Risk In The Shipping Industry Management Essay

Shipping industry is in a way the first global industry that correlates nations and continents. According to the (U.S Department of Transportation 2004), “shipping is vital to the nation’s security, economy and transportation”. In no doubt, the industry has enhanced economic development of maritime nations worldwide. Bråfelt and Larsson (2000), indicated that the industry is highly regulated with prescriptive requirements to ensure well-designed and constructed ships as it has been recognised that the best way of improving safety at sea is by developing international regulations that are followed by all shipping nations from the mid 19th century onwards, and a number of such treaties had been adopted as means of reducing maritime incidents. Consequently, players in the sector are of the main concern and interest that ships carrying their cargo is safe within the context of every voyage (i.e. certified to be seaworthy as well as ensuring safety of life of crews working onboard at every sea passages). The diagram below illustrates the player in the sector.

Fig. 1a Maritime Players

Basically, accidents occur at sea when they are less expected, taken for instance major marine incidents such as the capsizing of the Herald of Free Enterprise, the fire onboard Scandinavian Star, the stranding of the Exxon Valdez and the foundering of the Estonia have had profound effect on the marine environment; thereby making the industry’s regulatory body (International Maritime Organisation, IMO) to realise that in spite of well found ships as well as certificated crews onboard, there is still something missing (The Nautical Institute 1999). Afterwards, studies on how similar accidents may be prevented have been actively carried out at both national and international levels (Wang et al. 2004).

Consequently, the UK Maritime & Coastguard Agency (MCA) quickly responded and in 1993 proposed to the International Maritime Organization (IMO) that formal safety assessment should be applied to ships in order to ensure a strategic control of safety and pollution prevention (MSA 1993; Sekimizu, 1997 and Wang 2001) after Lord Carver’s report on the investigation of the capsizing of the “Herald of Free Enterprise” published in the U.K in 1992. Although, the studies of (Kristiansen 2005), discussed for some time whether basic economic mechanism could ensure safer shipping. Nonetheless, the industry is still faced either directly or indirectly with too many hazards resulting into fatal or total losses, as a result of inappropriate approach to risk management methodologies in commercial shipping operation. Predominantly, accidents are the consequences of highly complex coincidences. And within the multitude of the causal factors, human errors play a dominant role. Therefore, how to demonstrate that human error has been reduced to appropriate level “As Low As Reasonably Practicable” (ALARP) is now a topical issue in the marine accident prevention. Further to answering questions on (ALARP) in relation to reducing human errors in shipping operation, risk assessment tools and techniques must to be applied through reasonable quantitative approximates of the linkages in causal chains leading to an accident involving human error. Therefore, within the structure of this essay, recent maritime incidents at sea will be analysed with the incidents causal factors being discussed and critically evaluated in order to arrive at a measure of their complexity, and also putting forward a proposal for prevention of such maritime incidents from re-occurring in the future within the commercial shipping industry.

Background Report Outline

Prior to the management of risks in shipping, it is important that there is a combined measure of the chances of some particular event happening and the consequences if it does occur. In this way, risk is defined as it involves both the identification of the occurrence and the likelihood that it will happen (Chauvel 1997). According to (Lopes 1987); technically, the word risk refers to situations in which a decision is made whose consequences depend on the outcomes of future events having known probabilities. Indeed (Kristiansen 2005) advocated that the theory of risk stands central in any discussion of safety. He further went on and referenced to a given system or activity, thereby stating that the term ‘safety’ is mostly used to describe the degree of freedom from danger and the risk concept is a way of evaluating it. Subsequently, this is done by means of increasing the chances of successful action in the face of uncertainty through an improvement of the available information. Though, there is existence of risk in every organisational framework. Apparently, the only way to manage risk effectively is for organisations to be well assured that a reasonable best practice of (ALARP) is applied within the strategic control of operations against risks of any kind. Hence, (HSE 2001) approach on tolerability of risks framework (ToR) – (shown in Fig. 1b), applied risk in a broad sense, and not just including the risks of harm (i.e. individual and societal risks), but also the perception of hazards associated ethical and social considerations (“societal concerns”), such as aversion to large multiple-fatality accidents. Therefore dividing risks into three sections, namely:

Unacceptable; risks regarded as unacceptable except in extraordinary circumstances (such as wartime), whatever their benefits. Activities causing such risks would be prohibited, or would have to reduce the risks whatever the cost.

Tolerable; risks that are tolerated in order to secure benefits. In this region, risks are kept as low as reasonably practicable (ALARP), by adopting reduction measures unless their burden (in terms of cost, effort or time) is grossly disproportionate to the reduction in risk that they achieve.

Broadly acceptable; risks that most people regard as insignificant. Further action to reduce such risks is not normally required (HSE 2001).

Fig. 1b Tolerability of Risk Framework (ToR)

(Source: HSE 2001)

According to the UK Maritime Accident Investigation Bureau (MAIB 2000), it is evident that over 80% of most maritime incidents occurred as a result of human errors originated from organisational based errors, vessel’s classification system or as a result of vessel’s regulatory framework. With an evaluation (Rassmussen 1997) compared with accident records as rapidly guided attention to the human-machine interface problems, and therefore forced it to enter the arena of human error analysis, operator modelling, and display design, involving also psychological competence; (Moore and Roberts 1995) from history of shipping, it is obligatory that ship crews must be well certificated before going to sea, and which ship-owners and operators have not been focusing on the regulatory requirements that certify their ability to safely manage the operation of their ships. However, in the review of (Perrow 1999), it was indicated that the error inducing character of the system in shipping lies in the social organization of the personnel onboard, economic pressure, the structure of the industry, insurance and difficulties in international regulations. Undoubtedly, (Fang et al. 2004) confirmed that in order to improve and promote maritime safety, the adopted Formal safety assessment (FSA) by the IMO was introduced to the marine industry and put it into use, and members were asked to be actively involved in the research on ship safety. In the year 2009, the annual report on the accident investigations by the MAIB thankfully confirmed that the number of maritime fatalities has remained low, and the number of injuries to crew has shown a significant reduction.

Currently, within the framework of the IMO, International Safety Management Code (ISM Code), Standards of Training, Certification and Watchkeeping for seafarers 1995 (STCW’95), International Convention for the Prevention of Pollution from Ships (MARPOL 73/78), International convention for Safety of Life at Sea (SOLAS 74) and ISO 9001:2000 standards are being put forward as techniques relating to achieving maritime safety, risk and crisis management within the industry.

The context of Safety Regulatory in Shipping

Presently within the IMO; a broad-based, long-term effort involving not only the Marine Safety Committee (MSC) and Marine Environmental Protection Committee (MEPC), but all of its technical subcommittees (11 subcommittees in all), in which nearly all tasks and developments are being examined in a “human factors” light (Moore and Roberts 1995). Certainly, the plan has by now produced the ISM Code for the safe operation of Ships and for Pollution Prevention at large. The ISM Code Section 1.2.2:- stated “Safety management objectives of every shipping company should, inter alia:

Provide for safe practices in ship operation and safe working environment;

Establish safeguards against all identified risks; and

Continuously improve safety-management skills of personnel ashore and aboard ships, including preparing for emergencies related to both safety and environmental protection” (IMO 2002).

Nonetheless, the adopted Formal Safety Assessment (FSA) by the IMO has proved to be a systematic formal and integrated assessment approach towards achievement of maritime safety (Hu et al. 2006). The FSA can be used as a tool to improve the measures and regulations or to make new ones on the basis of analysis of current ship design and engineering techniques, ship’s operation and control, standards and regulations of safe management, together with the combination of the realistic needs (Hu et al. 2006 and Wang 2001). But in view of (Trbojevis and Carr 2000), while design standards and technical solutions have improved, major accidents continue to occur as a function of failure in the Safety Management System (SMS) of some organisations. From their studies, the analysis of the underlying causes of failure are increasingly viewed as originating not in the failure of the frontline technical and human control system, but in the safety management practices which are supposed to keep them in place. They further stated the main objectives of a good SMS which provides an assurance that: i.) risks are identified and evaluated, ii.) Suitable controls are in place to manage these risks, and iii.) Line management has responsibility for those tasks that ensure controls are effective at all times. Besides, the Health and Safety at Work Act (HSWA 1974), also gave a foundation for offshore safety regulations on the UK Continental Shelf (UKCS). The Act imposes on every employer a duty “to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all their employees” and “to conduct his undertaking in such a way as to ensure, so far as is reasonably practicable, that persons not in their employment who may be affected thereby are not exposed to risks to their health and safety” (HSE 2001).

The process of Risk Management in Shipping

Risk Management (RM) is an iterative process with the aims of alerting risk levels, making decisions about accepting or varying risks as well as restricting and maintaining risks within tolerable limits at proportionate cost (HSE 2001). Undeniably, it is fundamentally a learning process; hence, its success is ultimately seen to have been demonstrated through an effective response to incidents (Kristiansen 2005). On one hand, (HSE 2001) asserted that RM is the process of selecting appropriate risk reduction measures and implementing them in the on-going management of the activity. On the other hand (FreightMetrics 2003 p.4), argued that RM does not necessarily imply risk reduction. In fact, its objective is NOT to reduce risk, but more importantly to quantify and control risk. Further to (FreightMetrics 2003), RM is a three-step process, namely:

Risk Modelling: Identifying the underlying risk factor and modelling their dynamics,

Risk Measurement: Quantifying the impact of risk factors on financial results.

Risk Management: Controlling risk with risk-informed decision making.

As a result, the approach to assessing risk is another contemporary issue within the management (FreightMetrics 2003 p.4). On one hand (Trbojevis and Carr 2000), risks can be qualitatively assessed by the use of a risk matrix. This typical matrix has rows representing increasing severity of consequences of a released hazard and columns representing increasing likelihood of these consequences. (See Fig. 1b)

Fig.1c Risk Matrix

Source: (Trbojevis and Carr 2000)

Subsequently, (HSE 2001) asserted that risk assessment can best be applied in three approaches described as Qualitative, Semi-Quantitative and Quantitative methods. In addition, this aimed at risk reduction and the key test is one of reasonable practicability, hence, it is up to the project manager to decide on the appropriate approach for the job. These approaches is shown in (Fig. 1d)

Fig. 1d Risk Assessment Approaches

(Source: HSE 2001)

Bråfelt and Larsson (2000) affirmed that even though adequate safety standards and environmental protection is a culture in many companies but this, by itself, is not enough. Furthermore, good safety management requires a commitment through all levels of a company’s hierarchy and effective communication channels between the management ashore and those on board ship are a prerequisite of safe operations. Therefore, in conclusion to achieving effective RM, it is imperative to THINK THE UNTHINKABLE! as stated by “Murphy’s Law”; anything which can go wrong will go wrong!” Therefore, innovation is required to gain competitive advantage in RM and it is also advisable for every member of staff in the organisation be actively involve and take part in the risk management process.



Concept of Management in Commercial Shipping

With reference to the studies of (Gatfield 1999), it was affirmed that the commercial shipping companies have traditionally been very conservative. In addition, the industry is long-established to be of a high-risk and as such should be actively engaged in the management of risk in order to reduce to minimum the number of incidents which both threaten the safety and protection of our environment. At the moment, all shipping companies have been made aware of the need for risk management and contingency planning at considerable times (Thai and Grewal 2006). In relation to the studies of (Celik et al. 2007), the influences of rapid changes in various parameters such as technology, risks, policies, and strategies in competitive market conditions have been caused to seek new approaches in terms of management processes at shipping companies in order to accomplish the sustainable development in maritime transportation industry. According to (Hetherington et al. 2006), it is affirmed that there have been new improvements in some ships design and navigational aids which have reduced the frequency and severity of shipping incidents; nevertheless, the reduction of failures in technology has revealed the underlying level of influence of human error in accident causation. In reflection of this, recent research studies on effects maritime risk approach made it evident that human error is the primary source of most incidents at sea (MAIB 2009).

Requirements for Total Management of Safety in operation

In view of the studies of (Goulielmos et al. 2008), safety is a great analogy for understanding quality; in fact, everything about safety relates to the absolutes of quality management. Subsequent to the fact that theories of firms are conceptualizations and models of business enterprises which explains and predicts their structures and behaviours (Grant 1996); (Machlup 1967), stated that every “theory of the firm” is an abstraction of the real-world business enterprise which is designed to address a particular set of its characteristics and behaviours. According to (Chauvel 1997), quality must become the cornerstone of a culture that will unite the personnel; and having learnt the merit to work properly, they will want to do so. However, relative to the studies of (Cooper and Phillips 1995 p.3) quality in shipping is presented within the context of TQM as “a ship management philosophy, for the ship-owner and captain, attempting to link ship service quality to charterers’ satisfaction, by institutionalising planned and continuous quality improvement”. In view of (Ross 1993) TQM is an integrated management philosophy and set of practices that emphasizes, among other things, continuous improvement, meeting customers’ requirements, reducing rework, long-range thinking, increased employee involvement and teamwork, process redesign, competitive benchmarking, team-based problem-solving, constant measurement of results, and closer relationships with suppliers. Basically, every merchant shipping companies requires competent staff to delegate job responsibilities. On the long run, to achieve total management control of the commercial and safety aspects of shipping operation, the effectiveness of services must be determined by their safety aspect (Goulielmos et al. 2008). This includes; implementation of Safety policy in TSM, compliance with ISM Codes and Safety Management standards (SMS’s), and also practising good ship Safety Culture within the organisation. Further to their studies (Goulielmos et al. 2008), the final remark indicated that despite the similarities acknowledged in the process and techniques involved while striving for safety and striving for quality, and having ‘injected’ safety management with the values and practices of TQM, scholars and practitioners have produced a much-improved version of a management approach, (i.e. that of TSM). In no doubt (Cooper and Phillips 1995) advocated that TSM is thought to produce improvements in all areas of an organisation’s functioning, including quality. Furthermore, the concept of TSM was argued and declared as a management strategy that provides “a focus on safety and offers a realistic way forward at less cost and confusion”. In support of this fact (Chauvel 1997) affirmed it is imperative for the commercial shipping companies to implement the following objectives in order to achieve total management:

Policy statement; this is done by defining the management performance standard as well as integrating the statement inside the company policy.

Personnel orientation; this goes by to briefing management staff on the programme concept and intent as well as obtaining their commitment to the programme.

Progression of personnel career through training; this has to be in line with their aspirations and potential to enhance the work-force efficiently, and keeping it so throughout the technological developments needed to improve quality output.

Management participation; this is done by setting a good example from top management staff downward.

Quality improvement programme; this clarifies that everyone that every member of staff of within the organisation have to strife towards error-free performance.

Quality improvement committee; by implementing this objective, it helps to develop and guide the quality improvement effort to resolve systems problems adversely affecting management and service quality.

Quality measurement; this goes by providing timely information on the current and potential non-conformities in a manner that permits objective evaluation and corrective action.

Error cause identification; this objective provides personnel with a vehicle for communicating errors and problem situations to senior management for action.

Objectives; this engages all personnel in a continuous quality programme to improve the global performance of the company.

Corrective action; this provides a systematic method of permanently resolving problems on a timely basis.

Quality cost control; this helps in quantifying the cost of error and the cost of activities necessary to prevent, appraise and remedy error as a means of reducing the total cost.

The results of pragmatically practicing the stated objectives stated in (Chauvel 1997), will in no doubt enhance TSM as well as TQM within the commercial shipping companies.

Risk and Crisis Management techniques and Organisational Failure

According to (Harrald, Marcus and Wallace 1990) “Crisis Management” involves assessment of risks, determining the way to achieve the lowest possible (or an acceptable) level of risk, establishing systems and procedures to maintain the system at an acceptable level, preparing (contingency planning) to deal with possible events, and managing response organizations and actions whenever accident occurs. Subsequently, (Borodzicz 2005) indicated how risk occurrence should be perceived or managed; in the context of his view, these could be centred on communication, systemic or cultural, risk homeostasis and socio-technical or isomorphic approaches. A situation whereby these stated approaches are not duly practised will result into flaws within the organisation’s management systems and thereby posing the likelihood accident occurrence. A very good example of related maritime accident that showed flaws in “safety culture” is that case of the capsizing of “Herald of Free Enterprise” (HFE) dated 6th March 1987 as critically evaluated by (Goulielmos and Goulielmos 2005). Further example was noted from the analysis of the collision of two ferries crossing Dover “Diamant” and “Northern Merchant”. From the analysis of the findings, (Barnett n.d) pointed out that if an organisation’s shore-based management team pays “lip service” to its own operating policies and procedures by failing to implement good safety culture on the vessels and, at the same time, tacitly accepts or rewards deviant behaviour, then the individual officers onboard will adopt a similar cultural attitude. More importantly to the analysis of the findings that followed the capsize of HFE (Goulielmos and Goulielmos 2005 p.484) advocated that management of the organisation failed from Board of Directors down to young managers as they did not estimate properly their responsibility and their exact duties for ensuring the safe management of their ships. Further to this, it is obvious that they lacked proper consideration about the organisation of the HFE for the Dover-Zeebrugge crossing. Hence, with reference to (HSE 2001), the techniques applicable to Risk and Crisis Management within commercial shipping companies can be summarised as follows:

Hazard Identification (HAZID)

Hazard and Operability (HAZOP)

Failure Modes, Effects and Criticality Analysis (FMECA)

A structured what-if checklist technique (SWIFT)

Hazard Identification

According to (HSE 2001), “hazard” is defined as a situation with potential for causing harm to human safety. In most cases it appeared to be physical. Thus “Hazard Identification” (HAZID) is defined as a qualitative exercise primarily based on expert judgement of identifying hazards, and forms the essential first step of a risk assessment (HSE 2001). Further to this, emphasis on two main purposes for identifying hazards was given. Firstly, to obtain a list of hazards for subsequent evaluation using other risk assessment techniques; secondly, to perform a qualitative evaluation of the significance of the hazards and the measures for reducing the risks from them. With reference to (Fig. 1d) in page 8 of this essay, it is evident that HAZID is an essential component of all risk studies (HSE 2001).

Hazard and Operability (HAZOP)

According to the (Lloyd’s Register 2008), HAZOP is a study design with review technique commonly used for hazard identification, and for the identification of design deficiencies which may give rise to operability problems mostly within the offshore industry. Furthermore, it uses guidewords systematically to identify deviations from normal conditions to be further examined by skilled personnel.

Failure Modes, Effects and Criticality Analysis (FMECA)

According to (HSE 2001), FEMCA is a systematic method of identifying the failure modes of a mechanical or electrical system. As being a component-level review of a design, identifying failure modes and their consequences, (Lloyd’s Register 2008) asserted that each failure is subsequently analysed to determine if it would be detected by the user/operator before causing an incident or damage or whether mitigation controls are in place to prevent damage, escalation, etc.

A structured what-if checklist technique (SWIFT)

With reference to (Lloyd’s Register 2008), a structured what-if checklist (SWIFT) is similar to HAZOP. Only that SWIFT uses pertinent deviations from normal operation, brainstormed by the team for a number of question categories. Furthermore, SWIFT study will consider a system as a whole or in larger sections than HAZOP and can be up to three times more time efficient than HAZOP.




Considering the IMO’s perception on “safety culture”, (Håvold 2010) advocated that an organisation with a good “safety culture” is the one that gives appropriate priority to safety and realizes that safety must be managed in the same way as other areas of the business. Therefore, inappropriate organisational approach to “safety culture” will in no doubt result into flaws within the management system as well as giving rise to likelihood of accident occurrence. From the recent reports by the MAIB, UK on maritime incidents 2010, three out of these most recent lists of maritime accidents shall be analysed and discussed in this essay for the purpose of identifying the causal factor of the accident.

Table1. Merchant vessel Investigation reports 2010

Vessel name

Vessel type

Accident type

Accident date

Bro Arthur

(No 9/2010)



Fatality of a shore worker in No.2 cargo tank while alongside at Cargill Terminal, Hamburg


Ever Elite

(No 8/2010)



Uncontrolled descent of an accommodation ladder while the vessel was in San Francisco Bay, resulting in one fatality



(No 3/2010)

Merchant Tankers

Collision between mt Saetta and mt Conger on completion of a ship to ship transfer 9.5 miles south east of Southwold, UK


(Source: MAIB 2010)

Accident case study 1 “Fatality of a shore worker in cargo-tank No.2 onboard Oil/Chemical tanker Bro Arthur while alongside Cargill Terminal, Hamburg, Germany” (MAIB Report No 9/2010).

Context of the Incident

At about 2258hrs on 19 February 2010, onboard oil/chemical tanker Bro Arthur while alongside Cargill Terminal, Hamburg. One out of the hired team of three German shore workers arranged to “sweep” cargo residue in No.2 cargo of the vessel fell to the bottom of the tank while exiting on completion of the “sweeping” operation, he was fatally injured and later died.

However, from the post-mortem toxicology report, it was identified that the casualty was under the influence of variety of prescription and illegal drugs which would caused severe impairment. Nevertheless, evidence suggests that he fell from the slippery vertical ladder of the No.2 cargo tank as a result of safety harness or fall arrestor not being provided by the vessel. Within the context of the accident, the MAIB investigation report listed 14 safety issues that must have contributed to this fatal incident (MAIB 2010 p.42-44).

Analysis of the situation

The incident occurred as a result of inappropriate organisational structure of SMS practice within Bro Arthur’s regulatory framework. Hence, the safety culture is faulty with issues related to superficial risk assessments and inadequacy of safety equipments carried onboard (i.e. insufficient Personal Protective Equipments (PPE), and communication gadgets).

This incident also indicated that personnel onboard have no sailing experience on oil/chemical tanker, although they are experienced seafarers. Thus; they not familiar with cargo tank cleaning procedures onboard oil tankers, having in mind the importance of safety harness, PPE, how to use safety recovery equipment as well as a designated ship officer to monitor the No.2 cargo tank cleaning process.

The management of the vessel’s operating company has not monitored the vessel’s SMS practices accordingly. It appeared that crews’ emergency drills were scheduled last in August 2008. Indeed, no safety drill is being scheduled for the year 2009 or for 2010. As a matter of fact, crew familiarity with casualty recovery equipment during emergency drills would have improved the chances of surviving the injured person.

Accident case study 2 “Uncontrolled descent of M/V Ever Elite’s accommodation ladder while she was underway in San Francisco Bay, resulting in one fatality”. (MAIB Report No 8/2010).

Context of the Incident

At about 0505hrs on the 10th of September 2009, an able seaman from a UK registered container ship Ever Elite drowned in San Francisco Bay, while the vessel was approaching Oakland container terminal in California subsequent to breakage of the lower section of the accommodation ladder he was standing on after the hoist gearbox failed and he fell into the water and drowned because he did not use either fall arrestor or lifejacket. However, the able seaman’s body was spotted by an accompanying tug after the accident occurred and was recovered onto a pilot launch.

With reference to UK MCA publication (COSWP p.1), section 1: stated that all working onboard should be aware of their duties and the principles governing the guidance on safe practice which they are required to follow. Thus, rigging the accommodation ladder without (PPE, fall arrestor and lifejacket) while the vessel is underway was unnecessarily hazardous; consequently, a safe system of work has not been developed for the fact that no duty officer was present at the scene (MAIB 2010). From the investigations conducted (MAIB 2010) listed 14 safety issues that must have contributed to this fatal incident (MAIB 2010 p.47-48).

Analysis of the situation

From the analysis of this situation, it appeared similar to the previous (Bro Arthur) in terms of inappropriate Safety Management System practice onboard. With all indications, the number of deficiencies identified onboard the Ever Elite concerning safety management and planned maintenance systems, safety equipment, and emergency response casts doubt on the safety culture underpinning the vessel’s operation (sections 2.7; 2.8, MAIB 2010 p.45-46). However, the accident is seen to have been caused by the onboard personnel “Safety Culture” because they are not accustomed to the relevance of safety equipments as a result of the lack of regular safety drills. Had the vessel conducted regular and realistic man-over-board drills and developed ship-specific checklists, the likelihood of these actions and the need to save the information on the VDR being overlooked, would have been reduced significantly (Section 2.7 MAIB 2010).

In addition, the management of the vessel’s operating company played a role in the accident because they failed to provide onboard Ever Elite safety equipments that meets the UK regulatory requirements. From the investigation of (MAIB 2010), safety harness, fall arrestors and lifejacket found onboard the Ever Elite would not have achieved the aims of safety harness (i.e. to minimise the risk of risk of injury to the wearer by suspending them in

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