Shipping alliances and associated risks

Ocean alliances are an integral part of global trade. They have their own risks and benefits for customers and it is important to understand these risks. Ocean alliances are loose strategic alliances formed by carriers, or container liner companies, to share vessel capacity, port coverage, terminal facilities and trade lanes. This benefits the carriers by giving them access to higher level of vessel space utilization and reach with reduced overhead. Customer benefits from this increased coverage and reduced costs most of the time directly. The risks are divided into three categories, Proactive, Reactive and Avoid. Where proactive category risks are planned for and can be handled by the individual customers, reactive categories are handled with contingency plans after they have happened, there are usually little to no recourse to avoid these risks from happening. The final category avoid has risks best avoided as too expensive to deal with or transferred to a third party, such as an insurance provider. Proactive category has risks such as business risk, mitigated by being proactive about developments in the business field. Reactive risks include storms and force majeure as well as cargo tampering, with active contingency planning such as cut and run for vessels and seal tracking for cargo tampering. Risks best avoided are usually total loss cases best handled by insurance companies. Identified was a lack of studies done concerning ocean alliances and risk management studies in ocean freight.