Managing Global Shipping Risks Presented by Greg J. Kritz, CIC Vice President SCTIC May 27, USA England Ireland China Singapore UAE Germany

How Does One Manage Risk?

Follow a 4 Step Risk Management Process 1. Identify the Potential Problems

2. Analyze the Size of the Potential Problem * Probability * Maximum Financial Exposure * Frequency

3. Control the Risk *Avoid It *Prevent It *Reduce It U.S. Cargo Losses Exceed $18 Billion Annual Impact on U.S Economy

4. Finance the Risk [how you’ll pay for bad stuff when it happens to you] * Transfer the risk to an Insurance Company * Retain the risk [self-insure]

Examples of Today’s Shipping Risks Cyclones Delay Product Recall Non-payment Earthquakes Inclement Weather Tariff Retaliation Currency Valuation Cargo Theft Regulatory Seizure Environmental Hurricane/Monsoon Political (Nationalization) Extremes in Temperature

5 Commonly Overlooked Supply Chain Risks

Knowing The Total Aggregate Financial Exposure at Any One Place At Any One Time

3 rd Party Limited Liability Not Knowing Whose Responsible for What and Where.

Ocean Carrier/NVOCC Subject to terms of Carriage Of Goods by Sea Act (COGSA) $500 per Customary Shipping Unit as described on OBL Unit can be the container, a pallet, a crate, carton

International Air & Indirect Air Carriers Subject to terms of the “Warsaw Convention” $9.07 pound/$20 Kilo or 17 SDR Kilo if Montreal Protocol ($25 kilo)

Distribution Centers & 3PL Facilities Warehouseman’s Terms & Conditions Rule Unless Changed by Contract Liability Typically a multiple of base rate 3PL’s and Forwarding Operations Often Limit Liability on Warehouse Receipts Reasonable Care Standard Applies

Loss of Profit & Business Income Freight is insured for only landed cost

LOSS of BUSINESS INCOME : IMPORTERS NIGHTMARE A Property Insurance Policy Doesn’t Cover Loss of Business Income for Cargo Claims What if these were Yours’ at Peak Season? $30M

Haphazard Entry Into Logistic and Carrier Contracts

Clearly Defined Control & Security Procedures at Each & Every Link in The Supply Chain

CARGO CRIME SOARING Theft & Unexplained Shortages (shrinkage/Leakage) 4 Easy Ways to Access An Ocean Container Without Leaving a Trace

30% of Cargo Losses NOT Preventable

273 Hurricanes Hit USA Were Major Category 3,4 & 5

Thank You For Letting Me Be With You Today !