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Protecting maritime from drifting into a reputational crisis

How to manage reputational risk in the maritime sector?

Marine
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By Simon Lockwood and Peter Yates | June 10, 2021

Reputational risks in the maritime sector are on the rise due to political and public drive for greater transparency.

Shipowners have made considerable efforts to cast greater light on their industry’s vital role as the primary movers of world trade. However, recent global press has positioned shipping in a less than positive light with those who would otherwise not give it a second thought.

Dedicated efforts to support a vibrant global economy have been reinforced by emission-reduction initiatives elevated in the recent April virtual climate summit hosted by the US, helping to ensure the maritime industry is seen as an active participant in the fight against global warming. The industry is undergoing a rebranding, of sorts.

Reputational risks in the maritime sector are rising – fuelled by both a political and public drive for greater transparency, the latter with ever more access, influence and modern communication tools at their disposal.

As recent events in the Suez Canal have shown, companies whose reputations are damaged by an event are not always responsible.

While corporate reputations are by necessity built in the public spotlight, they can also be dismantled there. As recent events in the Suez Canal have shown, companies whose reputations are damaged by an event are not always responsible for it, but may be asked to bear the ensuing reputational damage.

Industry in general – and maritime is no different - is increasingly seeing corporate reputations as valuable intangible assets which are a significant part of the stakeholder value promoted by companies. For many, protecting those reputations is a strategic business decision driven by their fiduciary responsibilities to public shareholders.

The complex nature of shipping and the myriad counterparties involved increase the likelihood of reputational challenge to those that have invested the most developing the strongest brand – or those who are perceived to have the deepest pockets.

Environmental and pollution risk have the potential to demonise the shipping industry the most. The sight of oil covered sea birds, washed ashore, is an enduring image for the public and can wipe millions - if not billions - from the value of a company overnight.

It was widely reported that during COVID-19, some 200,000 seafarers were trapped at sea.

Reputation could also be directly impacted by a ship’s crew on many levels - from crew negligence leading to a high profile incident, through to the mismanagement and/or mistreatment of crews. It was widely reported that during COVID-19, some 200,000 seafarers were trapped at sea; so while crew changeover wasn’t permitted by some countries due to the pandemic, the reputational risk fell to the shipowner.

The Neptune Declaration Seafarer Wellbeing and Crew Change, established by the Global Maritime Forum and the IMO has over 800 signatories from across the industry, highlighting a shared responsibility and increasing commitment within the sector to resolve the crew change crisis.

In the marine sector, reputational risk insurance products have predominantly targeted the more consumer sensitive segments, such as the passenger vessel operating sector. Unlike “silent commodities” such as consumer goods, energy products and foodstuffs, ships’ passengers have the consumer power to ensure operators live up to their hard-won reputations for quality and safety; in the age of social media, they are also increasingly vocal when shipping lines don’t.

In response to the many challenges to reputation across all industries, Willis Towers Watson has developed its Reputational Crisis Insurance (RCI) solution, providing financial indemnity for specific costs and expenses arising from a ‘named peril’ identified in the policy, and helping recover the costs associated with business interruption, crisis consultancy and significantly - the rehabilitation of the brand.

In the maritime industry it is the world’s cruise lines that have long understood the value of image – their brands are the symbols of luxury, quality and safety, until crises conspire to change public perceptions and damage profit.

With the modern shipping industry committed to greater transparency and lower carbon footprints, even commodity-carrier brands are destined to become more and more associated with service dependability and environmental stewardship.

So, what strategies can be adopted to manage reputational risk?

There are three core areas for shipping company’s boards to consider when safeguarding intangible assets and building reputation resilience:

  1. 01

    Understand interconnected risks

    Are shipowners and their board understanding where there’s interconnectivity of risks? Reputational risk is central to many risk issues such as digitalisation, sustainability and decarbonisation. Are your leaders, information security, marketing and communications and ESG (Environmental, Social and Governance) teams interlinking their conversations? Reputational risk does not only rest with your CEO and CFO.

  2. 02

    Plan, partner and communicate

    Articulate an ESG plan that satisfies you as leaders and your employees' morals, values and standards, as well as your investors and industry regulators. Reinforce the importance of HSSEQ (Health, Safety, Security, Environment and Quality) awareness and safety culture with your employees. Commit to the Neptune Declaration. Protect your people. Communicate well all you are doing externally.

  3. 03

    Test and adapt

    Seek help to identify your risk appetite, total cost of risk, risk retention levels, and mitigating actions for your retained intangible risks from your broker. As a board, call in an independent facilitator to model and stress test the scenarios with you. Ask your insurance broker to help with claims defensibility and identifying your liabilities and geopolitical threats. Outcomes of insurer surveys can help inform your enterprise level business continuity and crisis contingency plans, even for reputational risk.

For further details on protecting reputational and intangible assets within the maritime industry please contact Simon Lockwood.

Authors


Sales Leader, Global Marine, GB

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