Transport Sector heading in the right direction?
By Insurance Blogger Kris Oldfield
Call it a credit crunch, an economic downturn or just a plain old recession the current financial situation is impacting in some form or another upon just about every single one of us and in many cases we having to adapt to survive. A recent survey by Marsh has highlighted the changes in attitude and strategy that are moving through the transportation and haulage insurance sector with nearly three quarters of Europe’s leading transportation firms set to review their approach to risk management in the near-term.
With just over half the respondents admitting that the Transportation sector had been hit harder than others the general mood is one of caution. Tellingly the research also shows that more than 80% of those questioned felt that Risk Management was of a much higher priority amongst senior management at their organisations since the economic downturn.
However despite the overwhelming majority of respondents seeing the need for re-assessing their risk management strategies, the research suggests that there is not necessarily a reduction in risk appetite as one may assume. The amount of respondents who felt that their board had become more risk adverse was equally matched by those who saw no change in their risk appetite (40%). Interestingly there was also a sizeable faction (14%) who believe that their organisations have actually increased their risk appetite as they look to prosper, by boldly maximising the opportunities created by their competitors caution during the downturn.
Unsurprisingly the biggest concerns in the sector are customer debt and in the near-term, credit risk. Nearly two thirds of the respondents stated that customer debt was their most significant concern with many citing the increased risk of credit lines and delayed or non payment as some of the key challenges they face. Over a quarter of all respondents also admitted that credit risk was a concern for their organization and one in six admitted that their company was either ‘fairly’ or ‘significantly’ affected by the reduced levels of trade credit available at present.
Mark Pollard, head of industry practices for Europe, the Middle East and Africa at Marsh, commented that it was unsurprising that the European Transportation sector felt that it had been hit particularly hard by the recession as the industries primary function is the delivery of goods and passengers – demand for which historically has been shown to decline in periods of recession.
However in addition to this Pollard added that the fact that firms have been able to use the recession as a springboard to make essential reviews to their approach to risk management and improve upon their existing resilience was “extremely encouraging”.
With nearly a third of those surveyed confirming that they anticipate increasing their risk management spend, the signs seem to indicate that Pollard may well be correct – especially as this comes at a time when many other areas of business are being subjected to ruthless budget reviews and cost cutting measures. In fact less than 10% of Transportation companies have indicated that they believe that they will be reducing the expenditure of their risk management budgets, a statistic that seems a clear indicator of the direction in which the sector is now heading.
InsuranceBlogger is not surprised that Risk Management in the Transport sector is thriving despite the recession. The recession itself has led to an increase in haulier cargo insurance and marine cargo insurance claims through piracy and modern day Dick Turpin highwaymen.
The old adage ‘it fell off the back of a lorry’ appears to never has been as true, as the rise in cargo and goods in transit theft continues despite major Police offensives. InsuranceBlogger believes that the ‘black economy’ is the main driving force behind this as consumer spending polarises to the ‘boot sale’ economy. Watch this space for a detailed look at risks to the haulage industry!