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Geopolitics at sea: Navigating threats to the marine industry

Marine
Geopolitical Risk

By Lucy Stanbrough | January 22, 2020

The lenses through which geopolitical risk can be viewed apply to almost every area, and the marine industry is no exception. But how do these risks manifest themselves and how can they be mitigated?

The Qatar blockade is now in its third year and there has been a high-profile attack on the Saudi oil fields. Both these events, and numerous others, have kept the world’s focus on the Middle East, but there are less high profile opportunists lurking in the shadows. In particular, the risk of piracy, driven by social and economic issues and straddling both land and sea, is a quiet but significant geopolitical risk.

Understanding piracy

At its most basic level, piracy begins on land, where criminals need safe havens and markets to sell goods. These markets operate best in failed or poorly governed states, and in coming decades, conflict, poor economic development and climate change may lead to an increase in piracy. With 90% of the world’s trade relying on sea transport and the facilities that enable it, more conventional piracy remains an issue.

These attackers are often aggressive, and crews may be held hostage or kidnapped, while the attackers steal any goods deemed valuable. This means that the effects of piracy accrue swiftly as they filter down the supply chain. One research study put the annual global cost of piracy at $24.5 billion, and noted that Somali piracy increased shipping costs by 8%-12% through rerouting fuel expenses.

Such trends and patterns are only as good as the data that informs them, hence the International Maritime Bureau (IMB) strongly urges all shipmasters and owners to report all actual and suspected incidents. The more data available, the better the ability to build metrics and models. If your supply chain involves maritime transport, then this database will be of interest to inform scenario planning.

Kidnap for ransom on the rise

In the first nine months of 2019, there were 119 incidents of piracy and armed robbery against ships that were reported to the IMB Reporting Centre. Particularly high risks were noted in the Gulf of Guinea, which accounts for 86% of crews taken hostage and nearly 82% of crew kidnappings globally. This has been driven by a shift in tactics from theft of crude oil, due to falling market prices, to kidnapping crews for ransom.

There has been similarly disquieting news from the Singapore Straits, where there has been an increase in incidents while ships are underway, with 15 in 2019 compared to seven in 2018. There were also five incidents on ships anchored off Bandar Penawar in Malaysia, compared to none last year.

Mitigation and response

The challenge for ship owners mitigation and response. Piracy deterrents include forming convoys, keeping an active watch on the horizon, outrunning them and physical barriers. Technology and research are increasingly allowing these risks and drivers to be articulated and managed. By employing lenses to identify and understand the relationships between geopolitical drivers, it is possible to bring potential futures to life, enabling the creation of interlinked solutions to interconnected problems.

Combining these lenses, here are three potential futures to consider when building resilience to piracy:

  1. 01

    Designing for safety and performance: people risk and cyber resilience lenses

    A visible lookout is recognized as one of the most effective methods of ship protection. The pathway toward autonomous vessels will make design choices increasingly important, especially with vessels being streamlined for efficiency to help meet environmental concerns and regulations.

    On the positive side, without crew onboard the potential for kidnap and ransom reduces, but this will put increasing importance on the physical security of the digital control room and the ability of systems to respond to malicious cyber and physical actors. Automation and security will also create new, different jobs, requiring higher skills and a redefinition of the role of personnel on board and ashore.

  2. 02

    Navigating risks and opportunities: climate and environmental and business resilience lenses

    As new waters open up the Polar Silk Road with retreating sea ice from global climate change, this could reduce travel time and increase security for Chinese businesses, but will also increase the requirement for monitoring. Digitalization, combined with developments in NewSpace – where constellations of satellites will provide near real-time geo-observation – could meet monitoring needs by finding patterns in activity and directing local resources.

    UK Satellite Applications Catapult has already developed a prototype, combining freely available satellite data with cross‐country vessel datasets to combat illegal fishing. This could be augmented to factor in piracy risks, offering insights that could improve the decision making process.

  3. 03

    Mapping global supply chains: investment and return and business resilience lenses

    The emergence of blockchain and smart contracts solutions, enabled by the Internet of Things, artificial intelligence and connectivity, will bring new opportunities to dynamically map the flow of goods through the system and enable new ways of reacting to geopolitical risk disruptions.

    Ports and airports are closely linked and goods often flow from one to the other across the world. Smart contract triggers could be used to take action throughout the supply chain as risk appetite thresholds are reached, factoring in potential routes and countries' trade and financial relationships to reduce exposure as banks or governments change policy.

There is no shortage of change happening in the geopolitical risk space, but as the marine industry builds out its future, ship owners and the industries and infrastructure that rely on them have an opportunity to understand, adapt and plot a strong course that will enable them meet tomorrow’s challenges head on.

Author

Lucy Stanbrough
MSc, BSc
Research Manager
Willis Towers Watson Research Network

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