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Workshop: Cyber Security information sharing, accountability & regulation

June 29th 2018
Icon representing Workshop: Cyber Security information sharing, accountability & regulation
Workshop: Cyber Security information sharing, accountability & regulation

June 28th 2018
Icon representing Workshop: Cyber Security information sharing, accountability & regulation
Workshop: Cyber Security information sharing, accountability & regulation

June 28th 2018
 
 
 

Maritime Security Companies Face Difficulties

 
August 8th 2014
Many will be aware that this month, private maritime security company (PMSC), Gulf of Aden Group Transits (GoAGT) ceased trading and, according The Independent newspaper, “suddenly went bust”.

The collapse of GoAGT did not come as a surprise to seasoned industry watchers and maritime security operators; rumours of the company’s problems had been quietly circulating for some time and CSOA had been monitoring the situation. Unfortunately, our hands were tied from commenting, given the legal situation surrounding he company’s failure. Meanwhile, the main concern of the company’s former staff is whether they will be paid.

As The Independent notes:
Former soldier Mark Mullins, 37, from Dymchurch in Kent, spoke to The Independent via satellite phone from his ship “in the middle of the ocean”. He said: “There are around 45 of us on this ship with 15 Brits. I was woken up by the vessel manager at two in the morning on Friday, along with 10 others, to be given a piece of paper with Nick’s email. The reaction was not good – we just started wondering how we’re going to get home. That’s my main concern.
“Some of the guys have been at sea without means of checking their bank accounts and living on false promises.”

Mr Mullins had been working for GoAGT for 16 months and said he extended his latest 90-day contact by a month because he felt loyalty to the company. He claims he is owed around £16,000 and that after gathering information from staff worldwide believes that colleagues are owed millions altogether.

Mr Mullin said: “The Eastern European guys alone are owed more than £200,000. Some of the Filipino guys are on six-month contracts so they’re owed more. By my calculations people at sea and at home are owed around £4.7m. It will take be about 10 days to get home and I hope my landlord is understanding, but some of the other guys could lose their homes. ”

It’s clearly a very unfortunate situation for all concerned, but will it be an isolated incident? We suspect not.

The maritime security industry sprang up from virtually nowhere to become a hugely profitable business for a number of firms. As shipping companies scrambled to employ PMSCs to guard their ships at the height of Somali piracy, the money rolled in. The profits were large, as was the potential risk to the men deployed on vessels. And without doubt, PMSCs have played a major role in the suppression of piracy in the East African High Risk Area, as even the international naval forces have grudgingly admitted.

That success has seen a dramatic drop in piracy in the region, which has been a double-edged sword for the maritime security industry. An absence of pirate attacks has led the shipping industry and many in the mainstream media to believe that piracy is over. It isn’t, it’s merely held in check as most naval commanders will tell you. But shipping is a cost-driven industry, more so than many other businesses, and anything that affects the bottom line has to be considered. PMSCs fall in to that category, and they are a cost the shipping industry would love to remove.

Unfortunately, a large number of PMSCs are owned and operated by former service personnel often with limited commercial training or experience. This was fine when the piracy was at its peak and demand for PMSCs sky rocketed but, as the market shrinks, companies with little or no real governance and genuine business plan in place will begin to fail. In part, this is the natural order of things in the business world, but it does throw up some potential hazards for the shipping industry as a whole. If as a CSO you contract a firm to protect your ship and that firm then fails during operations, where do you stand? We have heard directly from ships that some GoAGT armed protection teams actually stood down and ceased operations after receiving notification of the company’s collapse. Clearly, this is not a scenario any client wants to hear about.

Rates for armed transits have been pared to the bone in recent months, leading a large number of firms to look at costs as profits fall. With no obvious signs of the re-emergence of piracy in the Indian Ocean on the horizon (particularly during the monsoon period, as is now the case), the companies who have put funds aside to guard against ‘rainy days’ will be far better placed than their competitors. Similarly, companies which have sought to achieve new industry standards and certification, such as ISO PAS 28007, are more likely to get the nod from the boardrooms of shipping companies. Much has been made of the fact that GoAGT were certified to ISO PAS 28007, with some observers claiming that this demonstrates that the ISO isn’t worth much. In reality, the ISO merely proves that a company can operate to a certain standard; it does not guarantee what happens to the business overall. ISO PAS 28007 remains a de facto standard with which to judge any PMSC offering you as a CSO services.

As piracy in Somalia has effectively been suppressed, so many PMSCs have looked to West Africa as an alternative. However, the region is notoriously difficult to operate in, and things have become even less clear as the Nigerian Navy asserts its primacy over the nation’s territorial waters, battling internally with the Marine Police and Joint Task Force to determine who can operate where. The situation remains confused, but it’s clear that the Nigerian Navy would very much like to remove Western PMSCs from the picture.

At the same time, the recent spike in tanker hijackings in South East Asia has caused a number of companies to look at the region. However, the rules there are much the same as in West Africa, making it virtually impossible for private armed guards to operate in territorial waters. This has effectively left a number of companies all fighting for the same contracts in the East African HRA, and the losers will come off badly.

Some firms have moved into cyber security, claiming that this is a new area shipping companies should be concerned about. While this may be true to a certain extent, it also demonstrates that many PMSCs are actively looking for new areas in which to operate as times become tough at sea.

There are already murmurs that another PMSC may be in financial difficulties, which isn’t surprising in the least. Just as the last couple of years have seen a dramatic fall in Somali piracy, so we’ll also see a dramatic fall in the number of firms offering maritime security services. The risk/reward scenario isn’t limited to pirates; it’s exactly the same for the firms guarding against them.

For our part, CSOA recommend that any member looking to contract a PMSC conducts an even more thorough due diligence on them. Not just ensuring that they conform to your standards, but digging deeper into the company’s financial background to ensure that should the worst happen, there are fail safes in place to ensure that your company is not left exposed or, worse still, unprotected during a transit. We may now be approaching a time when a PMSC needs to demonstrate that it has plans in place to mitigate any financial issues it may have as a company, offering clients contingencies should they be necessary.