Safety builds your bottom line

jacob-grieg 4 months ago • 9min. read.

“There are as many, and more, upside economic consequences of a great safety culture as negative financial consequences of poor safety practices. It’s quite obvious which side shipping companies should be on, and our mission is to help them,”

says John Roger Nesje, chief executive of Norwegian wireless technology pioneer Scanreach.

As we all know or certainly should, the International Convention for the Safety of Life at Sea (SOLAS) ensures the minimum standards of safety to which all ships flying the flag of a contracted state must adhere. It requires those responsible for a ship to comply with the International Safety Management Code (ISM), with individual ships issued with a Safety Management Certificate (SMC) that has to be renewed every five years. The Maritime Labour Convention (MLC) also sets minimum requirements for working and living conditions for seafarers, including occupational safety.

Still lagging on safety

Despite these regulations, the global shipping industry is still struggling with safety issues. Poor implementation and/or breaches of SOLAS/ISM continue to be a major reason for vessel detentions by port-state control (PSC) around the world. The 2019 annual report of the Paris MoU clearly shows that ISM was the main detainable deficiency area whether it was fire safety, safety of navigation or life-saving appliances, among other categories.  

As ships have, and are, becoming increasingly complex and bulging with advanced technology, officers and crew as well as onshore personnel are being pulled in multiple directions. This pressured environment, not least mental health issues and fatigue, could lead to safety routine oversights and checks being missed.  

Global insurer Allianz GCS says its analysis “of almost 15,000 marine liability insurance claims between 2011 and 2016 shows human error to be a primary factor in 75% of the value of all claims analyzed – equivalent to over $1.6bn of losses. Given the role of human error in so many incidents, the quality of crew and shipowners’ overall safety culture are of increasing importance to risk assessment”. Human error may also be a contributing factor in up to 96% of marine accidents, Allianz indicates. “That pinpoints where our focus should be,” says Nesje.  

“While unfortunately there may always be a few owners with a slapdash approach to safety, responsible shipowners and operators of course do their utmost to embed a safety culture throughout their organisations both onshore and at sea,” he says. “Many have safety systems and routines that go far beyond the minimum standards. But even there the fact that accidents still happen, crew members get injured or worse, and ships are detained for safety faults means there’s still plenty room for improvement.”

A key to profitability

Nesje is convinced that a successful business involves a whole lot more than just its financial performance. Safety plays a big part and should never be viewed as just another operational issue competing for attention. “You’re playing a risky game if you don’t make it top priority, also as an economic strategy. Safe and effective operations are key to being profitable,” he says.

No shipping company can afford to be laissez faire. “First-rate safety management is crucial for optimal crew working conditions and welfare, complemented by technology that supports compliance. The price of getting it wrong can be high. A less than optimal safety culture can mean your assets are underperforming, your seafarers are not as motivated as they should be, while preventable accidents resulting in injury or the death of a crew member can result in punitive damages and associated costs.” 

Failing to adequately address safety can also significantly damage a company’s reputation, especially in the case of detentions. For example, a vessel having a low Safety Score from Rightship is hardly a great advertisement, and might cause charterers, and indeed cargo owners to have second thoughts. “That’s obviously bad for business,” says Nesje.

Direct and indirect costs

Other potential losses as a result of accidents include evacuation from a ship, medical bills, sick leave and repatriation if necessary, lost employee hours as well as trading downtime and crew replacement, maintenance costs or an unscheduled visit to a drydock, pollution costs and cargo damage. Indirect costs could come in the form of raised insurance premiums, penalties from maritime authorities, legal fees in case of injury claims, and management overtime spent on compliance issues. According to the International Shipping Federation, “The indirect costs of maritime accidents are estimated to be around three times the direct costs associated with injuries, deaths, property damage and oil spills”. 

Numerous studies in different industries have shown that companies that prioritize a strong safety culture can attain higher levels of productivity. “In shipping it makes sense that happy crews who are confident in the safety function contribute to the high performance of a ship and, in turn, the principal. Morale matters more than, I think, people would like to admit,” says Nesje. “Safety is a central value of doing business and should be an integral part of all activity on board a vessel, as well as rooted in company values.” 

A premium safety culture creates economic value in terms of increased productivity, better decision making and effective communication in the office and at sea, reduced loss events, reduced personnel turnover, reduced training costs, enhanced customer trust, and potentially favourable insurance terms.  

Commenting in Allianz CGS’ 2020 Shipping and Safety Review, the company’s global head of marine risk consulting, Rahul Khanna, said: “Shipowners will face additional cost pressures from a downturn in trade [due to the impact of Covid-19] and will no doubt put efficiency measures in place. We know from past downturns that crew and maintenance budgets are among the first areas that are cut. But it is important that safety and maintenance standards are not impacted by the downturn. The next few years will likely be a difficult time for the shipping industry. However, we hope the industry will not undo all the good work of previous years and let safety and risk management standards slip.”

Cracking the IoT code

Nesje echoes these sentiments. “There are many advisors out there who can help companies improve safety culture generally, but clearly, advanced technology plays a big role, and that’s where we come in,” he says. “With our ground-breaking wireless technology, we are driving an IoT revolution in shipping that really support safety.” 

ScanReach is the only vendor in the world to have successfully cracked the “billion-dollar problem” of wireless communication in a steel environment (known as the Faraday cage effect where steel bulkheads and decks block wireless signals) at an affordable price. “Our meshed wireless network means sensor arrays become a whole lot cheaper and flexible because you do away with all the cabling necessary in current setups, which is time-consuming and expensive to install,” says Nesje.

Penetrating metal

ScanReach’s ConnectPOB wireless network solution enables sensor data to be wirelessly transmitted from nodes throughout a ship, either fixed or carried as wearables. The data feeds directly into bridge monitoring and control systems. “The ship functioning as a single connected entity is a huge step forward and opens up a sea of new application opportunities to take vessel safety and performance measurement to the next level, at a fraction of the cost,” says Nesje. “Existing sensors can also be integrated into our system, whether it’s fire detection, pump sensors, anything.” 

“Especially for crew health, The IoT-connected ship will help enormously as wearables give you full and instant oversight of Persons OnBoard [POB],” says Nesje. With digital interfaces designed to deliver instant situational overview, the bridge knows where everyone is on the ship in real time. Should a seafarer fall or get injured the bridge can react immediately. “Furthermore, you can pinpoint exactly where in the water someone is in the case of Man Overboard [MOB],” he adds. This applies not only to ships but also offshore installations such as rigs, wind farms and aquaculture, including gangway control.

Gas detection

With wireless IoT detection the bridge also knows instantly if poisonous gases are present in enclosed spaces or tanks, while wearables provide an added level of safety providing instant feedback to seafarers undertaking checks or maintenance. “Fatalities due to gas inhalation are tragic and avoidable; we want to contribute to making that a thing of the past,” says Nesje. 

He hopes ScanReach’s wireless IoT platform will become de facto on a big chunk of the world fleet. “Who knows, wireless connectivity may also become a regulatory necessity in future, while marine insurers may in time require it as part of loss prevention or reward companies that do so,” he says. 

“Full onboard connectivity is a major value driver,” says Nesje. A typical ConnectPOB plug-and-play installation with 80 nodes on a ship with 40 crew members is going to cost around USD 12,000 per year, or just $30 per day, inclusive of baseline hardware and service. “We think that’s a very reasonable price to pay for heightened safety prevention versus what you might lose if something goes wrong.” 

Investments made in safety are way cheaper than the cost of a lost life or injured seafarer. “Our solution is proven and can make a big difference,” says Nesje. “That’s what gets me out of bed in the morning and it’s a great feeling.”

Please do not hesitate to contact us for more information:

John Roger Nesje 
Chief Executive Officer
email: jrn@scanreach.com
mobile: + 47 959 23 490 

Jacob Grieg Eide
Chief Business Development Officer
email: jge@scanreach.com
mobile: + 47 979 88 305