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Navigating between tradition and innovation

Navigating between tradition and innovation

We live in a world where Disruption became part of our daily routine. Be prepared to be a Disruptor, not the Disrupted.

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Manager, Shipping and Yachting

KPMG in Malta

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navigating between tradition and innovation

When changes anticipate regulation, the life of professionals, these being lawyers, financial or information technology advisors, is bound to be characterised by the need to face and provide answers to a number of challenges faced by clients in their work or business.

We live in a world where Disruption became part of our daily routine. Be prepared to be a Disruptor, not the Disrupted.

The expectations of clients have changed considerably over the years, particularly with regards to the time-frame within which solutions are expected to be delivered, often in the form of near-immediate, innovative answers required to the queries posed. Yet, the maritime sector is often described with reference to its natural connection with tradition and the assurance provided by past experience. These characteristics often affect the sector’s resilience to change as well as the manner and rapidity with which such change is received, if at all, among industry leaders. An explanation for this may be found through a sociocultural reading of the shipping and maritime context. Compared to other sectors, such as the manufacturing or tourist industries, decisions within the shipping industry are often taken by a restricted human capital resource insulated within a particular jurisdiction with a clear ideological and cultural footprint.

Another fundamental difference between the maritime and other specific sectors, such as those of financial or IT services, arises from the indirect, if not remote, manner in which the shipping industry is perceived when affecting the daily life of the final consumer even when shipping issues manage to attract the concern of the media and/or that of the Lawmaker. To quote a few recent examples, cryptocurrencies, blockchain technologies and cyber-security issues have notably achieved much attention even over a relatively short period of time. Markets have consequently been forced to evolve and adapt in order to integrate such innovative mechanisms, often in a total unregulated and uncertain scenario. Truly enough, there have also been attempts by certain lawmakers around the world to regulate these new devices even though when this was done the result has produced a clear lack of uniformity. Contrary to such an approach, the maritime cluster is known to welcome changes in a gentler fashion, through conventions which often take several years to come into force, with the risk that even when this happens, the resulting set of rules could even turn out to be technologically outdated (such as in the case of the Ballast Water Convention).

Having said so, it is evident that technological innovations and/or disruptions have revealed the inherent risk of mere reactionary approaches even in the maritime sphere. To quote one example, last year’s cyberattack to a worldwide major transport and logistics operator led to a standstill of its fleet operation, shutting down IT systems across multiple sites, leaving dozens of ships stranded all over the world and costing the company as much as $300 million in loss of revenues. It is impellent even for maritime professionals to be willing to embrace innovation or to do so more rapidly. The idea of having unmanned ships sailing around our shores has now become a reality with tests being carried out in the UK and Norway. The use of drones by maritime authorities to monitor greenhouse emissions by ships, or to facilitate the protection of our coasts and seas from spillage or release of noxious substances is yet another recent innovation in the industry. Innovation can be also found in alternative ways of funding shipping activities. Recent years have seen ship-owners shifting from exclusively bank sourced financing to alternative instruments such IPOs and securitisation vehicles.

Can challenges be predicted?

Probably not. But we can definitely prevent tsunami waves from suddenly hitting our shores. The polar star can be found in research and education, in diversification of investment and technological approaches and the will to embrace innovation in the new generations of ship owners and third party ship managers. It is necessary for stakeholders in the industry to appreciate that, being involved in a shipping company does not necessarily mean investing all energies in purely maritime-related assets or in a human capital made only of ship-related persons. Future generations should not be scared to depart from traditional family management models or to recruit the right advisors, particularly in key areas such as Financial Control and Information Technology. 

Challenges are here to stay. What must change is the approach towards them and the manner in which the Shipping Industry overcomes them or, at least attempts to do so. Space must be allowed for both reactive and revolutionary minds to work in symbiosis without hindering each other and with the ultimate scope of tackling existing and/or prospective challenges in a more decisive manner, rooted in a learned approach but also free from unnecessary constraints.

© 2018 KPMG, a Malta civil partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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