1 Introduction
There have been, primarily, seven landmark accidents since 1980, which provided the impetus for rigorous enforcement of safety regulations, improvement of ship construction and making risk assessment mandatory upon ship operators, flag States, classification societies, and port authorities: The Derbyshire (1980),1 The Herald of Free Enterprise (1987),2 The Braer (1993),3 The Sea Empress (1996),4 The Erika (1999),5 The Prestige (2002)6 and the Costa Concordia (2012).7
Before proceeding with an analysis of the subject, some general points should be made:
First, risk management is a science, which can be complex in its application because it requires multidisciplinary skills and knowledge. It involves principles applicable to legitimate methods of controlling behaviour by regulations and sanctions imposed for breach of such regulations. Its success depends on the companyâs internal rules of conduct and their clear communication to the people working in the organisation. How people respond to regulation and rules and the extent to which they comply with them depend on their psychological and cultural make-up, which is a field of psychosociological studies on organisational behaviour.
Second, risk assessment and management systems developed gradually over the years in other industries, such as aviation and rail, for the protection of human life. They are still developing and have been applied to shipping since the 1990s. They are now applied across the board by professional bodies to ensure provision of quality of services.
Third, improvements in technical standards, coupled with demanding survey regimes and rigorous enforcement of regulations, have, undoubtedly, had a very positive influence on safety. But it has also been recognised in recent years that, as people operate ships, the impact of the âhuman elementâ in accidents cannot be ignored.8 It is, in fact, an overarching aspect in all procedures.
Fourth, the management of risk is central to shipping and to similar industries; the process has been greatly facilitated by new systems, guidelines and codes, as will be seen later in this volume. Although the details of the International Safety Management (ISM) Code are examined in Chapter 3, below, reference to it is made here in relation to the principles of risk assessment that derive from the code. In addition, reference is made to the commercial incentive for best practice issued by the Oil Companies International Marine Forum (OCIMF), the Tanker Management Self-Assessment (TMSA) guidelines, to the Code of Safe Working Practices for Merchant Seamen (CSWPMS)9 and to the Electronic Chart Display and Information System (ECDIS), which affect the ISM Code.
Fifth, as the safety of ships, crew and cargo has been subjected to increasing piracy attacks since 2007, new measures had to be taken by the industry internationally, and the emphasis on risk assessment by applying the Best Management Practice (BMP4, 2011) has become paramount. Such measures and the revised International Maritime Organization (IMO) guidance (2012) to ship operators, flag States, coastal States and private maritime security companies, for the engagement of privately contracted armed guards, are mentioned later in the chapter.
Sixth, the years of a thriving freight market and a boom in shipbuilding have gone, and shipping is in a downturn cycle at present. However, shipping markets have their rises followed by falls and rises again. An unfortunate consequence during such a cycle, usually, is that some owners, in order to survive in this competitive business, may resort to cutting the budget required for maintaining quality in order to be able to accept lower rates of freight or hire, overlooking that the knock-on effect of such a policy will be an inevitable increase in risk exposure and accidents. However, in the twenty-first-century risk management era, such companies will not last for long, because the claws of safety regulations, Port State Control (PSC), as well as commercial auditing of their ships by traders, will push them out of business eventually; no sound bank, which exercises proper due diligenc, will provide further finance to them. (see Chapters 2 and 3, below).
To appreciate the complexities involved in the application of risk management, it is important to understand the interrelationship between the infrastructures that are within or outside a shipping company and, inevitably, influence how the company is operating and trading. The interrelations between such infrastructures are complex. It is only intended here to present the framework within which risk management can be evaluated.
It is appropriate to deal with definitions first.
1.1 Risk
In common parlance, âriskâ generally means the taking of chances in the hope that everything will turn out to be both safe and profitable, depending on the circumstances of the risk-taking. Risk also carries an additional connotation of a hazard that needs to be covered by insurance.
For the purpose of proper risk management, however, risk has a special meaning. It is understood as the possibility of harm or loss associated with an activity, or the likelihood of an incident happening that may result in danger to life, property or the environment, or may lead to commercial disputes and litigation.
In most industries, risk is understood as the combination of the probability of occurrence of an identified hazard, measurement of its frequency, and an assessment of its potency, that is, the magnitude of the consequences of its occurrence.
In the CSWPMS, the definitions are simple and easy to remember: âhazardâ is defined as a source of potential harm or damage, or a situation with potential for harm or damage. âRiskâ is seen as having two elements: (a) the likelihood that a hazard may occur; (b) the consequences of the hazardous event (section 1.2).
That being so, identified risks or hazards need to be evaluated in terms of their significance to the business, the probability and frequency of occurrence and the companyâs tolerance of their consequences.
There are many different methodologies available to shipping companies for risk assessment and evaluation, ranging from basic qualitative assessment to complex formal risk assessment (see further below).
1.2 Risk Assessment and Management
The phrase is used in different contexts. To a professional manager of business, the exercise of risk management broadly means a systematic approach to taking safety precautions at all levels of business, perhaps intuitively, including the management of financial and commercial risks, and the obtaining of insurance cover.
To a safety and quality assurance manager, it is the application of a systematic approach to hazards; the process, as derived from the ISM Code, includes: (a) the identification of hazards; (b) the assessment of risks associated with these hazards; (c) the evaluation of their frequency and potency in terms of the magnitude of possible consequences; (d) the application of controls to reduce the eventuality of their occurrence; and (e) the monitoring of the effectiveness of controls. These are simply steps, which may not mean anything until they are applied.
1.2.1 Under the ISM Code
The ISM Code, as amended, set the cornerstone of the risk management process; para 1.2.2 states:
Safety management objectives of the company should, inter alia: (1) Provide for safe practices in ship operation and safe working environment; (2) Assess all identified risks to its ship, personnel, and the environment, and establish appropriate safeguards; and (3) Continuously improve safety management skills of personnel ashore and aboard ships.
1.2.2 Under the FSA
A formal safety assessment (FSA) was developed by IMO10 for the main purpose of assessing risks as a tool to help in the evaluation of new regulation for maritime safety and the protection of the marine environment. This is a very good and easy model to understand, as well as to apply. FSA consists of five steps, which can be applied by any business in the assessment of risks:
- identification of hazards (a list of all relevant accident scenarios with potential causes and outcomes);
- assessment of risks (evaluation of risk factors, that is, potency and likelihood); 3 risk control options (devising measures to control or reduce the identified risks); 4 costâbenefit assessment (determining cost-effectiveness of each risk control option); and
- recommendations for decision-making (information about the hazards, their associated risks and the cost effectiveness of alternative risk control options).
In simple terms, these steps can be reduced to:
- What might go wrong? = identification of hazards (a list of all relevant accident scenarios with potential causes and outcomes);
- How bad and how likely? = assessment of risks (evaluation of risk factors);
- Can matters be improved? = risk control options (devising measures to control and reduce the identified risks);
- What would it cost, and how much better would it be? = costâbenefit assessment (determining costâeffectiveness of each risk control option);
- What actions should be taken? = recommendations for decision-making (information about the hazards, their associated risks and the cost-effectiveness of alternative risk control options is provided).
1.2.3 Under the CSWPMS
Under the CSWPMS, a ârisk assessmentâ is intended to be a careful examination of what could cause harm, depending on the nature of operations, so that decisions can be made as to whether enough precautions have been taken or whether more should be done to prevent harm. The aim is to minimise accidents and ill health on board ship (section 1.3). There are no fixed rules as to how risk assessment should be undertaken, although sections 1.9 and 1.10 give the main elements. The assessment will depend on the type of ship, the nature of the operation and the type and extent of the hazards and risks (section 1.4).
In broad terms, under section 1.9 of this code, the elements of risk assessment are: to classify work activities, identify hazards and risk controls, estimate risk, determine the tolerability of the risks, prepare risk control action plan, review adequacy of the plan and ensure that risk assessment and controls are effective and up to date. Section 1.10 gives a risk assessment pro forma for employers to use in order to record the findings, which covers, for example, an assessment of: each separate activity, the hazards involved in it, controls in place, personnel at risk, likelihood of harm (estimated in a table as to how likely it is for it to occur), severity of harm, risk levels with a risk estimator (low, medium, high), action to be taken following assessment, and administrative details, for example, names of assessor, date and the personnel involved.
All these definitions and elaborations come to the same thing. However, seamen would need specific and practical guidance by training to be able to perform the tasks expected of them. The guidelines set out in the CSWPMS intend to do that, but the code is a thick volume and would need to be simplified in practical terms by the training managers to ensure that the seamen know what t...