Key issues of Risk Management in Shipping
• Best practice – focus on a risk management system in a shipping company Risk – the exposure and the uncertainty • Understanding risk appetite and how it shapes management strategy • Quantitative and qualitative elements in risk management evaluation and strategy • Ship ownership and strategic risks • Risks to the vessel, people and systems
Contents of Risk Management in Shipping
Section 1 of Risk Management in Shipping :
Executive summary of Risk Management
1.1 Report structure
Section 2 of Risk Management in Shipping :
Introduction of Risk Management
2.1 Some fundamentals of risk management
Section 3 of Risk Management in Shipping :
Concepts of Risk Management
3.1 Introduction
3.1.1 Chronology of risk
3.2 Definition of risk
3.3 How to measure risk
3.3.1 The exposure
3.3.1.1 Position, positions, book, sub book and portfolio
3.3.1.1.1 Units for positions
3.3.1.2 Maturity and maturity buckets
3.3.1.3 Mark to Market or MtM
3.3.1.4 Forward curve
3.3.1.4.1 Units used for the forward curve
3.3.1.4.1.1 Worldscale (WS)
3.3.1.5 Linear and non linear instruments
3.3.1.5.1 Options
3.3.2 The uncertainty
3.3.2.1 Basic concepts related to a single time series
3.3.2.2 Basic concepts related to two or more time series
3.3.2.3 Models
3.3.3 Quantitative methods
3.3.3.1 Sensitivity analysis
3.3.3.2 Value at risk
3.3.3.4 Stress testing and scenarios
3.3.4 Qualitative methods: scenario planning
3.3.5 Chaos theory
Section 4 of Risk Management in Shipping :
Strategies to manage risk of Risk Management
4.1 Introduction
4.2 Risk appetite
4.3 Risk strategies
4.3.1 The do nothing strategy
4.3.2 Doing something
4.3.2.1 Strategic changes
4.3.2.1.1 Diversify
4.3.2.1.2 Alliance
4.3.2.1.3 Increase the capital base
4.3.2.1.4 Real options
4.3.2.2 Operational changes
4.3.2.3 Transfer risk
4.3.2.3.1 Hedge
4.3.2.3.2 Insure
4.3.2.4 Manage the retained risk
Section 5 of Risk Management in Shipping :
Strategic risk of Risk Management
5.1 Introduction
5.2 What is the adopted strategy?
5.3 Ship ownership strategies
5.4 Key partners
5.4.1 Key partners for ship owners – the customer
5.4.2 Key partners for ship owners – the ‘partners’
5.4.3 Key partners for ship owners – the suppliers
5.5 Company reputation
5.6 Loss of competitiveness
5.7 The uninsurable or unhedgeable?
Section 6 of Risk Management in Shipping :
Market risk of Risk Management
6.1 Introduction
6.2 Key elements in the tramp market
6.2.1 Recent market trends
6.3 Managing the risk – the paper markets
6.3.1 The forward freight market – a brief chronology of events
6.3.2 The forward freight markets – the products
6.3.2.1 Swaps
6.3.2.2 Options
6.3.2.3 Currently available FFA ship and route permutations
6.3.2.3.1 The dry bulk sector
6.3.2.3.2 The tanker sector
6.3.2.3.3 Others
6.3.2.4 Compilation of index values
6.3.3 Clearing
6.3.3.1 The NOS clearing model for Imarex
6.3.3.2 Others
6.3.4 Other shipping derivatives
6.3.4.1 S&P forward agreements
6.3.4.2 Demolition assessments
6.3.5 Risks associated with using risk management instruments such as FFAs
6.3.5.1 Liquidity risk
6.3.5.2 Market depth
6.3.5.3 Basis risk
6.3.5.4 Strengths of the FFA market
6.3.5.5 Weaknesses of the FFA market
6.3.6 Managing risk or speculating?
6.3.6.1 Hedging
6.3.6.2 Investment
Section 7 of Risk Management in Shipping :
Credit risk of Risk Management
7.1 Introduction
7.2 How can the probability of credit risk default be assessed?
7.2.1 Credit rating
7.3 Managing the risk
7.4 Other credit related issues
7.4.1 Creditworthiness of shipping – the outside world perception
7.4.2 Shipping, finance and the Basel II accord
7.4.3 Anti-money laundering measures
7.4.4 The ‘war on terror’
Section 8 of Risk Management in Shipping :
Financial risk of Risk Management
8.1 Introduction
8.2 Income stream or cash flow risks
8.3 Accounting-related risks
8.3.1 Accepted practices
8.3.2 Mark to market
8.3.3 Selection of accounting principles
8.3.4 Tonnage tax regimes
8.4 Capital cost risks
8.4.1 Newbuilding or secondhand purchase considerations
8.4.2 Loan and mortgage considerations
8.4.3 Loan appraisal criteria (Traditional bilateral loan)
8.4.4 Banks – risks for owners in lenders’ attitudes to shipping portfolios
8.4.5 Boutiques
8.4.6 Leasing
8.4.7 The capital markets
8.4.7.1 Equity markets
8.4.7.2 The ‘hybrid’ market
8.4.7.3 Bond issues
8.4.7.4 Private equity
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