Incidents of piracy may have dropped but the maritime security industry is still thriving. Madis Madalik, CFO of ESC Global Security, talks about 2013, the year of survival and change for the private maritime security company.
Madis Madalik: Open-minded communication between private maritime security firms and shipping companies should be established from day one. In some cases, it makes more sense to keep the security team onboard rather than disembarking and re-embarking it within a few days. Taking this into consideration, the PMSC and client must be sure that the firearms and guards are allowed in the port of call. The initial information on this should arrive from the provider and must be double-checked by the client.
The goal behind this would be to achieve a win-win situation, where the security company does not have to cover additional third-party costs and therefore can supply the services at a better rate. In some cases (such as the Gulf of Aden and surrounding ports near Sri Lanka), the shipping company can save up to 10-30% if the journey is combined as one continuous voyage instead of two separate ones. In this case, we're talking only about the direct costs, which relate to the PMSC, meaning indirect costs would drop, too.
There are still questions regarding the function and legal classification of floating armouries, but it's clear that they help save time and money. The best example is Oman's Muscat port. Using a floating armoury instead of the port avoids rerouting the ship, saving fuel, time and money. If there's a difference of a few thousand dollars, it might be cheaper to hire a PMSC starting from Fujairah and then pay it for the extra time, rather than absorbing the indirect costs involved with embarking at the port. Another advantage is that, with floating armouries, there are neither government regulations nor port dues, which usually add costs on top of the PMSC's quotation.
The current number of security companies is certainly too big. Smaller firms will begin to disappear or merge as they struggle to keep up with the various standards. The insurances, licensing by the different flag states and authorities, maintaining equipment and daily operational costs will all become unbearable for the smaller PMSCs.
We're expecting strong price pressures on the back of that; a lot of companies will start cutting corners to keep a foothold by not insuring the company properly or by losing operational staff and legal support.
This leaves the client in a vulnerable position should any claim arise. Security is a business of trust and at some point the shipping company may forget to check its renewed policies or their actual contents.
I think that companies with fewer than 15 transits a month will have difficulties due to the immense pressure on prices. It will become really difficult to compete with other, larger companies if you only have two or three teams out at the same time.
Of course, you might have a different view on the subject. As the author Wolfgang Riebe once said, "if you think you are too small to be effective, you have never been in the dark with a mosquito". Every industry has gone through a period of mergers and acquisitions. I hope that 2013 will be the year for maritime security.
The time when security companies were paid upfront is pretty much over. Nowadays, clients are demanding payment terms of 30-60 days counted from the date when the invoice is issued. This means that shipping companies are looking for a strong financial partner to do business with. This can be achieved with open-minded communication between the client and the supplier.
The whole industry is waiting for the new ISO 28007 standard, as this will help differentiate the serious companies from those who just want to try it out. I've spoken to CEOs from various PMSCs and all support the fact that the regulations are being tightened for this reason.
Pirates in Somalia have earned about $120-200 million annually as ransom or as gross income, while the shipping industry has lost billions of dollars. I think there's been an intermission in the attacks, but I doubt the pirates have closed down their multimillion-dollar industry for no particular reason and gone back to their daily jobs to earn as little as $20 a month. You can compare the current situation to the aviation industry. In the 1970s, there were hardly any extra security measures. Could you imagine now stepping into an airport and walking straight onto an aeroplane without any security control? But would you actually want to step onto an aeroplane where the cargo and the people onboard have not passed security control?
ESC Global Security (ESCGS) is a European security company that provides privately contracted anti-piracy security solutions for vessels sailing in high-risk areas. We provide services to major dredging, tanker, heavy-lift, bulk-carrier and submersible vessel companies. We have operated in maritime security since 2010 and have vast experience in serving major European shipping companies. Positive feedback from masters of vessels for all our missions reflects the high level of customer satisfaction.
Our competence is tested and approved by international industry institutions. We are signatories of the ICoC (International Code of Conduct for Private Security Service Providers) and we are accredited members of SAMI (Security Association for the Maritime Industry). We have the Lloyd's Register ISO 9001: 2008 certificate in the provision of global maritime security services. ESCGS possesses all insurances according to GUARDCON contract requirements, and all major insurance companies have approved us. All of ESCGS's security personnel consist of military and navy-background Europeans with experience from Iraq, Afghanistan, Kosovo and Atalanta (EU Naval Force Somalia) operations, where they have served hand-in-hand with US and EU military forces.
All our security personnel are combat-experienced, highly motivated EU soldiers, under former Atalanta officers' command. Our rates are very competitive, while we do not give any drawback on quality. We can offer favourable payment terms of up to 60 days. We have provided our services on most of the respected flag states' vessels. In addition, our company has the right to serve the flag of Luxembourg, and is in the process of acquiring the rights to serve on Greece, Cyprus, Belgium and Germany-flagged ships.
ESC Global Security (ESCGS) is a European security company, providing privately contracted anti-piracy security solutions for vessels sailing in high-risk areas. We provide services to major dredging, tanker, heavy-lift, bulk-carrier and submersible vessel companies.
We have operated in maritime security since 2010 and we have vast experience in serving major European shipping companies. Positive feedback from masters of vessels for all our missions reflects the high level of customer satisfaction.
Our competence is tested and approved by international industry institutions. We are signatories of the ICoC and we are accredited members of SAMI. We have Lloyds Register ISO 9001:2008 certificate in provision of global maritime security services. ESCGS possesses all insurances according to Guardcon contract requirements and all major insurance companies have approved us. All of ESCGS's security personnel consist of military and navy-background Europeans with experience from Iraq, Afghanistan, Kosovo and ATALANTA operations, where they have served hand-in-hand with US and EU military forces.
Here's what makes us different from our competitors: