Assurance of Security in Maritime Supply Chains: Conceptual Issues of Vulnerability and Crisis Management

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Assurance of Security in Maritime Supply
ChainsConceptual Issues of Vulnerability and
Crisis Management
Dr Paul Barnes Mr Richard Oloruntoba School of
International Business Queensland University of
Technology, Brisbane, Australia
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Overview of Presentation

• Aspects of Maritime Security - Old New
• Supply Chain Threats - Economic Impacts
• A Conceptual Framework Systemic Organisational
  Vulnerability
• Options for Crisis Management Vulnerability
  reduction
• Issues for further Research and Inquiry

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• In October 2001, authorities in the southern
  Italian port of Gioia Tauro discovered an
  unusually well-equipped and neatly dressed
  stowaway locked inside a shipping container.
• Italian police named the stowaway as Rizik Amid
  Farid, 43, and said he was born in Egypt but
  carried a Canadian passport.
• He was found to be carrying
• two mobile phones,
• a satellite phone,
• a laptop computer,
• several cameras, batteries,
• airport security passes and,
• an airline mechanics certificate valid for four
  major American airports.

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Security in Maritime Trading Systems
What are the Challenges?

• Approx. 90 of world trade moves in shipping
  containers
• - Any reduction of throughput is likely to have
  a significant impact on regional and national
  economies.
• Global business enterprise, and trading systems
  in particular, are vulnerable to terrorist
  incidents
• - Perturbation of maritime supply chains will
  impact on movements of material across large
  sections of the network.
• The asymmetry of approach in modern terrorism can
  make use of systems of commerce
• - Maritime trade as a vector for terrorism.

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The Management of Crises (including prevention)
is critical
Further issues of Importance

• Crises have become Normal often suddenly
  emergent
• With major consequences across many sectors
• Exxon Valdez
• Barings Bank
• Enron
• 9/11
• Bali bombing
• Madrid bombing

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Why does do these issues matter?

• Could the incidents have been prevented or
  deflected?
• Could their consequences have been better
  mitigated?
• Could they have been anticipated?

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Maritime Security - Issues of Complexity
Cargo
Vessels

• Using the vessel as a weapon
• Using the vessel to launch an attack.
• Sinking the vessel to disrupt
  infrastructure

• Using cargo to smuggle people and/or weapons.
• Using cargo to transport conventional,
• nuclear, chemical or biological
• weapons.

ExternalImpacts

• Loss of life and damage to property.
• Disruption to trade flows.
• Additional cost of transport due to
  additional security measures

People
Money

• Attacking the ship to provoke human
  casualties.
• Using the cover of seafarer identities to
• insert terrorist operatives.

• Using revenue from shipping to fund
  terrorist activities.
• Using ships to launder illicit funds for
  terrorist organisations.

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Maritime Security
Estimated ISPS Code Costings

• Maritime carrier companies
• Initial Cost (million USD) 1170.6
• Yearly Costs (million USD) 725.6
• Ships (requirements)
• Initial Cost (million USD) 757.4
  
• Yearly Costs (million USD) 4.3
  
• Ports
• Initial Cost (million USD) 55.8
• Yearly Costs (million USD) 1.6

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Maritime Security
Container Security Initiative

• Participants are expected to
• Establish security criteria to identify high-risk
  containers.
• Pre-screen those containers prior to arrival at
  US ports
• - Involving the deployment of American Customs
  staff in foreign ports.
• Develop and use of ICT enabled and secure
  containers

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Maritime Security
Customs-Trade Partnership Against Terrorism

• Participants are expected to
• Conduct a comprehensive self-assessment of supply
  chain security using the C-TPAT security
  guidelines jointly developed by U.S. Customs and
  the trade community.
• The guidelines encompass
• Procedural Security, Physical Security,
• Personnel Security, Education and Training,
• Access Controls, Manifest Procedures, and
• Conveyance Security

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Security Initiatives across Supply Chains
Composition
Decomposition
Buyer
Producer
Trans
Trans
Maritime
Customs (Port)
Customs (Port)
ISPS
CSI
C-TPAT
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Supply Chain Impacts Reduced Continuity

• An industrial dispute (late 2002) impacting 29 US
  West Coast ports involved gt 200 ships.
• A total of 300,000 containers remained unloaded
  and rail and other inter-modal shipments were
  delayed across large sections of the transport
  network.
• Resulting in filled warehouses, freezers and
  grain elevators on both sides of the Pacific
  Ocean, costly mid-ocean diversions of maritime
  traffic to other ports and businesses, laid-off
  workers and/or reduced production.
• Estimated loss from this disruption on Hong Kong,
  Malaysia and Singapore alone was estimated to be
  as high as 1.1 of nominal GDP.

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SCI Regional Economies
A 2001 EIS covering the St. Lawrence Seaway and
related waterways, ports and their inter-modal
connections, vessels, vehicles and system users
demonstrated the importance of an efficient
maritime trading system on regional
competitiveness.

• Up to 152,508 jobs are in some way related to the
  Seaway
• 192 million tonnes of cargo moving on the US side
  of the great lakes seaway system in the previous
  calendar year (2000)
• USD1.3 billion of purchases were made by firms
  providing transportation services and cargo
  handling services in the great lakes region
  (supporting approx. 26,757 indirect jobs)

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SCT - Economic Impacts - St. Lawrence Seaway

• USD3.4 billion of business revenues generated
  for firms providing transportation and cargo
  handling services - on the U.S. side of the great
  lakes seaway system (excluding the value of the
  commodities moved)
• The generation of USD1.3 billion in federal,
  state and local tax revenue (2000)
• USD1.3 billion spent on purchases for a range of
  service-related deliverables (i.e. diesel fuel,
  utilities, maintenance and repair services) by
  firms providing the cargo handling and
  transportation services.

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A Framework Systemic Organisational
Vulnerability
A systems approach to understanding incident
causation examines relationships between all
aspects of events and provides a means to look
more deeply at why the events occurred by
focusing on the interactions among system
components. Such an approach takes a broader
view of what went wrong with the systems
operation or organisation thus contributing to an
incident. The emphasis differs to that of
industrial/occupational safety models (unsafe
acts or conditions) and reliability engineering
emphasising failure events and the direct
relationships among these events.
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Systemic Organisational Vulnerability
Empirical Findings

• Crisis Prone organisations
• Cultural beliefs about invulnerability
• Non-existent or ineffective internal control
  mechanisms
• Senior managers not trained in decision making
  under crisis situations
• Contingency planning inadequate or non-existent
• Accidents in highly complex systems
• Cook slowly
• Occur suddenly
• Often Warning signs existed

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Systemic Organisational Vulnerability
Application of the Concept
Organisational Complexity

• Rigidity in thinking- Restricted expectation
  about contingencies and their consequences -
  Inflexibility in considering alternative options
  choices for mitigation
• Lack of Decision ReadinessKey decision makers
  not practiced in emergency decision making
• Information DistortionAttenuation and filtering
  of information to key decision makers

Smart C. Vertinsky, I. (1977)
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Network Complexity
Systemic Organisational Vulnerability
The Globalised Economy

• Transport Systems Road, Rail, Air, Maritime
• System of Systems Supply Chains

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Decision making in Crises (Assumptions)
Systemic Organisational Vulnerability
They will be impacted by the presence of
- Uncertainty / Ignorance
- High Decision Stakes
- Extreme Systems Complexity
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Systemic Organisational Vulnerability

Critical Infrastructure Protection

• Loss of interoperability interconnectivity
  (data, networks)
• Interdependency of Infrastructure
• Power supply (Generation transmission)
• Telecommunications (Soft hard)
• Transport systems (Road, rail, air, water)

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Vulnerability
A susceptibility to change or loss as a result of
existing functional or organisational or
practices or conditions.
Type 1 The operational complexity within a port
encompassing the transport node infrastructure
and onsite operators Type 2 An attribute of the
maritime movements themselves (with ports as
nodes of the system) and global logistics
management practices that underpin supply chains.
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A conceptual Frame
Type 1 and Type 2 Vulnerability
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Type 1 or Type 2 ? The Exxon Valdez
Contingency Planning

• The National Oil and Hazardous Substances
  Pollution Contingency Plan
• The Coast Guards Captain of the Port Prince
  William Sound Pollution Action Plan
• The Alaska Regional Oil and Hazardous Substances
  Pollution Contingency Plan
• The State of Alaskas Oil and Hazardous
  Substances Pollution Contingency Plan
• The Alyeska Pipeline Service Companys Oil Spill
  Contingency Plan for Prince William Sound
• The National Oil and Hazardous Substances
  Pollution Contingency Plan

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Assertion

• The current Mandated and voluntary Maritime
  Security initiatives are more suited to
  preventing marine vectored terrorism rather than
  resolving the consequences or improving the
  resilience of supply chains and port
  infrastructure and thus sustainability of trade.
• What is needed?

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Enhanced capacities for Crisis Recognition

• A robust Crisis Management capability and
  capacity includes skills
• Environmental Scanning
• (Detection of weak signals)
• Emergency Management Escalation Triggers
• (Incident or issue recognition) leading to rapid
  consequence analyses (in the context of high
  uncertainty)
• Crisis Management Decision-making Capacity
• (Separate to routine business decision making
  structures)

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Development of Crisis Management skill-sets

• A capability in applying foresight (via
  interdisciplinary teams) to issues that can limit
  achievement of organisational and business goals.
• Robust analytical and conceptual frameworks of
  security risk management and corporate governance
  appropriate to the functions and purpose of an
  organisation.
• Prevention - recognition systems for emerging
  crises
• Preparation - planning for the unknown
• Response - making effective decisions and having
  them implemented
• Recovery - restoring normality and learning.
• Both preventing and preparing for
  crisis-situations presumes a deep and effective
  understanding of the way in which the unknown
  factors and conditions can manifest.

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Other Management Options Strategies

• Additional corporate strategies would logically
  include ensuring transparency and trust amongst
  stakeholders, employees and especially
  government(s)
• The Secure Trade in the APEC Region (STAR)
  Initiative for example, seeks to strengthen
  maritime security against terrorism while
  boosting trade efficiency (including)
• implementation of the ISPS Code and encouraging
  implementation of common standards for electronic
  customs reporting
• common standards for the collection and
  transmission of advanced passenger information to
  prevent the fraudulent use of travel documents
• partnerships between government and business at
  the national and international level to mitigate
  terrorist or criminal threat throughout the
  supply and logistics chain.

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Issues for Research Inquiry.1

• Higher Order Issues
• How might the variable implementation of the CSI
  and C-TPAT program impact on global sourcing
  strategies in particular
• time-sensitive supply
• reliance on single-source or geographical
  location suppliers?
• Would more complete implementation of the CSI and
  C-TPAT programs separate countries unable to
  afford the cost of implementation from access to
  trade opportunities and thus affect the notion of
  the benign and equitable benefits of
  globalisation?

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Issues for Research Inquiry.2

• Analysis of the capacity for interactive
  complexity within critical infrastructure at hub
  ports - including interface zones
• Details of the nature and organisation of current
  security risk management functions and governance
  systems in place in a sample of hub ports
• Evaluation of the variation across high
  frequency low consequence and low frequency
  high consequence incident scales at major ports
  (thus facilitating a mapping of the Type 1 and
  Type 2 vulnerability)
• Appraisal of the potential impact of full
  integration of port and trade route crisis
  management capacities on maritime insurance
  premiums
• Identification and allocation of costs/benefits
  of the provision of crisis management capacities
  across industry/client stakeholders.

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Issues for Research Inquiry.3

• Critical Network Events
• Because of the cascading nature of these events,
  institutions within marine trading would be
  unlikely to face single incidents but rather
  systemic failures appearing concurrently.
• Unexpected convergence of factors impacting on
  human-systems can generate effect propagation via
  connectedness and interoperability of these same
  systems.

• How might interdependencies and linkages - across
  Type 1 Type 2 vulnerability generate
  tendencies to create or propagate major
  discontinuities within maritime trading systems?
  
• What forms of investigation or analyses would
  provide enhanced understanding that extends
  beyond the grasp of competent managerial
  authority?

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Closing thoughts
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