Wednesday, July 15, 2020

What Preventative Measures Can Ports Put in Place to Protect Against a Variety of Disruptive Events?

Consultancy Considers Dangers Which Can Affect Any Type of Business
Shipping News Feature

WORLDWIDE – GHD, a business started in the 1920's in Australia and which has grown to include multiple sectors in its consultancy portfolio, has taken a look at how recent disruptive events have impacted the port sector. Unusually in these extraordinary times this is not just focused on the current pandemic.

In a piece constructed by two of the group’s advisors, Matt East and Keith Brown, it points out two of the most serious recent interruptions to trade, both of which have received much coverage in these pages and elsewhere, and which should awaken stakeholders to the realities of what can happen with absolutely no prior warning.

The roll out of a new terminal system at Britain’s senior port, Felixstowe, saw the operator, Hutchison Ports, fitting tried and tested technology which had been successfully introduced in its similar operations around the world. The GHD report is generous, saying that teething problems with the nGen port operating system lasted a month. In fact from June 2018 right through to October of that year at least, delays to trucks and containers continued.

The other incident was not only more major, both in financial cost and scope, but also arose due to outside influences which any business could find itself vulnerable to. This was the NotPetya virus which attacked Maersk Line technology and caused the biggest box shipper in the world to replace all of its computer terminals and servers at a reported cost of some $300 million.

As with the current Covid-19 crisis that cyber-attack saw competitors jump in to help mitigate the problems with rival line MSC offering all assistance it could. What happened to Maersk could happen as easily to others. So what are the threats which the modern port faces? GHD lists the obvious thus:

  • Extreme weather events and climate change
  • Economic disruption and market turbulence
  • System failures and disruptive technological advances
  • Ageing assets
  • Strikes and similar actions
  • Civil emergencies
  • Compliance failures
  • Pandemic and terrorism threats
  • Supply chain failures

GHD concludes that the answer to mitigating these collective threats is for the reformation of ports from the traditional land/sea interfaces they have always been to providers of complete logistics networks.

So, what can actually be done to mitigate against unseen and unexpected threats? As with Covid-19 those who take rapid and decisive action will fare best, although the real winners will be the ones who plan properly and have the foresight to be ready for whatever is coming down the track. Without effective risk management and business continuity procedures, the disruptions or shutdowns resulting from such events, and in turn the negative impacts these have, can potentially cause both significant short and long-term financial and reputational damage to the broader business. The outcome could also expose the Board and management team to legal action and possible prosecution.

The simple ‘plan, do, check, act’ approach to contingency planning is a universal concept that has been successfully applied around the globe but, like any system, it has to be managed and maintained. The first step to developing an effective contingency plan is to assess the existing business operations to identify the inputs, decision points, processes, information and connections that produce the outputs and outcomes.

In many cases, system weaknesses stem from gaps or discontinuities within these areas. Another common problem is having a hierarchy structure in place that does not operate effectively during disruption, for instance, one that doesn’t allow for those rapid decisions that need to be made in order to achieve an effective outcome.

GHD proposes an initial four steps, or ‘levers’, which ports can take to begin a policy of contingency planning. These steps however are equally applicable to any business wishing to future proof against the variety of harmful events which can occur.

  • LEVER 1 Define direction, authority, values and business goals to drive the development and implementation of a Business Continuity Plan that addresses unplanned events which disrupt business
  • LEVER 2 Undertake a business impact analysis with a focus on risks that could cause long-term harm, have financial implications or reputational damage. Consider effort to mitigate against effort to manage
  • LEVER 3 Develop a recovery strategy that leverages already defined risks and identify processes to be followed to return business to normal operations
  • LEVER 4 Develop a process to simulate, test and monitor the effectiveness of the proposed contingency plan, modifying the plan as appropriate

Importantly the contingency plan should aim to identify a process that can be followed to manage a return to normal operations, rather than identifying individual mitigations to known operational risks. This process should include the identification of:

  • Who has been delegated what authority ?
  • The ‘criticality ranking’ of each business operation so that priorities can be established
  • The stakeholders who need to be contacted
  • The responsibilities of individual departments across the business

The system must incorporate a testing and monitoring process that can identify the effectiveness of the continuity strategy, which may include a mock run-through of an emergency event. A mock test is particularly important, given that some of the scenarios being planned for may only occur once within a lifetime. However, one must be confident that the intended response will be effective and achieve the goals targeted.

In many examples, it is more beneficial to take preventative steps to avoid loss of business operations than to take corrective steps following failure. It will depend on the nature of the failures and the extent of the impact, with a balance between the ongoing cost of prevention and what might be the one-off cost of recovery.

Having a well-defined strategy in place will enable the business to proactively respond to a disruptive event. The strategy will also provide confidence to clients and the local community the business serves that there is a coordinated and tested approach, which will minimise the length of the disruption and its impact during and after an unforeseen event.

The GHD report was written by Matt East, Senior Advisor, Logistics and Infrastructure Policy for the UK, Europe & Middle East, and Keith Brown, Executive Advisor, Asset Management.