RISK ASSESSMENT AND

LOSS PREVENTION

S.K.Aneja Advisor (Training &

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 Risk Assessment & Loss Prevention - 1

• A risk is a chance of something going wrong.

• Risk is the uncertainty or lack of knowledge
concerning the outcome of events. The two
basic components of risk are Frequency of
occurrence & severity of consequence. If either
of them is zero, the risk is zero !
• Risks are of two types- Static & Dynamic.
• Static Risks are pure risks where the possibility
is of a loss or no loss.
Conti…
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• Dynamic risks on the other hand are more speculative is

nature, where there can be a loss, or even a profile ! A
typical example would be that of a Shipowner time
chartering his vessel out rather than operating her
himself.
• RISK: Lack of knowledge regarding the outcome of
events. Risk is the combined effect of portability of an
undesirable event and the severity of the consequence.
• HAZARD: A condition that increase the probability or the
severity of the risk exposure. It is a act of conditions in the
operation of a process or a system, which have the
potential for initiating events that could result in accidents.

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The Process of Risk

RISK
ANALYSIS
(Planning)

RISK ORGANIZATIONAL RISK

TREATMENT
CONTROL GOALS
(controlling) (Implementing)

RISK
FINANCING
(Motivating)

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 Risk Assessment & Loss Prevention - 4

• RISK ANALYSIS: is the process of evaluating risks

in order to ascertain their potential cause injury to
persons, damage to properly, un-budgeted
expenses and loss of profits to an organization.
RISK ANALYSIS

HAZARD RISK
IDENTIFICATION ASSESSMENT

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What is Risk Management?

RAHU (Lack of Quality)
DEFECTIVE Disability of Death of personnel FAULTY
DESIGN personnel INSTALLATION
Legal Liability Damage to Own
Property
A “HORROR-SCOPE”
Contractual Liability Damage to Others
Property
INADEQUATE Loss of Tangible Loss of IMPROPER
MAINTENANCE Profile Intangibles OPERATIONS

* KETU ( Lack of Safety)

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RISK

RISK RISK
AVOIDANCE ACCEPTANCE

Risk Assessment and the remedy of the risks identified in this

exercise, through Loss Prevention is called Risk Management

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• Risk Management is the means of increasing the chances of

successful action in the face of uncertainty by analyzing and
improving available information.
• RISK PERCEPTION: is the manner in which an organization
perceives the risk exposure vis-à-vis its Vision and its
resources. If the risk exposure does not meet the criteria, it is
avoided, or else, it is accepted.
• The exercise is to ensure that threats are reduced to
acceptable limits and benefits outweigh the risks.
• Then, the best Risk Management would be to shut up shop
and down shutters I If one does not do anything, nothing can
go wrong?
• If we believed in this dogma, we would not be present here
today!
S.K.Aneja Advisor (Training &
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 Risk Assessment & Loss Prevention - 8
• To manage risk one must first assess the risks. The tools of Risk Assessment are:
• What can go wrong? Hazard Identifications
• How often can it go wrong? Estimated Frequency
• How bad will the outcome be? Consequence
• So What- who cares ! Risk Assessment
Risk management is the systematic way of processing human, material and natural
resources against loses, so that the commercial goals of the shipping Company can
be achieved, despite the constant risk of losses due to hazards and perils, that
cause marine casualties and consequential losses.

RISK ANALYSIS

RISK REDUCTION RISK TRANSFER

RISK
RETENTION
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• It must be clearly understood the Risk Management is

not Insurance, although Insurance does often from part
of an effective Risk Management programme.
• Risk Management is the identification and possible
preventive action against the unknown incidents. One
can never alleviate risk completely, the aim being to
control risk to manageable levels at a reasonable cost.
• RISK TREATMENT: In order to make the accepted
risks as benign as possible, risks require to be “treated”.
This is achieved either by “reducing” the risk, or by
“transferring” the risks. Those risk which cannot be
reduced or transferred, have to be necessarily retained.
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• What is Loss Prevention?
Loss Prevention is the efficient exercise of Risk Identification, Risk Assessment
and then Risk Management.
The Process of Risk

RISK

REVIEW OF RISK RISK MANAGEMENT

Whether this is carried out by

• Adequate available equipment
• Skilled and motivated manpower
• Additional specialized Training ashore/ onboard/ on the job
• Or a stroke of luck!
We have some control over the first three.
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• Loss Prevention is a necessary expense incurred

continuously to reduce the possibility of uncontrolled
incidents which could cause serious damage to life,
environment & properly, which may even result into a
catastrophe ! RISK
ANALYSIS
(Vision)

RISK ORGANIZATIONAL RISK

TREATMENT
CONTROL GOALS
(Learning) (Mission)

RISK FINANCING
(Empowerment)

S.K.Aneja Advisor (Training &

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• Risk Management in Shipmanagement

• Shipmanagement being a service, faces the maximum

uncertainties. Whether it is weather, personnel, faulty
equipment, latent defects, other vessel(s), act of
governments, ports or other such bodies, the brunt of
the pressure comes on the Shipmanager.

• Risk Management is essential for every Shipmanager at

all levels of management. A dynamic is required by the
Shipmanager, as targets achieved are water under the
bridge, in an ever evolving trading scenario.
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• With ever increasing focus on the bottom line, in these lean times, the financial
implications of risk are paramount. Coasts must be controlled and contained
within tolerable limits and at proportionate cost. The cost of risk management
must continuously be compared to savings or damages.
• The various risks faced by the Shipmanagement can be broadly divided into
the following:
1. Vessel / Fleet : These risks would include injury to personnel, sickness,
damage to vessel or to shore installations, damage to the environment,
damage to other fixed or floating objects including vessels, detention by
governmental authorities, stowaways, piracy, etc..
2. Professional: This risk is primarily based on the professional capability of the
various used by the Shipmanager to render services to the vessel/ fleet.
3. Strategic: The Shipmanagement is at dynamic risk as to where he has placed
himself in the Shipmanagement market. This may include takeovers but at the
same time may also attract more shipowners.
4. Corporate: This risk in exposure which the Shipmanager bears to the market
on behalf of his Shipowners in way of Criminal & Civil liability.
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• At the outset each risk has to be meticulously identified and

documented. The next step is to analyze the risk and identify
whether the risk can be borne by the Shipmanagement or
transferred to another entity and at what cost. Then a Cost
benefit analysis needs to be carried out to confirm that gains
are more than the additional expenses. Finally, the market
must also have sufficient elasticity to bear these expenses.
• If at all the corrective action is taken to alleviate or reduce a
risk then the action must confirm that the risk has infact
reduced and not given birth to another risk.
• The above exercise needs to be continuously repeated for
every risk in the dynamic Shipmanagement scenario as the
gravity of the risks and their consequences keep on
changing.
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• Risk Management is an implied demand of the ISM Code. The
objectives of ISM code demand that each Shipmanager ensures
that a learn, responsive and effective Safety Management System
is in place. Suitably qualified and motivated staff, who are well
trained and experienced control the keys to effective Risk
Management onboard, under the guidance of committed senior
management.
• Primarily the various risks which a Shipmanager must address the
following:
 Shipboard Risks
• Personnel qualifications and experience
• Personnel motivation and attitude
• Adherence to Procedures- SMS, D& A etc.
• Inter/ Intra personnel communication skills
• Use of PPE and COSWP S.K.Aneja Advisor (Training &
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 Shore Management Risks

• Professional capability and attitude
• Two step approval for critical operations
• Effective Inter/ Intra personnel skills
• Insurance against professional indemnity
• Effective monitoring and review of SMS
• Provision of Un-budgeted expenses against
breakdowns
• Adequate record keeping and IT
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 Corporate Risks
• Risk of take-over
• Loss of clientile
• Operating expenses- what the market can bear
• Attitude and commitment of Owners towards
Shipping
• Risk of Regional regulations, wars, natural
calamities
• Monitoring entity as due to Flag, Nationality etc.
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S.K.Aneja Advisor (Training &
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