Maritime Business and Management - Homerville Ship - Case Study Example

MARITIME BUSINESS AND MANAGEMENT Name: Course: Date: 1. Third Party Ship Management Homerville Ship Management Ltd. Ship owners encounter cost pressures, crew management challenges and uncertainties in the global trade. This is the time to re-evaluate the need for maritime outsourcing. Ship owners must know what should be done in-house and what should be outsourced (Asuquo, Coward and Yang, 2014). Homerville Ship Management provides full ship management of vessels globally. We have a long history of exemplary management of all vessels, especially tankers, bulk Carriers, and container ships. Homerville Your Number One Choice in Ship Management Homerville Group of companies is a pioneer in the provision of third party ship management services. We offer integrated ship management services to the offshore and international shipping industries. Celebrating 50 years of third-party ship management services, Homerville Group of Companies symbolizes a unique combination of the best elements of a third party ship management company. With Homerville, you are guaranteed of optimal use of your vessel and the best returns. Our system is designed to cater for your precise needs. We don’t consider your one ship as too little or too small. We take the pain and risk to offer you perfect services in a personal, tailored manner. We believe that ship management is essentially a relationship business and we, therefore, aim at offering you the best services you could ever get in the global shipping industry. Your satisfaction is our priority. Your ship is a high-value asset to us. We know that efficient operation and optimizing the use of the asset is crucial. In shipping, time is money. Homerville’s exclusive system allows instant access to your ship’s performance data in a complete package, anywhere, anytime. With our great powerful system integration, our clients can have real-time feed of their vessels crew training, schedules, budgeting, and accounting. Transparency is a core value in all our activities and we pride ourselves in establishing and maintaining long-term relationships with our principals all over the world (Asuquo, Coward and Yang, 2014). Managing your ship is what we do best. We don’t pretend to offer what we cant. Rather, our assurance is that we endeavor to better in a culture of continuous improvement. Rest assured no hidden agendas or costs. Pursuant to our open door policy, we highly value all feedback and suggestions from our clients and staff and above all, we listen. We believe this is a rich source of motivation and improvement to our practices that enable us always to keep a step ahead of our rivals. We have a culture of encouraging cultural diversity in our offices. We believe this cultural diversity is our strength in offering a globalized package of services to you. Homerville, as a leading world third party ship management company, we are constantly in search of principals like you in order to work as a team in pursuit of mutual realization of goals. Managerial Responsibilities At Homerville, we offer a variety of levels of management services that are required to run you ship profitably. Our main levels of management services include Crewing, technical management, accounting, insurance and commercial management. Your company could accrue a lot of benefits from these services (International Maritime Organization, 2014). Crew Management Small ship owners face a lot of crewing challenges when the function is done in-house. Crew recruitment, training, and retention are among of the challenges in shipping industry. At Homerville, we will relive you the burden of crew management. We have a large pool of well-trained crew, and we allow you to tap this pool of expertise. Our crew have solid values of transparency that corresponds to the company’s core values. By contracting with us, your company transfers the risks and costs inherent to workforce management to us as crew are our employees and the complex issues of employment contracts, determination of pay levels and compliance with employment laws are our responsibilities. In addition, by taking it upon ourselves to hire, train and employ crew retention measures, we substantially reduce the cost to your company (Asuquo, Coward and Yang, 2014). Management fee that will agree in our contract with you is the most reasonable in the industry, and it is commensurate to the quality of services you will receive from us. Technical Management At Homerville, we offer full technical management to our clients. Our key technical management concern is to keep your ship running. In this we cover human, mechanical and system requirements. As a seasoned leader in the industry, we have far much stronger purchasing power than small fleet ship owners. We offer technical management services to all our client at the most economically feasible terms. In regard to technical management, we also help our clients to live up to terms with creditors in case of a ship acquired on credit. Creditors want to work with professional ship managers like Homerville because the ship still belongs to them until the credit is settled (Asuquo, Coward and Yang, 2014). Our specialized technical management services are focused to maintain the vessel at the best possible mechanical and system conditions. The regulatory environment is a major area affecting technical management issue. The core of the regulatory environment is the International Maritime Organization conventions (Asuquo, Coward and Yang, 2014).We also believe our clients this responsibility. Insurance There are many risks inherent to the nature of maritime business (International Maritime Organization, 2014). Other than the unavoidable sea disasters, maritime security is a major concern. Though countries and ship owners can employ different measures to enhance maritime security, the risks can only be controlled but cannot be eliminated. In this regard, the choice of insurance provider is a critical issue in the maritime industry. The technicality of maritime insurance process makes it prudent for small ship owners to outsource this service from the well-established ship management companies (International Maritime Organization, 2014). Homerville fits in this classification. As pioneers in offering third party ship management services, we have the expertise in the insurance industry. We guarantee our clients high-quality risk management services and insurance of their ships with the highest class insurance companies. This is both risk mitigating and cost saving to the small ship owning companies (Asuquo, Coward and Yang, 2014). Commercial Management The focus of any investment is income stream. The key is maximizing the employment of each vessel in our fleet and obtain the best freight rates. The shipping market is influenced by other market sectors and also the global economy. With a pool of the best expertise in commercial management, at Homerville we have the ability to study the market accurately and negotiate employment for the vessels at the best terms according to the prevailing market conditions, thus ensuring that our clients get the maximum returns on their investments (Waggoner, 2011). Accounting By contracting accounting services with Homerville, we allow you to focus on your companys core competencies. Your company will also save money, improve quality of work and free out resources. We pride ourselves in having a streamlined accounting function. We understand your needs and deliver it with due consistency, on time and within your budget. We optimize the talent and knowledge of our professionals across all our clients. The ultimate result is the provision of timely financial statements and reports that allow you to use your financial information as a tool for running your business more profitably. Under our management, costly errors are avoided, and relevant skill levels are applied when required. Your accounting is always a priority to us. Disadvantages of Third Party Ship Management The shipowner might desire to have control over their vessels. However, through contracting ship management services, control over the vessel is surrendered to the managing organization. In this regard, the shipowner might opt not to take on ship management services. In addition, subject to the management services agreed upon in the contract, the ship owner may lose contact with the market where the managing company assumes the role of commercial management. In this respect, conflict may arise between the owner and the third party ship manager on the preferred employment of the vessel yet contractual terms must be adhered to (Waggoner, 2011). In addition, contracting ship management services could mean that the shipowner has no control over the crew as the latter are employees of a third party ship management company. Lack of command over the crew may not be in the best interest of the vessel owner but again, the contractual terms must prevail (Waggoner, 2011). Each organization has its corporate culture which it regards as an important component of its business brand. Third party ship management organizations also have their distinct corporate cultures. The two sets of corporate cultures may not be compatible to each other, and this may not be not be appealing to the ship owner (Willingale, 1998). Word Count: 1405 2).Maritime Safety and Security Management Formal safety assessment (FSA): Deficiencies and recent developments at the International Maritime Organization (IMO) Much of maritime safety policy has been developed in the aftermath of accidents. Shipping industries have questioned the prudence of such an approach where maritime industry and the society have to wait until an accident happens in order to formulate new rules or suggest new ones. The need for a proactive approach to maritime safety has been widely argued time and again. Formal Safety Assessment (FSA) has been viewed as the prime scientific tool for creation and development of proactive safety regulation (Yang and Wang, 2008). To achieve the mentioned objectives, International Maritime Organization (IMOs) recommends a five-step approach consisting of: 1) Hazard Identification 2) Risk Assessment 3) Risk Control Options 4) Cost-Benefit Analysis Assessment 5) Recommendations for Decision-Making (Montweka, Goerlandant and Kujala, 2014). Although FSA is currently the best risk evaluation method IMO has, the method has some limitations inherent to its construction and application. In particular, there is the need for unification of the applied terminology, discussion on the development of risk models and how risk should be reported in FSA studies. The argument is that the Formal Safety Assessment (FSA) in its current form is presented as a highly technical and complex method and it can be misused thus giving results that may not fully reflect the important features of the analyzed system. To enable a more coherent presentation of what FSA expects from an analysis, it might be important to adopt a more systematic risk perception which integrates the various features of risk description. This could be useful in ensuring that all the relevant recommendations that are located in different chapters of the FSA guidelines are addressed at the applicable stages of risk analysis (Montweka, Goerlandant and Kujala, 2014). Another deficiency of FSA lies in the first step of the model (Hazard Identification). This step has two objectives: 1) To identify all potential hazardous situations that could result into significant consequences and, 2) To prioritize the identified potential hazardous situations by risk level. The first objective can be met through a combination of creative and analytical methods that focus to identify relevant hazards. The creative part (usually through brainstorming) is aimed at ensuring that the process is proactive, and it is not limited only to hazards that have occurred in the past. However, most Formal Safety Assessment (FSA) studies have been found to use historical data obtained from various casualty databases. While it can be understood that historical data if available can allow risk profiles to be constructed without the need of modeling scenarios, this usage has several setbacks. The most important setback, which IMO has also recognized, is that the entire idea of using historical data is not proactive and in this regard it cannot be used for new designs and cannot measure the impacts of a newly implemented risk control options, because it needs to wait until accidents occur to have adequate data (Kontovas and Psaraftis, 2009). The second disadvantage of using historical data relates to how casualty databases are structured, and the information contained therein. These databases are mostly useful for aggregate statistical analysis. However, they are less useful to draw conclusions about the actual cause of an accident and the chain of events connected to it. The chain of events may actually be a complicated task to ascertain since it could be the object of investigation of an accident that might take years to complete, and it might also be the result of a litigation process that could be equally as long. Using the casualty databases that contain incomplete or at times even wrong cause information might skew the subsequent analysis (Kontovas and Psaraftis, 2009). Another problem is that only those hazards that have been identified in step 1are reviewed for further steps, leaving unidentified hazards outside the analysis This could be fatal for the entire FSA study, therefore, analysts have to very careful to ensure this does not happen (Kontovas and Psaraftis, 2009). Another deficiency on the FSA lies in step 2(Risk Analysis).The aim of this step is detailed the investigation of the causes and consequences of the relevant scenarios identified in step 1, so that focus is on high-risk areas. The risk of a hazard identified in step 1 starts with an estimation of frequency (F). F=No of Casualties/Ship years. The consequences are quantified using the Potential Loss of Life Method (PLL), PLL=No .of Fatalities/ Ship years The problem with this step is the use of casualty historical data and frequencies. In addition, consequences will vary from human losses to shipping losses or environmental harm. There is, therefore, need of a common unit in this case, and the unit could be a monetary one. Further, in view of the potential drawbacks of quantification of risk as currently done, through the risk index approach, a qualitative approach(uses numbers but ranks risks in qualitatively) could be more reliable or less prone to problems than the current quantitative approach (Kontovas and Psaraftis, 2009). Step 3 (Risk Control Options) focuses on suggesting effective and practical Risk Control Options that involve four steps: 1) Focusing on risk areas that need control 2) Identification of possible risk control measures (RCMs) 3) Assessment of the effectiveness of the RCMs in reduction of risk by re-assessing step 2 and, 4) Grouping risk control measures (RCMs) into practical regulatory options. The deficiency of this step is its reliance on expert opinion in forecasting risk reduction. This approach is questionable. Further, giving numerical estimation of risk reduction using historical data is not proactive as required of FSA model (Kontovas and Psaraftis, 2009). Another problem with FSA lies in step 4(Cost Benefit Analysis). This is a crucial step, but also vulnerable under the logic that it involves too many assumptions on a numerous number of variables. This might render the step risk of wrong conclusions or at times manipulations if those assumptions are not rigorously justified. The purpose of cost-benefit analysis is to identify and compare the benefits and costs linked to the implementation of the risk control options (RCO) in step 3.A quantitative approach is used to approximate and compare cost effectiveness of each risk control option (RCO) in terms of cost per one unit of risk reduction. Assumptions might be made in the analysis, that may even appear to be made in order to arrive at a prior desired result on what risk control options to be suggested and what not(Kontovas and Psaraftis, 2009). Recent Developments on Formal Risk Assessment There have been some recent revisions of the FSA guidelines aimed at making it easy to manage the broad, complicated FSA studies. Other than these revisions, recent FSA studies within IMO have paid serious attention to the topic of environmental risk assessment criteria with focus on oil pollution. A major issue has been the definition and risk assessment criteria with respect to accidental releases to the environment and in particular releases of oil. There have also been submissions of different FSA studies for particular types of ships. These include Container vessels, LNG carriers, crude oil carriers, cruise ships and others (Kontovas and Psaraftis, 2009). Possible applications of FSA in maritime security given its growing impacts to safety at sea Formal Safety Assessment is already being applied in bulk carrier safety. The Maritime Safety Committee, which is the senior technical body of IMO, has agreed on a framework that sets out project objectives, scope and application which include: To inform IMOs future decision making concerning measures to enhance safety of bulk carriers. To apply Formal Safety Assessment method to the safety of dry bulk shipment and To obtain international cooperation and agreement (International Maritime Organization, 2014). International cooperation and agreement are particularly important in view of the surging problem of maritime insecurity particularly around the horn of Africa. This insecurity is an international concern as it threatens the commerce, peace and regional stability, and international trade and energy flows. In 2009, of the total cargo pirate attacks all over the world, 297 occurred in the Indian Ocean. In 2010, piracy attacks in the same region surged to 311.Most of these pirate attacks and hijackings off the horn of Africa occur particularly around Somalia in the Gulf of Aden. Somali Pirates at times expand their activities beyond Somalia and go as far as the south of the Mozambique Channel. The pirates often receive hefty ransoms to release captured ships and hostages. The cost of international piracy menace is estimated at US$5 to 7 billion exclusive of the additional costs related to naval operations and the lost revenue to countries from national and international trade. In this respect, there has been substantial progress toward ensuring that different countries contribute toward dealing with international piracy problem (Bichou, Szyliowic and Zamparini, 2013). Other possible applications include : use of FSA for granting exemptions or accepting equivalent solutions for particular vessels under the provisions of SOLAS by an individual administration ; for establishing the safety of a specific vessel and its operation in compliance with the compulsory requirements to the acceptance of the Flag Administration by a particular owner; and as a management tool to reinforce the identification and control of risk as component of the safety Management System in compliance with IMS code by and individual owner(Wang, 2001). Word Count: 1525 Bibliography Asuquo, M., Coward, I. and Yang, Z., 2014. Modeling selection of third-party ship management services. Case Studies on Transport Policy, 2(1), pp.28-35. Bichou, K., Szyliowicz, J. and Zamparini, L., 2014. Maritime Transport Security. Cheltenham: Edward Elgar Publishing. International Maritime Organization, 2014. IMO | Formal Safety Assessment. [online] Imo.org. Available at: http://www.imo.org/OurWork/Safety/SafetyTopics/Pages/FormalSafetyAssessment.aspx [Accessed 25 Nov. 2014]. Kontovas, C. and Psaraftis, H., 2009. Formal Safety Assessment: A critical Review. Marine Technology, 46(1), pp.45-49. Montewka, J., Goerlandt, F. and Kujala, P., 2014. On a systematic perspective on risk for formal safety assessment (FSA). Reliability Engineering & System Safety, 127, pp.77-85. Waggoner, J. (2011). Pros and Cons of Outsourcing Ship Management. 1st ed. HMS Global Maritime. Wang, J., 2001. The current status and future aspects in formal ship safety assessment. Safety Science, 38(1), pp.19-30. Willingale, M., 1998. Ship management. LLP. Yang, Z and Wang, J., 2008. Ship formal safety assessment: in `Maritime Safety, Security and Piracy (ed. Talley, W.K) Edition. Read More