PRODUCING A total and efficient trade solution is the essence of risk management correctly applied to the transportation element of the supply chain, according to Victor Tabosa-Vaz and Mike Murrell, specialists in transportation risks at Eikos.
The treatment of risk by the freight operator - going back several hundred years - has moved from one of traditional absolute liability to a system of limited liability, Murrell told FTW. This triggered the necessity for shippers to purchase additional marine insurance.
It is a practice which has resulted in the duplication of cost of risk, and causes gross inefficiencies for all parties in the supply chain - as well as the economy as a whole.
Murrell and Tabosa-Vaz propose a return to the concept of single liability.
This through a one-stop funding of risk throughout the transport chain - with the risk covered through a single premium.
We maintain that the competitive future of managing supply chain risk lies in integrating the freight operator's risk with that of the cargo owner, said Murrell. This is achieved through a common risk vehicle. It will cover a broad range of risks - from physical loss or damage risks, through credit and liability risks, to foreign exchange fluctuations.
This common risk vehicle reduces multiple transactions to one - and cuts costs.
According to Murrell and Tabosa-Vaz, this single premium deal allows for a more creative approach to financing these risks.
Reducing risk can result in increasing reward through mixing traditional insurance purchases for risk transfer with other appropriate value-added risk transfer solutions, said Murrell.
Integrating approaches to supply chain risk in this way, produces a total and efficient trade solution.
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