In maritime shipping, operational and financial risk are ever-present forces for organisations on both sides of the contract. Operational and financial risk are closely linked, and both are top of mind for the market. With all the effort spent on planning and forecasting, maintaining control throughout the execution phase is paramount to staying on budget and avoiding surprises at period close.
Through our expertise and close collaboration with clients across the industry, we have uncovered four primary areas where high-quality information and processes are required to better identify, manage, and proactively address risk.
1.) Invoices
An important area of risk management is invoicing. Catching every invoice and ensuring they get out on time is, of course, crucial for an organization’s success and growth. Leveraging the right commercial solution, your team can create invoices with ease and help ensure that none slip through the cracks by keeping a close eye on scheduling and proactively identifying any gaps that need closing or overlaps that need resolving.
You can also set up your own approval rules, which will then automatically generate alerts and tasks for the relevant user(s) to address in the right scenarios. These can range from a simple “FYI” alert to a full stop that prevents the user from saving the record if they are violating a rule.
Organizations need to maintain a holistic view of not only invoices, but demurrage claims as well. Digitising the tracking of claims can help ensure that demurrage claims are evaluated and sent to counterparties on time to avoid getting time barred and no longer being allowed to claim that money.
2.) Approvals
The next step to proactively managing operational and financial risk involves your stakeholders. To ensure your operational and financial data is of high integrity, make sure it is validated by the appropriate stakeholders through standardized approval processes. To do this in the most efficient and standardized way, leverage technology.
The right commercial solution will give you the power and flexibility to manage and enforce approvals for a range of different workflows all within one system. Standardized approvals processes are also key in this area, as they allow you to determine who has the rights to approve invoices based on a number of variables such as invoice type and amount.
Approvals can help prevent costly errors and keep your organization proactive. For example, being able to validate and approve noon report information and bunker stems before they impact the voyage helps ensure that the subsequent impact on the bunker exposure for that vessel is also accurate. In addition to risk management, getting stakeholders involved in one streamlined workspace in this way is essential for greater efficiency, data sharing, and visibility.
3.) Data
When it comes to data, we know that the output is only as clean, accurate, and relevant as the input. We also know that the maritime industry is inundated with data from a myriad of sources, and it can therefore be confusing and time consuming to capture, sort, analyze, and report on the right data at the right time and in the right way.
The first step to mitigating risk in this area involves the digital systems that support your business. Ensure you have a strong digital foundation in place internally to create streamlined processes with configurable controls that allow for timely, accurate data to flow through the hands of the right stakeholders at the right time. Further, ensure that your core commercial solution is extensible, allowing you to manage relevant data from difference sources within one centralised workspace through secure, flexible integration capabilities. This reduces risk of human error and gives you access to up-to-date data automatically, which is especially crucial when it comes to managing exposure. With market-linked data integrated into your workflows, your teams can closely monitor freight and fuel prices alongside voyage data, allowing users to systematically measure exposure and execute paper trades that properly offset risk from price fluctuations. With operational data updated regularly and correctly, your market position can be accurately reflected so that you can confidently take action in the market as needed.
4.) Your Bottom Line
Last but most certainly not least is your bottom line. Keeping a close eye on variances in revenue and expenses throughout the voyage ensures that no surprises pop up at the end and helps you stay proactive. Configurable alerts within your commercial system can act as guardrails that safeguard from large swings by letting users know when a change they are making will result in an outsized impact on the bottom line.
From an exposure management perspective, understanding the financial performance of the voyage allows teams to compare against the market to see if it is necessary to enter into any paper trades. Additionally, users can better understand how existing paper trades are impacting the voyage.
Sam rejoined Veson in 2021 as a Senior Product Manager, building on her previous Veson experience in both Product and Professional Services. Sam’s breadth of industry knowledge and passion for maritime shipping make her a leader within Veson and a key advocate for clients and users. You can connect with Sam on LinkedIn.
Tracking and reporting on variances in a systematized way allows organizations to identify larger-than-expected swings and investigate differences between estimated and actual, and actual and posted. This is also a great way to gain insights and make improvements for the future.
To learn more about operational and financial risk and how to proactively manage it with the industry’s leading platform for freight and fleet management, join us for a dynamic 30-minute webinar on the 27th of April! (Can’t make it? No problem. Register and we will send you the on-demand recording to watch on your own time.)
