Estimating the impact of maritime security: financial tradeoffs between security and efficiency

Abstract

Maritime transportation accounts for over seventy percent (70 %) of global transport, thus exceeding by far the carriage of goods by air and land. In the wake of the 9/11 attacks in the United States, the International Maritime Organization under the umbrella of the United Nations, established the International Ship and Port Facility Security Code (ISPS Code); this is a mandatory set of security measures that aim to enhance the security of ships and port facilities. The enforcement of ISPS is one of the most promising and effective measures for alleviating security threats, both in terms of terrorist attacks, and sea piracy. The implementation of these measures requires large sums of investment in purchase, maintenance, and amortization of capital equipment both at ports and onboard ships; this includes X-Ray scanning, Gamma Ray, neutron scanning, biometrics; employing armed guards with ballistic vests; using computer software to identify security vulnerabilities (i.e. MSRAM Analysis Model (Burns 2013)); sharing sensitive information at a global diplomatic level, carrying out extensive training and security drills, etc. While these measures are effective and resulted in a decrease of 35 % of security threats from 2012 to 2013, at the same time the industry is concerned about the commercial and financial consequences entailed, such as delays in transportation, route deviations, and high implementation costs. Aim of this work is to evaluate this opinion dichotomy, i.e. proactive security vs. commercial and financial efficiency. To achieve this, the extended “Simon Kuznet’s Theorem” will test the Supply Chain Value and Security Risk. Econometric models will assess the security threat and the asset value pertaining to the supply chain security. The findings of this original study will assist transportation professionals in assessing the benefits of proactive security measures, and also help them verify the security-associated risks and consequences, while forecasting possible threats.