Risk Mitigation
What is Risk Mitigation?
Risk mitigation refers to the process of identifying, assessing, and prioritizing risks, followed by the application of resources to minimize, control, or eliminate the impact of those risks on an organization. The goal of risk mitigation is to reduce the probability of a risk event occurring and to minimize negative consequences if it does occur.
Background on Risk in the Maritime Ecosystem
The global shipping risk landscape has been transformed in recent years by the Russia-Ukraine war and accompanying sanctions, extreme weather events, the Houthi disruptions, and much more. The modern landscape requires advanced risk management features and configurable parameters for trade resiliency.
Russia, the most sanctioned country, has posed unprecedented challenges since invading Ukraine. Increased vessel transactions, front organizations, and the emergence of dark and gray fleets are strategies to mainly bypass sanctions on crude oil and gas products. But these evasion techniques can also be used for other illicit activities, such as sarms, narcotics, and human trafficking
Iranian and Houthi attacks, U.S. sanctions on Venezuela, and other threats underscore the need for proactive risk management to protect your reputation and stay ahead of evolving risks. Effective risk management helps identify maritime anomalies, strategize better, and seize business opportunities (without false positives).
Bad actors are increasingly agile and sophisticated in their deceptive shipping practices (DSPs). The challenge is to adopt a dynamic approach to risk management that quickly identifies, defines, monitors, and responds to new risks.
What are the Major Risks Affecting Stakeholders in the Maritime Ecosystem?
Risk management impacts many major stakeholders within the supply chain and maritime ecosystems, encompassing various sectors with their specific workflows. Itis no longer a luxury but a necessity, crucial for maintaining the integrity and continuity of maritime and supply chain operations.
As explained in Windward’s recent eBook on risk management, here are some of the major risks affecting stakeholders in the maritime ecosystem:
1. Sanctions compliance risk: refers to the threat of violating sanctions regulations, which can significantly harm an organization’s reputation and business operations.
- Pre-fixture screening: know your business partners by using Maritime AI™ technology for sanctions screening, trade compliance, and case escalation prioritization.
- Post-fixture monitoring: utilize advanced fleet visibility and proactive risk management to monitor active deals and contracts, generating lists of vessels of interest and real-time alerts for potential threats.
- Container tracking: maintain visibility and insights to build new compliance procedures and ensure compliance with regulations, especially those from the EU against Russia.
- Bunkering: implement comprehensive due diligence processes to avoid enabling sanctions evasion and price cap breaches.
2. Financial risk: maritime trade involves ensuring transparency, compliance, and timely execution to manage financial exposures effectively.
- Pre-trade verification: verify voyage details and bill of lading, assessing risk associated with vessels and cargo before executing trades.
- Audit trail: maintain a detailed log of actions and decisions for compliance and review purposes, ensuring traceability and alignment with global trade standards.
- Post-trade monitoring: continuously monitor for deviations and emerging risks, track container milestones, predict arrival times, and monitor vessel movements.
3. Safety risk: includes operational risks associated with marine insurance and marine assurance, that impact the safety and reliability of maritime operations.
- Marine insurance: insurers assess vessel quality and company reputation to determine risks, influencing premiums and coverage scope.
- Marine assurance: energy and mining companies conduct detailed inspections to assess vessel safety and compliance on a per-voyage basis, ensuring continuous evaluation and adaptation.
4. Security risk: encompasses threats to national borders, critical infrastructure, and maritime security, influenced by geopolitical disruptions and illegal activities.
- Geopolitical disruptions: develop new risk assessments to account for local tensions and violence, and adapt to changing geopolitical realities.
- Smuggling: identify and investigate potential smuggling attempts by analyzing maritime entities and deploying resources strategically.
- IUU fishing: monitor and track vessels flagged for illegal, unreported, and unregulated fishing, defending territorial waters from encroachment and exploitation.
- Critical infrastructure protection: analyze and track vessel behavior near vital assets, such as communication and energy infrastructure, to identify potential threats.
How Does Windward’s Organization Defined Risk (ODR) Approach Enhance Risk Mitigation?
Different organizations have different goals and priorities so they require different risk insights and thresholds.
Organizations looking to be proactive in their risk management approach must find agile solutions that will provide them with the autonomy to define their own risk profiles and enable alignment to growing and evolving risk needs. For certain official agencies, particularly in the security and intelligence spaces, risks are defined differently depending on the specific geographic area of interest. Risk profiles are local in nature, and are not always aligned with risk exposure on a global scale.
Windward’s Organization Defined Risk (ODR) is the first fully configurable risk type. It is defined independently by an organization according to its needs and is applied across both dynamic (behavioral) and static (list screening) data sets.
Windward’s ODR approach allows organizations to customize risk parameters specific to their needs and scenarios. This tailored approach ensures that risk assessments are accurate and relevant to the organization’s operational context. By integrating behavioral and intersectional indicators, organizations can make more informed decisions, improving their ability to mitigate risks effectively.
