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Armed Security; Increasing Competition & Decreasing Demand February 10, 2012

Posted by Chris Mark in Industry News, Piracy & Maritime Security, Risk & Risk Management.
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Recently I wrote about the armed security market and the inevitable shakeout.   A look at the most recently data supports this position and does not seem to fare well for the new entrants into the maritime security space.  As of February 1st, 2012 there are now 307 signatories of the ICOC with 55 signing on December 1st, 2011 and another 42 signing on February 1st, 2012.  While some of those signing are older, more established companies there is a large percentage of new entrants.  In short, competition is becoming fierce within the maritime security industry.

In January, 2012 the IMB released statistics on pirate attacks and hijackings.  From 2010-2011 pirate attacks in and around Somalia increased roughly 7.5% from 219 to 237 while at the same time hijackings decreased roughly 43% from 49 to 28.  In 2010 approximately 22% of the ships attacked were taken and hijacked while in 2011 the percentage dropped to just below 12%.  A combination of increased naval patrols, armed guards, and implementation of BMP is having a desired effect on hijackings.

There are several things that can be surmised from the information above.  First, competition within the maritime security industry is increasing rapidly.  With the wars winding down in Iraq and Afghanistan there is an increasing number of veterans entering the job market.  Some of these are founding security and maritime security companies to try take advantage of the perceived demand for the services.  This will have the effect of decreasing rates across the industry unless demand increases, as well.  The second thing that can be surmised is that demand for maritime security is likely to decrease significantly.  There are several reasons to anticipate a decrease.  As current efforts are showing success companies will logically begin to evaluate the need for expensive, armed guards when other controls may prove sufficient.  Additionally, it is expected that the number of ‘free riders’ will increase as companies begin to hedge their bets and forgo the use of security with the belief that other companies investment will have a residual affect on their security.  Finally, insurance rates should drop for ships traversing high-risk waters making the justification for the cost of engaging armed security more difficult.  As any first year economics student can attest; increasing competition and decreasing demand does not bode well for the industry.  Companies will have to drop their prices to compete for a rapidly decreasing pool of potential clients.  The end result is the inevitable shakeout of the industry.

Completing the Puzzle: Verifying Company Claims & Information January 27, 2012

Posted by Chris Mark in Risk & Risk Management.
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I have received a few emails over the past several weeks on how companies can have assurance that the security provider they are evaluating is on the up and up.  Sometimes a little due diligence goes a long way.  Here is a quick and easy start to your verification.

1) Check business formation dates.   In the US (and I am sure many other countries) business data such as incorporation dates, etc. are public record.  Companies need to be registered in a particular state or states.  If you do a quick Google search on the particular state you can find where the records are kept.  For example, in Utah you simply go the the following website: https://secure.utah.gov/bes/action .  In Nevada you would visit: http://nvsos.gov/sosentitysearch/corpsearch.aspx  in New York you would visit: http://www.dos.ny.gov/corps/bus_entity_search.html   If a company claims to have been doing business since 2001 and there are only records from 2005, you know that they are likely not telling the truth.  Additionally, you can find if the business license was ever revoked, dissolved etc.

2) Check the WayBack Machine.  http://www.archive.org   The Internet archive is very familiar to geeks but many others are not aware it exists.  Here you can see what a company’ website looked like at a very particular point in time.  A word of caution.  Some sites are not archived and some are only periodically archived.  That being said, if there is a snapshot of a company’s website from a particular date you can learn quite a bit.  For example, if a company claims to have provided maritime security services since 2008 and their website snapshot from 2009 shows no indication of such a service it should raise red flags.  Often, companies will ’embellish’ or change information on their website without realizing that the snapshot exists.  Like #1 above, if a company claims to have been in business since 2001 but their snapshot from 2008 shows a founding date of 2004, you have to question the validity of the 2001 date.

3) Google, Google, Google some more.  Google is an extremely powerful search tool.  It can use Boolean logic to conduct searches.  What is Boolean operators to make your searches more precise?  Here is a link to using boolean operators in Google searches.  Boolean operators are things like the use of quotes to have Google search for a complete phrase such as “Chris Mark” instead of Chris Mark which would result in a search for Chris, and Mark, and Chris Mark.  You can also use the AND or a + sign to narrow the searches.  For example:  “Chris Mark” + security will pull up all links to Chris Mark and Security.  You can search within a specific website with the Site:   such as “Chris Mark” Site: NYTimes.com  Within Google don’t forget you can use the advanced search function on the left hand side of the page to search by specific dates.  Again, if a company claims they have been around since 1990, you would expect to see some searches returned for the dates 1990.  Unless told, Google will provide the most relevant links first.  If you tell it to search by date it will provide very specific information on dates.

4) Search blogs, and forums.  Often people with publish their opinions in blogs and forums.  While the information should be taken with a grain of salt it certainly can give you information on companies and the perception within a particular group.  Find forums relevant to the industry and search for the principals of the company or the company.

While this is not an exhaustive list of techniques to verify company information, with some practice these four steps will provide a laundry list of information that can be used to verify whether claims are accurate or not.  Companies that change their claims and contradict themselves should be looked at very carefully.

Experts in Every Room and One Dunce in a Corner January 25, 2012

Posted by Chris Mark in Piracy & Maritime Security.
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The influx of new companies within the maritime security industry has increased competition.  In response, some companies have given in to the temptation to embellish the experience or expertise of individuals or companies in an attempt to differentiate themselves from the crowd.  It is an unfortunate reality of business.  In an effort to help shipping companies evaluate the vendors selling “today’s solution to tomorrow’s problem”, I have put together a quick paper on ‘expertise’.  Below is an excerpt of the paper you can read here:

“Introduction

The current market for maritime security and anti-piracy has resulted in the creation of a cottage industry of self-proclaimed experts speaking on the subject of anti-piracy and selling maritime security and anti-piracy services.  A review of some of these “experts’” comments and the services being promoted suggests that the expertise espoused is a rarer trait than one would be led to believe.  This paper is intended to provide information to allow prospective clients to separate the experts from those that claim expertise to capitalize on the current market for maritime security services.   For brevity’s sake, this paper will use the generic term Maritime Security to refer to both anti-piracy and maritime security services.

 Author’s Note

While knowledgeable on the subject, I do not consider myself an expert in maritime security.  I am a payment security expert and probably have expertise in a number of other areas but have not achieved a level of experience or education that would allow me to call myself an expert by any means.

Expertise Defined

To understand how to identify those with actual expertise from those who simply call themselves experts it is important to have a definition of the term ‘expert’. Webster’s dictionary provides the following definition for the noun ‘expert’:

Noun:

“…one with the special skill or knowledge representing mastery of a particular subject”

 Within the context of maritime security, expert, as a noun would be applied as follows:

“Joe is an Expert in maritime security.” 

Making this statement implies that Joe possesses a special skill or knowledge representing mastery of a particular subject.  In this case, the subject is maritime security.  The focus of this statement should be the word “mastery”.  This suggests that Joe possesses an intimate knowledge rather than a passing familiarity with the topic.

Webster’s dictionary provides the following definition for the adjective ‘expert’:

Adjective:

“…having, involving, or displaying special skill or knowledge derived from training or experience”

Within the context of maritime security the term expert, as an adjective, would be applied as follows:

“Joe’s expertise in maritime security is derived from his formal training and experience.”  

Making this statement indicates that Joe has a special skill or knowledge derived from training or experience.  Within this context, the key is “training or experience”.  Without relevant or appropriate training or experience (or both, in most cases), it is difficult to see how a person could be defined as an ‘expert’.

Consider the example of a Doctor that has passed her medical boards.  While the doctor may be a general practitioner and not considered an expert in neurosurgery, she would arguably be considered an expert in medicine relative to those who have not attended similar training or passed the medical boards.  The doctor’s expertise is qualified by training (medical school) and experience (residency), as well as quantified by passing medical school boards.  If a person were to sit at home and read anatomy and medical books they could certainly attain some level of medical knowledge but it is extremely difficult to see how a person such as the one described would be considered an ‘expert’ in medicine.

While it is not suggested that becoming an expert within the maritime security industry is similar to that of becoming a neurosurgeon, the complexity of the industry and the maritime security challenges should not be underestimated since valuable resources and human lives are at stake.  The maritime security industry is complex and the ever-changing regulatory landscape coupled with the changes the pirates’ tactics increase the complexity.  In his popular book, Outliers, Malcolm McGladry references Neurologist Daniel Levetin who says:

“The emerging pictures from such studies is that ten thousand hours of practice is required to achieve the level of mastery associated with being a world-class expert-in anything.””

You can read the full paper here.

UK House of Commons Report: “Piracy off the coast of Somalia” January 7, 2012

Posted by Chris Mark in Laws and Leglslation, Piracy & Maritime Security.
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The UK’s House of Commons Foreign Affairs Committee (FAC) published a report this week titled “Piracy off the coast of Somalia”.  You can read the report here. The 72-page report set out the findings of the FAC enquiry into the efforts of the Foreign and Commonwealth Office (FCO) and the UK Government to combat the increasing levels of piracy off Somalia.

Tackling the use PASGs, the report concluded that “the evidence in support of the use of armed guards is compelling” (emphasis added) but that the “Government must provide clearer direction on what is permissible and what is not”.

The report also said that the risk to pirates of encountering serious consequences is still too low to outweigh the lucrative rewards, and simply returning suspected pirates to their boats or their land provides little long-term deterrence.

SomaliaReport.com January 7, 2012

Posted by Chris Mark in Laws and Leglslation, Piracy & Maritime Security.
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I came across a good reference that is worth sharing.  SomaliaReport.comhas great info on hijacked ships, ransoms, released vessels, and currently held vessels.  It also provides a weekly piracy report.  If you have a chance, take a look and see if there is any valuable info.

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