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UAE Tanker Hijacked in Indian Ocean July 18, 2011

Posted by Chris Mark in Piracy & Maritime Security.
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Today 9 Somalian pirates hijacked the MV Jubba XX tanker in the Northern Indian Ocean. The fully laden tanker was enroute from UEA to Berbera, Somalia when attacked.  The pirates have captured the ship as well as her 16 crewmen.  As the IMB stated: “In the last six months, Somali pirates attacked more vessels than ever before and they’re taking higher risks,” said IMB Director Pottengal Mukundan. “This June, for the first time, pirates fired on ships in rough seas in the Indian Ocean during the monsoon season. In the past, they would have stayed away in such difficult conditions. Masters should remain vigilant,’’

Pirates are becoming more violent and taking greater risks in their pursuit of targets.

Pirate Ransom Payments going to Somali Militant Groups July 6, 2011

Posted by Chris Mark in Laws and Leglslation, Piracy & Maritime Security, Risk & Risk Management, weapons and tactics.
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According to John Steed, the principal military adviser to the U.N. special envoy to Somalia and head of the envoy’s counter-piracy unit, said links between armed pirate gangs and Somalia’s al Qaeda-affiliated rebels were gradually firming.

“The payment of ransoms just like any other funding activity, illegal or otherwise, is technically in breach of the Somalia sanctions regime if it makes the security situation in Somalia worse,” said Steed.

“Especially if it is ending up in the hands of terrorists or militia leaders — and we believe it is, some directly, some more indirectly,” said Steed, a retired military officer.  For those who believe it is still all speculation, an Al Shabab representative confirmed the arrangement:

“If there was no relationship between us, there is no way the pirates would be able to operate, or carry their weapons within zones we control,” said an al Shabaab militant based in the pirate haven of Haradhere, north of Mogadishu.

Unfortunately, this means shipping companies may be in violation of international sanctions if they pay ransoms to the pirate groups.  Under the terms of the arms embargo on Somalia, financial support to armed groups in the Horn of Africa country is banned. Both the United States and Britain regard al Shabaab as a terrorist organisation.

The best course of action for shipping companies is to ensure that their ships are adequately protected from takeover.

Evaluating “Safety & Security on the Cheap” June 21, 2011

Posted by Chris Mark in Risk & Risk Management.
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Suppose you decide to take of sky diving and are looking for a parachute.  Would you consider buying a parachute from a street vendor at a great price or would you look for a company that specializes in parachutes?  I am confident that everyone reading this would opt for the specialists over the street vendor.

Security and safety are closely related and both are frequently debated topics in which risk and risk analysis plays a critical role (or should play) in allocating spending.  So the inevitable question of all for-profit companies becomes: “What is appropriate security or safety?”  In reading the blog post titled Risk 101 the answer is simply that spending should ensure that the controls are commensurate with the identified risks.  In his article “Safety on the Cheap” Robert Reich succinctly states the issue and challenges when he says:

“Inevitably there’s a tradeoff. Reasonable precaution means spending as much on safety as the probability of a particular disaster occurring, multiplied by its likely harm to human beings and the environment if it does occur.

Here’s the problem. Profit-making corporations have every incentive to underestimate these probabilities and lowball the likely harms.”

This is consistent with accepted risk management doctrine and where the challenges arise.  Companies are often willing to roll the proverbial dice and underestimate the likelihood of an event occurring or the impact should it occur.  While still a sensitive subject, the earthquake and tsunami that devastated Japan and resulted in the meltdown of nuclear reactors is a case study in this phenomenon.  Investigations after the tsunami indicated that the managers of the plant grossly underestimated both the likelihood of the tsunami and the impact.

While it is easy to talk in the abstract about spending on security, it is a difficult question to answer.  It is impossible (or nearly impossible) to determine a Return on Investment for security spending.  In the early 2000’s a number of companies attempted to define what they were calling the ROSI or Return on Security Investment.  The problem is that you cannot quantify a return for an event that does not occur.  In short, the only time you can see the value of your investment is when an incident occurs which the controls work and when you can quantify what the loss would have been.  Having been involved in many of the largest data breaches I have seen first hand the impact of underestimating the risk and ‘rolling the dice’. Another challenge that exists is the lack of actuarial data for events such as piracy.  While insurance companies have actuarial data refined to the n’th degree for automobile theft, the data does not currently exist to accurately predict the risk to ships.

According to the Dodd report, between 2007 and 2010, the average success rate of an attack is roughly 31%.  IMB reports that in spite of the presence of various task forces, piracy is at an all time high in the first quarter of 2011 with 150 incidents of the coast of Somalia in the first quarter of 2011, alone.  The average reported ransom is between $3.5 and $4.5 million. It should also be noted that pirates have captured 338 crew members, killed 7 and wounded 38 in the first quarter of 2011.  While it is difficult to precisely quantify anecdotally it is understood that piracy is increasing in both frequency and in violence.

Shipping companies, like all companies, are focused on revenue and the bottom line.  Spending on safety and security is always difficult as it is difficult to quantify a return on investment.  While it is not always possible to calculate with exacting precision the risk associated with an event, qualifying the risk is often enough to justify the spending.  When evaluating the level and type of security to engage for your ships, the same risk management principles apply as they would in information security, safety and any other industry where safety and security are critical.  It simply does not pay to buy parachutes from street vendors or approach the safety of your ships crews and the security of your ships by adhering to “security on the cheap”.

Economics of Piracy June 20, 2011

Posted by Chris Mark in Piracy & Maritime Security.
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Geopolicity published a very good study in May 2011 which surveys the earnings of pirates and analyzes the economics of the maritime piracy industry.  While it is no surprise that piracy is increasing significantly off the coast of Somalia but the report articulates why it is growing at such a pace. With an estimated 1500-3000 pirates operating in the Somalian waters alone, attacks are increasing at a breakneck pace.  In the first quarter of 2011, there were 117 identified attacks which resulted in 338 people being taken captive and 7 crew members killed.  Average ransom paid was between $3.5 and $4.5 million US.   According to the survey Somali pirates earn between $33,000 – $79,000 US per year with a potential lifetime earning of between $168,000 and $394,000.  When compared to the US median income of roughly $34,000 per year, it seems like piracy pays well.  When compared to the average per capita income of $500 per year in Somalia, it is easy to see why piracy is so attractive.  The income earned by pirates is between 679% and 1,570% higher than the average Somalian.  The report estimates that the current cost of piracy is between $4.3 and $8.5 billion per year increasing in 2014 to $13 and $15 billion per year.  In short, it is a growth industry.

 

Analysis of “Are Weapons the Answer to Counter Ship Piracy?” Part 1 of 2 June 14, 2011

Posted by Chris Mark in Piracy & Maritime Security, Risk & Risk Management, weapons and tactics.
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Recently I was reading an article on Maritime Executive and a few of the comments gave me pause which, I believe, requires a response.  This post will attempt to objectively analyze the underlying issues outlined in the article.  Brevity precludes a comprehensive critique of the article so only the major identified issues will be addressed in this post

Notice that the term objectively is italicized in the first paragraph.  The first aspect of the article that raises issues is the assertion that it is ‘objective’.  As defined by Webster’s dictionary:

“a : expressing or dealing with facts or conditions as perceived without distortion by personal feelings, prejudices, or interpretations “ 

Simply saying that an article is ‘objective’ does not make it so.  It is impossible for any position paper to be ‘objective’ in that the author is attempting to make an argument to support their conclusion.

In reading the article, the author clearly has an agenda as articulated in the final sentence of the conclusion where he definitively states:

“The potential means of reducing the commercial return for pirates and of imposing considerable financial pressures on them currently exists within the power of the industry, without resort to arms.”

Furthermore, in an attempt to assuage the readers’ fears that the author is not being objective, a disclaimer is provided in which the author acknowledges “…his interest through its support to GAC Solutions in the provision of maritime security services and support to maritime clients.”

With the conclusion clearly articulated and the author’s position within the industry identified for the readers,  it is now possible to review some of the premises, which ostensibly support the conclusion.

In the background section of the article, the author editorializes while making several strong claims.  Namely he asserts that:

“..the debate (about arming ships) currently seems to be driven more by the following: fear induced pressure on the stakeholders; the questionable authority of some proponents of arming ships; frustration throughout the industry at the apparent ease with which pirates can gain access and control of ships.”

This author would suggest that “the apparent ease” of gaining access and control of ships is a legitimate concern for ship owners and does not suggest an environment of pressure born out of fear.  A disturbing aspect of the article is the imperious attitude of the author when he suggests that some proponents of arming ships are of ‘questionable authority’.   Many proponents of arming ships (this author included) have experience and education that would likely merit some level of respect of their positions.

He further states that:

“The effect of an over-dramatic media creates a perception of the frequency and impact of piracy attacks that is not borne out by statistics. Also, the argument for arming ships increasingly relies on the use of the strap line “No ship with armed escorts has been taken.” There are many equally true statements such as, “ships with particular funnel markings have not been taken””.

While this blog post is not intended to dissect the statistical aspects of the argument, when discussing risk there are two primary components; probability and impact.  While the probability of a ship being taken is, in fact small, it is suggested that the impact is anything but trivial.  In fact, yesterday it was acknowledged that pirates received a ‘double-figure million US dollar” ransom.  When evaluating the risk from an annualized loss expectancy perspective, it is suggested that arming ships does in fact, make financial sense.  The last statement related to ships being taken merits no further response as any college freshman statistics student would rightly identify that the funnel markings would be considered a spurious relationship while the armed escorts would be considered statistically relevant. To read more about risk and risk analysis please read this post.

The last section that stands out is the one titled Weapons and effects.  I was apoplectic when I read the author’s assertion that:

“Hollywood and the media have greatly exaggerated the destructive power of such weapons as the RPG7, while the AK47 has an iconic status. The RPG7 is a rocket propelled grenade, with very limited capability and effect. The AK47 is a superb close quarter battle weapon, ideal for insurgents, pirates and many others, because of its simplicity and functionality. However, it is a very inaccurate weapon, with little penetration capability. Both can, and do, create a situation of panic and fear in those with no understanding because of the noise effect and peoples unrealistic image of their capabilities”

Once again the author attempts to assert authority on the subject by demeaning readers who lack the same experience as the author.  He clearly intimates that the reason people are afraid of the RPG 7 and AK 47 is because they lack understanding of the weapons, the weapons are loud, and people have unrealistic images of their capabilities.  While certainly shows like Rambo and the A-Team portrait unrealistic capabilities of weapons, this author also has experience with such weapons and can state definitively that RPG 7’s and AK 47’s deserve respect.  To suggest otherwise is irresponsible to those who may not have the requisite experience to understand the destructive capabilities of such weapons.  More information can be found in the post titled: “Whitpaper on Weapons and Tactics”

Part 2 will continue the analysis.