We're slicing through this blog series on shipping risks! As you’ll know from our previous entries 1, 2 and 3, these blogs are based on a major shipping companys annual report. It's scary stuff…
When it comes to shipping, there are so many risks involved that it's a wonder anybody chooses to invest in this industry at all. Put this list of stuff you already know in the context in which we read it – 7 pages of risks to which the company was alerting its shareholders it is exposed to!
Volatility in the international shipping and offshore markets hit cashflow and are often the reason why chartering customers are unable to pay charterhire; which we know is extremely damaging.
The companies depend on directors who are "associated with affiliated companies, which may create conflicts of interest"; another risk that makes one wonder what the positives are in this risk-filled world… or indeed whether the company concerned chose the right directors in the first place! (You know who to call…) Associated companies' business activities may conflict with the shipping company… and then what follows is a legal headache.
Shipping company shareholders are also expected to rely on the shipping company to enforce their rights against any contract counterparties.
These annual reports are definitely not good bedtime reading for shareholders. We wonder if they hide behind the sofa when this comes through the post, or at the very least read it with a double whisky nearby. Either way and while we understand that companies must cover their liability backs, it seems to us that a seven page list of the reasons not to invest in shipping is hardly an attractive thing to send to investors. Perhaps a little less worry about litigation and a little more common sense is in order?!