The sea beckons the adventurous and the daring. At the design stage, ships are built to withstand about 100 million waves of a certain formation in the Atlantic Ocean over a period of 20 years. Nature’s fury is obviously estimated empirically to determine ship strength and the risk of failure.
The word ‘risk’ is thought to be derived from the Arabic word risq or the Latin word risicum. The Latin word originally referred to the challenge presented to seafarers by a barrier reef, and so implied a possible negative outcome. Contrary to the popular association of risk with bad possibilities, it is the uncertainty of the outcome that lends suspicion to the probability. As a Simon and Garfunkel song whispers, “... she said the man in the gabardine suit is a spy, I said his bow tie is really a camera...”.Indeed, suspicion is camouflaged in risk! Bill Gates and much earlier Winston Churchill (who once confessed he had written down the question numbers and nothing else in a school examination) are admittedly two of the best examples of risk takers who turned out tosuccessful.
Often, risk takers conveniently use the theory of “inadequacy of argument” propounded by Edward De Bono. The story goes of a bank robber who painted one side of the getaway car white and the other side black.
Witnesses offered sufficient contradictions to confuse the jury, and as a result the accused got away scot-free. Obviously, the defendant had mapped out his exposure to possible risks and managed to keep the booty.
Finance managers grade investors on a scale of risk aversion. It would only mean that the higher the risk of the venture, the higher the returns the investor expects out of it. Ex Barings trader Nick Leeson’s speculation on Nikkei stock and the fallout of it are typical examples of the truism, “There is no such thing as a free lunch!” In other words, if you seek a higher return on your investment, you must be prepared to accept the risks associated with it. In another league, Steve Forbes, the billionaire publisher, just quit the US Presidential campaign after spending three years and $35 million of his own money on the trail. Did Forbes analyse his risk or was he merely bold if not beautiful?
One wonders if Forbes ever considered being a shipowner, because for the seafarers in us, $35 million will fetch two new buildings in Japan, which can be operated in assured markets.
Bold we may not be as Forbes, but bald we will surely be by the time we excitedly estimate our returns!
The Sanmar strategy of managing ships centres on leveraging risk appropriately. The cyclical shipping business is so global in nature that it leaves no room for a generic strategy.
Mapping risk in this industry involves an intuitive understanding of the fluctuations of exchange and interest rates, sources and depth of funding, sources of cargoes, oil and commodity (both capital and finished goods) prices, trade policies, stability of governments, vagaries of nature and above all concerns regarding safety and protection of the environment. With the markets looking up, Sanmar resolves to surge ahead with patience and perseverance, and with integrity and commitment in this new millennium, setting nagging doubts to rest.
“Oh dear! The mighty seas, such mystic blue, but scary green and dull gray at times so risky, so easy to rock the boat, yet we sail ahead with all our hearts and our souls to bring glory to our brethren, and to our land.”
– An unknown 18th century Tamil poet.
– The author is Assistant Vice President-Technical, Sanmar Shipping Ltd.