Yemen or Yellowknife? Rethinking transportation risk

How well do transport companies--or brokers--know their clients?

It’s a long way from a Yemen airport to a Canadian highway or dockyard, but the recent terrorist attempt on a U.S. cargo plane there highlights the fact that such risks to the transportation industry are still a threat–to any organization, in any country.

Last week, transport officials in Canada outlined special measures meant to make air shipments safer: no large printer toner cartridges allowed on either passenger or cargo flights, and no shipments from Yemen or Somalia. But risks aren’t limited to a particular type of cargo, or one spot on a map–giving brokers here a chance to revisit potential risks and solutions with transport industry clients.

Whether a company operates a fleet of trucks in several provinces, or a larger cross-border cargo operation, “there’s a wide range of exposures on any one point on the supply chain,” says Todd MacCumber, president of the risk services division at HKMB Hub International in Chicago. “A lot of companies are taking a hard look at their risks and controls.”

Getting it right

Some industries, like the airlines and food services, had to address terrorism-related risks immediately after 9-11, and established strict security standards, though “some transportation sectors have responded better than others,” says Mike Delaney, president of RIO Insurance Brokers Inc. in Toronto.

When incidents like the one in Yemen hit the headlines, “[organizations] should ask, ‘are we doing enough risk assessment?'” he says. “It’s a great opportunity for brokers to educate their clients. They  may not be shipping to Yemen, but it’s a good example of why they need to continually update their own guidelines and procedures.”

The first step–for both brokers and transportation organizations–is to ask questions. It can be hard for insurers to gather data on shipping companies, and even drivers often don’t know what’s in the back of their trucks sometimes, he points out. But brokers must gather as much information about cargo and destinations as possible to ensure that a client is protected.

“[The more] I know about your cargo routing, the better I can help identify your exposure,”  he says.

Security measures meant to deter theft can also help prevent cargo tampering. A fenced-in, well-lit facility that’s guarded by the company itself–not a third party–are essential security steps, says Glenn Murray, a partner at Jones Deslauriers Insurance Management Inc. in Toronto. “Preventing someone from getting into your facility is the first step in getting things locked down,” he says.

Organizations should also identify areas along their supply chain where they don’t have control, and shore them up, adds MacCumber. Ideally, all supply partners should take a coordinated approach to risk or security gaps and address them consistently, he says.

Buy-in challenges

Buy-in might be hard to achieve. It can be difficult to get transport companies to take on pre-screening responsibilities, and the current environment makes it even more challenging, says Delaney. In emphasizing supply chain safety, “you’re asking them to use greater vigilance and slow the process down at a point in the economy where they’re just happy to get a shipment,” he told Canadian Insurance Top Broker.

Some of the challenges are heightened when “[an organization] is relying on security in developing countries, where the definition of security might be fundamentally different,” he adds.

And transport or cargo companies may not want to tackle security issues, but “they need to get to know their clients better, make sure they meet their standards and be prepared to  walk away if necessary,” suggests Delaney.

Larger brokers with in-house consulting should offer that expertise to transport clients, points out MacCumber–“they can reach out and say, ‘here’s what we know, and here’s how we can help.”

Know your client

The Yemen incident also underscores the need for brokers to know more about their clients, too.  “Yemen highlights the need for brokers who don’t specialize in transportation and cargo insurance to ask more questions before offering cargo coverage,” Delaney points out.  “Do we understand what this client is shipping?”

If the answer is “no,” it’s time to find out. “Don’t treat this as an isolated incident, in an isolated country,” he says.

Even with container shipments landing and leaving, and trucks crossing the border daily, some in the broker community may not have thought about risks in terms of terrorism, adds Murray. “It’s probably time that we should.”

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