The COVID-19 pandemic has brought about sudden changes for cargo transportation, impacting shippers and transport companies around the world and potentially increasing the risk environment, particularly for high-value and temperature-sensitive goods. In a new risk bulletin, AGCS’ risk consulting experts highlight a number of steps for cargo owners to consider when developing contingency plans.
While in most cases initial government directives have established cargo transportation as an essential activity, permitted during any quarantine period, a large number of companies are shutting down operations and are currently unable to handle cargo. News of business closure does not always reach transportation providers for goods in transit until after arrival at the intended destination.
This can result in unintended cargo storage in high-risk areas without appropriate security controls or protective safeguards and increased inventory levels at static locations. It may also result in damage to perishable or temperature-sensitive goods. Analysis of marine insurance industry losses by Allianz Global Corporate & Specialty (AGCS) over a five year period shows that damaged goods, including containers, is the most frequent generator in the shipping industry accounting for more than one in five claims , based on more than 230,000 claims.
“The current pandemic situation has impacted the global supply chain in an unprecedented manner and risks to cargo in storage and transit, especially to high value and temperature-sensitive goods have significantly increased,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS. “Locked down and unmanned facilities means not only an increased risk of theft and fire to the cargo but also risk of damage to goods due to extended storage periods.
Transit disruptions to cargo due to closed borders, delayed customs clearances or simply due to lack of personnel can mean long delays to delivery times or even cargo being abandoned. Companies should do all that they possibly can to implement robust planning of cargo shipments and ensure they have back-up plans in place because of the last-minute shutdowns we are seeing around the world.”
Risks to cargo in storage and transit, especially to high value and temperature-sensitive goods have significantly increased.
In the new bulletin AGCS’ risk consulting experts highlight a number of loss prevention measure for cargo owners, focusing on two areas in particular: risks for cargo storage and risks for goods in transit.
Mitigating risks in cargo storage areas
The accumulation of unattended cargo in warehouses brings the added threat of theft and organized crime. Where possible companies should strengthen warehouse security and check alarm functionality. Companies should also consider checking whether prolonged staging of loaded trailers outside of warehouse locations can be avoided, as this increases the risk of cargo theft and damage. With the coronavirus outbreak having the potential to cause prolonged disruption to supply chains inventory turn times will increase and capacity in warehousing spaces will be limited, therefore companies should also consider identifying alternative warehouse capacity in the event occupied spaces can no longer safely receive cargo.
Mitigating risks for cargo in transit
Where possible companies should obtain confirmation that the final destination is able to receive cargo prior to beginning the shipment. If necessary, prepare for the possible non-receipt of cargo at the final destination, as an increasing number of organizations are ceasing operations at short notice as a preventative measure. Companies should also make efforts to Identify the amount of cargo in transit and obtain status updates from carriers. If the intended destination is unable to receive a shipment, check whether it is possible to seek alternative destinations.
Companies should also consider utilizing trailers that have integrated GPS technology whenever possible and also integrating Internet of Things monitoring devices into cargo packaging to enhance shipment visibility. These devices are capable of providing GPS tracking of goods in transit and can provide real time location information in the event of shipment deviation or delay.
Where possible companies should also consider reviewing requirements for perishable cargoes. Food and pharmaceutical products associated with the response to the coronavirus outbreak have been given priority for temperature-controlled capacity. Therefore, non-critical perishables will be subject to increased transit time as temperature-controlled capacity is stretched. Consider to review packaging design to ensure applied schemes are able to maintain required product temperature for an extended period of time. Additional packaging or storage configurations should be considered for “just in time” perishable products not deemed critical under the latest guidance.
All of the recommendations are technical advisory in nature from a risk management perspective and may not apply to specific operations. Please review any loss prevention measures carefully and determine how they can best apply to specific needs prior to implementation. Any queries relating to insurance cover should be made with your local contact in underwriting and/or broker.
— Arrive Alive (@_ArriveAlive) March 30, 2020