The above picture is not of the Spanish Armada ready to invade. This is a picture of the southern California coast, lined with record breaking ships waiting to dock and unload. Per reports, this is the fourth time in three weeks the record has been broken. It currently stands at 56 container ships and 76 total ships. And it epitomises a failed delivery risk management strategy.
Such coastal idling has made many commodities-related trading companies, brokers and even logistics companies re-consider all the potential effects on the business.
A RIPPLE EFFECT
Most of these setbacks can be blamed on pandemic-induced regulations and scarce resources to process ships at the usual pre-covid pace. However, it does open up an interesting set of questions for everyone, especially those in the commodities market:
1) What are the cascaded impacts of berthing delays on the global maritime market?
2) What are the cost implications of additional fuel and demurrage costs?
3) What are the environmental implications of idling and higher use of bunker fuel?
TIME IS MONEY
Each of these questions require great scrutiny because the implications and impact on the prices of commodities and finished goods can be enormous. Not to mention higher logistical costs leading to cash management and liquidity crunch with payments being delayed as a result.
ARE YOU READY?
With Environmental, Social and Governance (ESG) at the heart of many companies’ policies, waterfront lingering has a huge impact on marine life around the port as well. And doesn’t align with any ESG strategies.
CTRM software generally focuses on market and credit risk. However, it’s not uncommon for organizations to overlook delivery risk management and its ramifications on the business. For example, most scenario analysis is around market prices and volatility changes and how they influence the portfolio. Not necessarily on the results of delayed deliveries.
We would like to hear your thoughts and ask a bigger question: are you equipped to quantify and mitigate delivery risk?