Industry profile: risk transfer fallacies in shipping. (Global Perspectives)

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Author: Blair Basham
Date: Mar. 2002
From: Risk Management(Vol. 49, Issue 3)
Publisher: Sabinet Online
Document Type: Brief article; Column
Length: 712 words

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Acme Manufacturing makes widgets at its factories in Asia and sells them all over the world. To get the widgets from the factories to the stores, Acme contracts XYZ Movers. This makes Acme a shipper. XYZ Movers transports the widgets with its own ships or makes arrangements to have them moved. This makes XYZ a carrier. The risk manager's concern in this relationship is the legal contract that determines which party takes responsibility for the widgets while in transit.

If only it were so cut and dry.

Out in the real world, the transportation industry is in deep trouble. The global economy is sagging, freight rates are dropping sharply, sailing schedules are being trimmed and terrorist attacks are pushing up insurance premiums. Tighter security at seaports and airports is sure to cut the industry's profits, while inspections of vessels, cargoes and crews have intensified, threatening to increase delays.

These headlines may worry the world's major shippers, but the freight carriers are the ones stuck in the middle. As insurance companies raise rates and tack on war risk surcharges...

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Gale Document Number: GALE|A84156220