply chain integrity, the International Maritime Organization has issued guidelines to provide high-level cyber risk management. A technology asset is threatened by a potential circumstance or event, which may result in shipping-related operational, safety or security failures as a consequence of information or systems being corrupted, lost or compromised. Perhaps not the most eloquent description of the fight against cyber-crime, but an illustration that the rise of the digital enemy is as great a threat as any other.
There are many risks and dangers facing individuals, businesses and even entire international supply chains, but preparation plays a pivotal role. Whether it is terrorism, piracy, data theft or corruption, damage limitation to some extent is possible and the industry can assess where the greatest risks exist. As author Tom Clancy wrote in The Sum of All Fears: Panic is something that good operations officers plan for.
However, there are the unforeseen and unpredictable events, the Black Swans which will always have the potential to be catastrophic. Events such as Icelandic volcano ash, Hurricane Katrina, the Tsunamis of Sri Lanka and Japan, Ebola, new scientific advances, legal issues and much more can bring a companys logistics operations to its knees. These disasters are few and far between and each is unique, but there are still some contingency plans that can be shared on a global stage. Echoing Clancys sentiments, Mark Twain tells us: History doesnt repeat itself, but it often rhymes.
2016 international Maritime Threats
Africa
Severe risk: Libya, Nigeria
High Risk: Kenya, Sudan
The expansion of territory controlled by IS militants in Libya and Egypt has worsened the kidnap threat across North Africa. The fragile security situation in the Sahel was also evident, with foreign aid workers targeted in Sudan and South Sudan, and co-ordinated abductions by Islamist militants targeting foreign nationals in Mali and Burkina Faso. In Nigeria, the kidnap threat expanded at varying levels nationwide, with domestic nationals now increasingly targeted.
The Americas
High risk: Mexico, Columbia, Venezuela
Medium risk: Brazil
In 2015 the Americas saw a reduced proportion of global kidnapping incidents compared to previous years. Colombias progress toward a peace agreement with the regions largest left-wing guerrilla group and security initiatives in Brazil have contributed to these improved results. However Venezuelas rapidly deteriorating economy and Mexicos public distrust in authorities means kidnapping remains a significant regional concern.
Asia
Severe risk: Pakistan
High Risk: India, Philippines
Medium Risk: China
Kidnapping threats in Asia have varied and evolved between countries, with Afghanistan and Pakistan retaining the most significant threat from criminal and terrorist elements. In the Philippines, the Abu Sayyaf Group has heightened the kidnap threat to foreign nationals in the south, and a potential rise in express and virtual kidnappings in China may stem from the growing use of social media.