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risk and reward

Shipping company risks vol.3

If you've been following our risk blog series featuring the operational risks from just one company's annual report to shareholders, you'll know it's been a picture of doom and gloom. As we've already been discussing in the series through the first and second instalments, the number of risks in the shipping industry 'out of our control' is many. It's a scary thought when you actually start listing the various risks that come from stuff that we just cannot control.

The operational risks involved in this industry can range from marine disasters, war, accidents, human error, strikes, and even terrorism.

The list goes on: political situations, changes in tax rates and even poor weather could all potentially impact on shipping companies with very little warning or immediate solution.

Political and terrorist attacks, such as the large-scale attacks we have seen in the past 10 or 12 years, cause inevitable financial uncertainty within global markets, and therefore can have a distinct knock-on effect to the shipping industry. This can lead to economic instability, and can affect shipping companies obtaining any additional financing that they may require.

In some areas, such as the Middle East, political conflict has resulted in attacks on vessels, or attempts to upset the international shipping industry. All of this adds up to increasing insurance premiums, and some countries' government regulations could prevent certain business activity from progressing with other nations depending on any terrorist activities that may have taken place.

These factors can add up to a loss of earnings, and possibly even the requisition of vessels – one of the harshest blows when it comes to risk. If you're thinking "ouch" then you're not alone!

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