As a further enhancement of its services, the American Club has recently made arrangements to assist operators entered for Class I and/or Class II cover in conducting due diligence inquiries into their potential charterparty or other contract partners.
Two asset investigation companies – LSR Services Limited of Hong Kong and Roxburgh Forensics of Newcastle-upon-Tyne, United Kingdom – have been appointed to provide such services.
As explained, the shipping industry continues to endure considerable economic stress, as vessel operators are sometimes exposed to the financial failure of their business counterparties. Recent examples include the OW Bunkers collapse and the bankruptcy of Hanjin Shipping. Increased sanctions regulation is also adding to the challenges facing vessel owners and operators trading worldwide. And cyber fraud in the form of bogus charterers, shippers and agents represents another growing threat to the industry.
Information which assists operators in making more insightful commercial decisions will tend to reduce the prospect of their experiencing counterparty financial failure, being exposed to sanctions penalties or suffering the consequences of cyber fraud. Indeed, knowing one’s contract partner is a key imperative of modern enterprise risk management.
In view of these, the turnaround times for reports from the two asset investigation companies are as follows:
- A same-day due diligence report
- A next-day due diligence report
- A standard corporate investigation report (non-expedited time frame; hourly rate).
For a trial period, which will extend for the remainder of this policy year (i.e. until February 20, 2018), the Club will bear the expense of reports commissioned under the parameters of items 1. and 2. above.
The expected benefits of undertaking such due diligence include:
- fewer and/or lower value claims
- improved operational profile and reputation;
- meeting the compliance requirements of larger trading groups;
- using enhanced risk procedures and methods as marketing tools to attract better clients; and
- savings in management time.
LSR Services has been retained to provide investigation services covering Members’ potential counterparties operating primarily in Asia, Australasia and westward to the Middle East. Roxburgh Forensics has been retained to provide investigation services for inquiries primarily involving Europe, Africa, and North and South America.
The initiative will be conducted on a trial basis for the remainder of policy year 2017, that is to say up to February 20, 2018. Thereafter, the arrangement will be revisited, reviewed and reassessed. It is hoped that the use of this new resource will be of assistance to fortify business practices and thereby minimize unforeseen credit, regulatory and related financial exposures.
