TT Talk - Planning ahead for the seasonal blow
The traditional assertion that storm events are unexpected and their consequence unavoidable may no longer be simple to establish. Planning from the outset is as critical as planning for the emergency.
The fact that more rain fell on a particular day than any other in recorded history is no guarantee of defence if a claimant can demonstrate deficiencies in your operational risk assessment or inadequacies in the steps you took in advance of the weather event.
Information is the lifeblood of business and records of sound processes - from risk assessment through to implementation of procedures - will form part of the evidence in defending any claim made against you, either in its entirety or at least reducing the exposure.
Whilst the focus here is primarily on port and terminal property risks, the principles considered are applicable to a variety of exposures through the supply chain. The risk of storm surge related flooding in many locations, especially around port areas, comprises a significant concern. Prudent operators conduct risk assessments and consider what their exposure would theoretically be in the event of a flood, thus allowing risk appetite and mitigation strategies to be established.
Thorough risk assessments at the time of constructing a facility - or leasing it - need to be available. This could include the sufficiency of flood defences or of drainage for the square footage of roof span (in the case of warehousing) or yard apron. It is not safe to assume that the landlord retains responsibility for maintenance and providing a facility fit for purpose. Such matters will usually be covered in the lease contract, though in many instances, the ultimate responsibility is placed on the operator and not the landlord. Regardless, the operator needs to be satisfied that the risks are understood in relation to the intended operation.
Furthermore, operators need to consider the impact of any change of use of the facility, such as storage of more sensitive cargo. There may be a need to revisit risk assessments, document the findings and, where necessary, enter into dialogue with the landlord in an attempt to address any new or emerging risk exposures.
No party - landlord, operator or customer - will necessarily be comfortable with the consequences of a storm event, but enhanced clarity and certainty will go a long way to retaining good business relationships in the long term. On the basis of experience, TT Club urges all facilities globally - ports, terminals and warehouses - to establish sound practice systems, procedures and equipment to withstand severe storms.
Specific to the marine port environment, there are two leading issues for management to consider - quay cranes being blown over or along the berth and ships at the berth breaking mooring lines and causing damage.
Wind damage due to cranes being blown over or along the rails accounts for about one fifth of the total cost of weather related insurance claims in ports and terminals globally, according to the TT Club's experience.
Mooring lines for berthed ships parting during storms can cause significant damage to ships, the berth infrastructure and cranes. TT Club's statistics indicate that this type of incident accounts for 13% of the cost of weather caused claims.
So, every port should have documented plans and procedures. Most have contingency procedures to prevent berthing or de-berthing when wind speeds are above a certain critical speed, set in accordance with local conditions. All ports should, however, additionally have specific plans in case more severe wind speeds are to be experienced. In such conditions, it is advised that all ships should be de-berthed and sent out of the port before the wind gets too severe to prevent such mitigation.
In summary, all physical supply chain operations will be exposed during severe weather conditions. Stakeholders should work together to establish contingency plans and implement appropriate systems, procedures and equipment to withstand storm risks. The TT Club's risk management handbook 'Windstorm II: Practical risk management guidance for marine & inland terminals' is a recommended starting point.
We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you.
Risk Management Director, TT Club