Black Sails in Sight: Shipping Companies, Private Security and Piracy

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Black Sails In Sight.

Shipping Companies, Private Security and Piracy. Lorenzo Cusinato

S2101769 Final Dissertation

10 August 2018

MSC Crisis and Security Management

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Acknowledgments

“I blame all of you. Writing this thesis has been an exercise in sustained suffering. The casual reader may, perhaps, exempt herself/himself from excessive guilt, but for those of you who have played the larger role in prolonging my agony with your encouragement and support, well…you know who you are, and you owe me.”

Brendan Pietsch

The end of a dissertation is always a special time and I would like to express my gratitude to several people that have been important to me. Firstly, I would like to thank my mother and my father for their unconditional support. A special thanks to my girlfriend Rachel for being always supportive and caring, and for forgiving me when I was neglecting her phone calls. My deepest thank to my supervisor Ludo Block, for guiding me through the dissertation and meeting with me with short notice. I would like to express my gratitude to ‘Proximities Risk Consultancy’ (Leusden, Netherlands) for their support in the making of this dissertation, in particular to Hugo Blom and Daan Brink. I am also very thankful to a consultant of G4S, and a CEO of a British PMSC although their identity will remain anonymous. A final thanks to all the participants of the questionnaire that were anonymous too, so I will miss the opportunity to thank them directly. Without all of you my research would have been impossible.

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Abstract

This research is a multiple case study set out to investigate “what factors do shipping companies take into account when hiring private security companies to secure their ships against piracy?” This research question arises from the fact that different sources confirm that the maritime security industry has been overflooded with security firms in the past years. The result is a steady decrease of prices for the protection of the vessels and the inevitable decrease of the quality and capability of PCASPs (Privately Contracted Armed Security Personnel). This allowed shipping companies to select PMCSs with increasingly lower prices. Well established PMSCs, with quality and standards as a priority, particularly suffered in this situation as their prices were inevitably higher in order to maintain such standards. Shipping companies, oil and bulk tankers operate in an extremely demanding environment that is characterised by complexities and tight coupling. The reliance on PMSCs with low standards and ‘sloppy’ preparation is a real security issue that can lead to serious accidents. The price of ‘marine accidents’ are severe and will be payed firstly by the workers on the ship and the society as whole, in a worst case scenario.

The research demonstrates that there are different factors that shipping companies consider before hiring PMSCs; the risk exposure, the costs for enhanced security, and the risk appetite of the shipping firm. But the greatest difference lies how committed a certain company is to security and reliability. Therefore, the strata which the shipping companies own has to be considered. Big shipping companies and ‘big oil’ will invest much more in reliable PMSCs compared to smaller ones as security and reliability is a primary concern.

The data collection has been done through interviews and a questionnaire that involved different actors; namely Private Maritime Security Companies (PMSCs), shipping companies, and risk consultancies. The theories selected for the analysis are the ‘High Reliability Theory’ and the ‘Normal Accident Theory’.

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globe where modern piracy is more active. These locations are Nigeria and close to the delta of the river Niger, the Gulf of Aden next to Somalia, the southern area of the Red Sea, the seas that surround India (in particular between Sri Lanka and India), and the Malacca strait between Indonesia and Malaysia.3 Those specific locations, and the surrounding seas, are

densely navigated by cargo vessels and more generally ships that deliver an array of goods, such as oil, gas and even wheat. Maritime transport is essential to the world’s economy as over 90% of the world’s trade is carried by sea.4 Furthermore, maritime shipping is still one

of the most cost-effective way to transport goods, therefore a menace to this business must be considered as a menace to the world-wide economies and globalisation. The most direct way piracy affects the global economy is the increased price of the premium that shipping companies pay in order to secure their vessels, the goods and the crew. An increased price of the premium coincides with a consequent and direct increase of any good transported by a shipping company.5

An escalation of piratical activity was witnessed in the area of Somalia, between the late 90s and continuing to 2012. The media coverage of the so called ‘resurgence of piracy’ was extensive and attracted the public opinion, fostering the debate for a ‘concrete solution’. On the other hand, the persistency of piracy through the centuries suggests that this crime is extremely difficult to tackle and requires world-wide cooperation and particular attention to

1_{I would like to express my gratitude to ‘Proximities Risk Consultancy’ (Leusden, Netherlands) for}

their support in the making of this dissertation, in particular to Hugo Blom and Daan Brink.

2_{Hassan, Daud, and Sayed M. Hasan. "Origin, development and evolution of maritime piracy: A}

historical analysis."International Journal of Law, Crime and Justice49 (2017): 1-9.

3_{Forster, Bruce A. "Modern maritime piracy: An overview of Somali piracy, Gulf of Guinea piracy and}

South East Asian piracy."The English Historical(2017): 1291-1317.

4_{Business UN, https://business.un.org/en/entities/13}

5_{Sullivan, Alexa K. "Piracy in the Horn of Africa and its effects on the global supply chain."}_{Journal of}

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the lands where pirates reside. In fact, piracy is often described as a ‘land-based problem’6.

The most severe, or most media-covered, piratical accidents happened between 2009 and 2012. A land-based approach, to tackle the problem was not planned, considering the ‘failed state nature’ of Somalia. Instead, a more proactive approach was implemented with the presence of armed guards on board of shipping-cargo vessels. The private sector, in accordance with the US authority’s recommendations, increasingly employed private security contractors for the safety of vessels.7 Another incentive, for the shipping companies to hire

PMSCs, is the reduction of the premium for the insurance company which could be up to 40%, depending on the insurance firm.8 Some of the insurance companies, in fact, considered

the risk of piracy (and all the potential risks related to an attack) as too high, and therefore, the on-board protection with armed guards would lower the risks of economic loss for the insurance carrier.9 These events fostered the maritime security business and many private

security firms took advantage of this situation, opening new security firms or maritime branches. Nowadays, many shipping companies consider the on-board presence of security teams as a standard practice. The private maritime security companies (PMSCs) are payed and prepared to deal with crisis situations on-board of vessels. It is possible to assume that these PMSCs have a rational approach to crisis and security management, based on intense pre-crisis preparation that entails intense training, ship hardening, intelligence and monitoring. This assumption is based on different indicators like the International Code of Conduct (ICOC)10, the ISO norms that set an international standard and common procedures

for MSCs11, and other documents such as the ‘Best Management Practice’ (BMP4)12 and the

‘International Ship and Port Facility Security Code’ (ISPS Code)13. Consequently, shipping

companies hire these highly qualified security companies in order to protect their ships with

6_{Bellamy, Chris. "Maritime piracy: return of the world's second-oldest security problem."}_{The RUSI}

Journal156, no. 6 (2011): 78-83.

7_{Mineau, Michael L. "Pirates, blackwater and maritime security: The rise of private navies in}

response to modern piracy."J. Int'l Bus. & L.9 (2010): 63.

8_{Ibid., P.71.}

9_{Percy, Sarah, and Anja Shortland. "The business of piracy in Somalia."}_{Journal of Strategic}

Studies36, no. 4 (2013): 564.

10_{ICOCA official website. Available at:https://icoca.ch/sites/all/themes/icoca/assets/icoc_english3.pdf} 11_{ISO official website. Available at https://www.iso.org/obp/ui/#iso:std:iso:28007:-1:ed-1:v1:en} 12_{EUNAVFOR. Available at:} http://eunavfor.eu/wp-content/uploads/2013/01/bmp4-low-res_sept_5_20111.pdf

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the highest quality-standards available in the market. On the other hand, there are other indicators such as newspaper articles14 which suggest that there are many MSCs in the market,

with doubtful origins and reliability (failed compliance with anti-money loundering is one example) that entered in the maritime security market, offering their services on board of shipping-cargo vessels for a price that is sensibly lower than MSCs with ‘western standards’ that comply with the previously mentioned international norms and regulations. Evidence of this fact is the decision of G4S to withdraw from the maritime business because they could not compete with the price offered by these companies offering cheaper services.15

Taking into consideration the above-mentioned differences between MSCs, the ambition of this thesis is to understand the factors that shipping companies take into account when they hire private security companies to secure their ships against piracy.

From the beginning of the research two hypothesis have been predicted for the behaviours of shipping companies when considering private security. On one side there may be shipping companies that have a ‘high-reliability approach’ to crisis management and therefore want to hire the more expensive MSCs complying with all the regulations. On the other side, there are shipping companies that are driven by cost-efficiency approach and hire the cheapest MSCs. These preliminary speculations do not answer ‘why’ and reasons for such scenarios are expected to become uncovered.

Part of the scientific relevance for the completion of this thesis is the lack of research regarding this particular topic. There has not been sufficient academic attention to deepen the knowledge regarding the rationale behind hiring armed guards on board of shipping vessels and the parameters that shipping companies use to choose specific private security companies. Much of the literature is focused on the debate to whether it is opportune or not to employ MSCs on board of private ships. Another part of the literature concentrates on the discussion concerning the effectiveness of MSCs in combatting piracy’s root causes or if it is just a ‘temporary’ solution to a multidimensional problem. Therefore, this research will attempt to fill a gap in this area of the academia.

As part of the societal relevance of this dissertation, the research will improve the general knowledge of the security practices in the context of maritime shipping, which is a fundamental topic in transportation security. Moreover, another benefit will be the increased

14_{Leask, David. “Ukrainian mercenaries are using Scottish ‘tax haven’ firm as front”. The Herald Scotland,16} February 2016. Available at:

http://www.heraldscotland.com/news/crime_courts/15998656.Ukrainian_mercenaries_are_using_Scottish__ __tax_haven____firm_as_front/

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understanding of the business of Maritime Security Companies. In addition, this research can promote further debate amongst professionals, highlighting knowledge gaps for future research, with regards to the security standards on board of shipping-cargo vessels, increasing the attention the issue of piracy receives.

This thesis will try to answer the following research question:

What factors do shipping companies take into account when they hire private security companies to secure their ships against piracy?

Some scholars might think that piracy is a problem that has been dealt with effectively in the period from 2009 to 2010, and therefore does not need further attention or academic debate. In fact, there has been no successful hijacking in the waters surrounding Somalia from 2012 to 201716. Nevertheless, piracy and sea robberies in South East Asia have fluctuated over the

past ten years17. But even more important, the literature seems to suggest that there is a

substantial issue of unreported cases of piracy attacks in the world.18 Unreported cases of

piracy are so common that up to 70% of attacks are thought to be undeclared in the Gulf of Guinea.19 Non-reporting of an attack is against international law and the correct procedure

entails the reporting of every case of piracy in the world to the International Maritime Bureau (IMB) and the International Chamber of Commerce (ICC). There are many reasons why this phenomenon happens and the most plausible one is because shipping companies (or owner of the ship regardless of the business) do not report piracy accidents in order to avoid the increase of a premium for their insurance. Another plausible speculation might be that sailors do not want to attract the attention of the media in a particular location because this could contribute to an increase of piracy in that area. A further, less severe explanation could be

16_{Graham, Luke.}_{“Somali pirates hijack first commercial ship in 5 years”. CNBC, 14 March 2017.} Available at:

https://www.cnbc.com/2017/03/14/somali-pirates-hijack-first-commercial-ship-in-5-years.html

17_{Rahman, Chris. "Piracy in Southeast Asia: Trends, Hot Spots and Responses ed. by Carolin Liss}

and Ted Biggs." Contemporary Southeast Asia: A Journal of International and Strategic Affairs 39, no. 2 (2017): 414-416.

18_{Sullivan, Alexa K. "Piracy in the Horn of Africa and its effects on the global supply chain."}_{Journal of}

Transportation Security, no. 3 (2010): 240.

19_{Alqattan, Mohammad EA, Tim Gray, and Selina M. Stead. "The Forgotten Pirates: Iraqi and Iranian}

Pirates in the Arabian Gulf Who Have Never Been Reported to the International Maritime

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that the unreported attacks were not serious, and the captain decided not to report them in some cases.20 Considered the issue of ‘dark numbers’, it seems clear that piracy is still an

important issue of international security, worthy of academic debate.

20_{Alqattan, Mohammad EA, Tim Gray, and Selina M. Stead. "The Forgotten Pirates: Iraqi and Iranian}

Pirates in the Arabian Gulf Who Have Never Been Reported to the International Maritime Bureau." Studies in Conflict & Terrorism (2017): 1-10.

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Chapter 2

Body of knowledge and theoretical framework Introduction

The first chapter introduced the context of the dissertation and the research question. This chapter establishes the ‘body of knowledge’ and the theoretical framework that allowed for analysis. The first paragraph introduces a definition of the phenomenon of piracy and summarises the current academic debate regarding the protection of merchant vessels with the employment of PCASPs. Although the deployment of PCASPs is an accepted procedure nowadays, there is still academic debate regarding the appropriateness and effectiveness of deploying private armed guards. The second section illustrates the theoretical framework. Two theories have been selected; High-Reliability Theory and Normal Accident Theory. While HRT focuses on factors that increase organisational reliability, NAT concentrate on organisational attributes that can lead to accidents.

2.1 Body of knowledge

Although piracy is a well-established crime, there is no international agreement on its definition. The ‘International Maritime Organisation’, a United Nation’s agency defines piracy as:

(a) any illegal acts of violence or detention, or any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft, and directed:

(i) on the high seas, against another ship or aircraft, or against persons or property on board such ship or aircraft;

(ii) against a ship, aircraft, persons or property in a place outside the jurisdiction of any State; (b) any act of voluntary participation in the operation of a ship or of an aircraft with knowledge of facts making it a pirate ship or aircraft;

(c) any act of inciting or of intentionally facilitating an act described in subparagraph (a) or (b).21

This definition of piracy is one of the most renown and it is also shared by the ‘International Maritime Bureau’ (IMB), a division of the International Chamber of Commerce, which is one

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of the main authorities in the maritime sector for the establishment of international norms and standards.22

Most of the contemporary academic debates concerning piracy have been focused on the area of Somalia, while South East Asia was discussed more during the late 90s. The attention that Somalian piracy has received is partially driven by its intense media coverage and its increased occurrence since 2005 and more specifically between 2009 and 2011 when it became significantly more violent. Moreover, the unruliness of Somalia and the presence of Islamist groups such as Al-Shabab increased the caution of the International community, which feared a partnership between the two factions. However, this speculation was discovered to be unfounded.23

Due to the strategic importance of the Somalian waters for the International shipping (oil in particular), different naval operations were created to secure the free passage and disrupt piratical activities. The operation ‘Ocean Shield’ was implemented by NATO between 2009 and 2016. The European Union created the ‘Operation Atlanta’ which is still ongoing. In addition, there are two task forces (T.F. 150/151) that are currently in activity, which patrol the Indian Ocean, the Gulf of Aden and the Arabian Sea.24

While the cooperation against piracy along the coast of Somalia has been an example of international cooperation, its overall effectiveness has been challenged. The modus operandi of modern pirates involves a ‘mother ship’ and one or more very small boats to enlarge the range of attacks. These small boats were usually very difficult to detect in the open sea for modern navies.25 Another factor to challenge the effectiveness of the coalition’s navies is the

widespread presence of Maritime Security Companies, with armed guards, on board of shipping vessels. It is not clear to what extent the military operations deterred the pirates, since attacks occurred with or without the presence of the Navy.26 It seems more reasonable to

assume that the presence of armed guards was so widespread, making piracy simply too risky. Since 2012 the number of attacks declined dramatically in Somalia.27

22_{International Chamber of Commerce. Available at: https://www.icc-ccs.org/piracy-reporting-centre}

23_{Stevenson, Jonathan. "Jihad and piracy in Somalia."}_{Survival52, no. 1 (2010): 27-38.}

24_Ibid. 25_Ibid.

Studies36, no. 4 (2013): 541-578.

27_{Bueger, Christian. "Learning from piracy: future challenges of maritime security}

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There is an overall disagreement amongst both academic and practitioner circles regarding the appropriateness and effectiveness of employing private security companies on board of shipping vessels. On one side, some scholar believe that the presence of armed guards can potentially escalate the confrontation between pirates and officers, endangering the ship, the crew, and the goods transported. The greatest fear for the sailors is the potential use of rocket propelled grenade (RPG) against a ship, which pirates might use in the event of a failed boarding of a vessel. The presence of armed guards might frustrate the pirates and consequently increase the possibility of the use of such weaponry. The same scholars against MSCs, further argue that fighting the pirates in the sea, is not a comprehensive approach to tackle the problem. An effective approach would be to address the land-based root causes of piracy. 2829

On the other hand, other scholars and different authorities such as US Navy, supported the idea of highly specialised armed guards on board of private ships. “We would encourage shipping companies to take proactive measures to help ensure their own safety”30. Firstly, the

security personnel are highly trained, and they usually have previous experience with special force units of the navy or similar backgrounds. Therefore, they are appropriately qualified professionals to deal with the dangerous and stressful environment created by pirate attacks. Less experienced, random crew members, appointed to deter an attack might put their own lives and the lives of other members of the ship in danger, and the integrity of the cargo may be compromised. 31

Another reason why MSCs are employed, even in the patrolled waters of Somalia, is because there is no guarantee that the navies will intervene before the pirates are able to gain access to the vessel. The international coalitions have been assigned an area of 2.5 million square metres of waters to patrol, of which only a limited amount can be secured at any one time. In

28_{Harrelson, Jill. "Blackbeard meets blackwater: An analysis of international conventions that address}

piracy and the use of private security companies to protect the shipping industry."Am. U. Int'l L.

Rev.25 (2010): 283.

29_{Onuoha, Freedom. "Sea piracy and maritime security in the Horn of Africa: The Somali coast and}

Gulf of Aden in perspective."African Security Studies18, no. 3 (2009): 31-44.

response to modern piracy."J. Int'l Bus. & L.9 (2010): 64.

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a case of pirate attack, the intervention by a Navy unit is expected to arrive roughly 20 minutes or more after the assistance request. If the pirates get on board, the navy usually do not send troops in the ship for fear of casualties among the crew and risk of endangering the cargo. On the other hand, the presence of the navy usually deters the pirates from proceeding with their plans.32

But the main incentive for hiring private security derives from the extra cost incurred from paying a premium to an insurance company, as previously stated in the introduction. Some insurance companies offer a discount up to 40% if armed guards are on board of vessels.33 In

the United Kingdom the insurance companies were not willing to offer a cover ‘unless recognisable and enforceable standards are implemented upon the basis of which insurers can assess risks and set premiums’34.

2.2 Theoretical framework

In order to allow for analysis, this thesis relies on two different theoretical frameworks. The ‘high reliability theory’ is employed to understand the decision making process of shipping companies which adopt a ‘high reliability approach’ and in contrast, the ‘Normal Accidents Theory’ is used to explain those shipping companies that are driven by a ‘cost efficiency approach’.

Before delving into the theories, it is important to clarify why shipping companies seek a ‘high reliability approach’ or a ‘cost-efficiency approach’. The nature of a shipping company can influence a culture of security that is embedded in their organisational values. Therefore, any other organisational goal, such as efficiency and competitiveness of any single transit are treated as a secondary priority. Accidents must simply never happen for these shipping companies, that are call ‘high reliable organisations’. The cost of dealing with potential damages or disaster is too great to be underestimated when considering safety procedures.35

Studies36, no. 4 (2013): 548.

response to modern piracy." J. Int'l Bus. & L. 9 (2010): 71.

34_{Zedner, Lucia. "Liquid security: Managing the market for crime control."}_{Criminology & Criminal}

Justice6, no. 3 (2006): 276.

35_{Boin, Arjen, and Paul Schulman. "Assessing NASA’s safety culture: the limits and possibilities of}

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On the other hand, the maritime shipping industry operates in a highly volatile and competitive market. These characteristics were further exacerbated by the economic crisis in 2008 that caused a steady decline in the daily shipping rates.36 The economic pressure was

increased for the shipping companies that were pushed toward economic efficiency and competitiveness to adapt to the market. As a result, some shipping companies followed a ‘cost efficiency approach’ described by the ‘Normal Accident Theory’ for two main reasons. Firstly, the economic pressure does not allow many firms to invest in enhanced security if they want to maintain their profit margins. Secondly, some shipping companies decide not to invest in reliable security (for a higher price tag) because they are willing to take a greater risk in order to maximise profits and reduce the costs. Obviously, this corresponds to a decrease of the on-board security.37

Both ‘high-reliability’ and ‘cost-efficiency’ represent a rational approach to decision-making, the difference lies in the circumstance of the decision-making process and the goal that a specific shipping company wants to achieve.

‘High Reliability Organisations’

Shipping companies face very challenging organisational issues, some of which are inherently linked with this type of business, such as coordination, efficiency and accuracy in meeting the needs of the customer, logistical challenges and many more. But another central concern is the security of the ship. ‘The Guardian’ considered working in ‘the high sea’ in a cargo vessel as one of the most complicated and dangerous environments on the planet.38 For

commercial and Navy ships alike, one of the main concerns is the safety procedures related to fire safety and the maintenance of the engines. Moreover, in many circumstance commercial ships, like bulk tankers transport highly dangerous materials like oil and gas and other potentially hazardous substances. Therefore, companies that are responsible for these materials must obtain the highest standard of security in a very un-permissive environment. There are an uncountable series of standard operating procedures (SOPs) written by several maritime authorities that can illustrate the risks and importance of highly reliable safety

36_{Investment tools. http://investmenttools.com/futures/bdi_baltic_dry_index.htm}

37_{Perrow, Charles. Normal Accidents: Living with High Risk Technologies-Updated Edition. Princeton}

university press, 2011.

38_{George, Rose. “}_{Worse things still happen at sea: the shipping disasters we never hear about”. The Guardian,} 10 January 2015. Available at: https://www.theguardian.com/world/2015/jan/10/shipping-disasters-we-never-hear-about

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procedures on shipping vessels.39 A ‘mistake’ that causes structural damages on a bulk tanker

carrying oil along the coasts of Africa, could potentially affect millions of people and create a catastrophic tragedy. In such context piracy is added to the strategic calculation of security. For academics it is extremely complicated to theorise and understand from an organisational point of view, an organisation that does not and cannot fail, without passing through a process of trial and error. ‘High reliability management’ is a managerial theory that focuses on the exploration of “the conditions that are associated with large-scale operating systems already performing at an extraordinary level of safety and productive capacity in the face of very demanding circumstances”40. The companies that are under this category are called High

Reliability Organisations (HROs). K. Roberts, in order to identify an HRO asked the following question, “How often could this organisation have failed with dramatic consequences? If the answer to the question is many thousands of times the organisation is highly reliable”41. Furthermore, J.C. Spender and P.E. Bierly consider the choice of ‘reliability

above profit’ or even reliability above any other organisational goal, as a core characteristic of HROs.42

HROs have different common characteristics, regardless of the variety of activities they have to deal with. The main goal of an HRO is to operate highly complex and demanding technologies and operating them at high regime for a variable amount of time, with intermittent moments of high demand, but still maintaining a high level of reliability and security.43 Another common characteristic amongst HROs is that the top managers are

committed to maximising the level of performance and production. In contrast, senior officials are responsible for the reliability and safety of the organisation, despite possible difficulties in the operating conditions. An adequate communication between these two levels is crucial for high reliability, and in many cases of failures, the root causes were identified

39 _{Shilavadra, Bhattacharjee. “23 Important Maritime Codes Used in the Shipping Industry”. Marine Insight, 6} September 2017. Available at: https://www.marineinsight.com/maritime-law/21-important-codes-used-in-the-shipping-industry/

40_{La Porte, Todd R. "High reliability organizations: Unlikely, demanding and at risk." Journal of}

contingencies and crisis management 4, no. 2 (1996): 60.

41_{Roberts, Karlene H. "Managing high reliability organizations." California Management Review 32,}

no. 4 (1990): 101-102.

42_{Bierly III, Paul E., and J-C. Spender. "Culture and high reliability organizations: The case of the}

nuclear submarine." Journal of management 21, no. 4 (1995): 643.

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primarily concerning inadequate communications.44 A further feature of HROs is that standard

operating procedures are not sufficient to understand the technicalities of a certain organisation, its cooperative skills and its motivations.45 In other words, studying the SOPs of

a certain HRO company will not give you a comprehensive understanding to why certain performance levels were achieved. A key essence for understanding HROs is through the organisational ‘culture’. Culture in high reliability theory is “the body of shared knowledge built up through learning”46. Trial and error are the essence of empirical science, but clearly

this method is not feasible in a high-risk context. Learning is often a group process that involve collective bonds and trust within the personnel of a HROs. In many cases, even a ‘near-accident’ can induce a learning process that will affect the culture of the organisation.47

With this theoretical framework, the intention is to investigate the factors that shipping companies consider when hiring private security companies. In the context of this thesis, the ‘High Reliability Theory’ will allow for analysis of the shipping companies that intend to hire the PMSCs that comply with all the standards and are usually more expensive. It is reasonable to believe that many of the shipping companies are HROs and have a high-reliability approach toward crisis management, considering the operating procedures that are available, such as the ISO norms and ISPS. But according to the theory, lingering on the standard operating procedures does not allow for a comprehensive study of HROs, and further investigations are necessary, for example on how SOPs are really employed in a specific company. Consequently, the ultimate goal for these organisations is to be ‘highly reliable’ even in cases of pirate attacks.

On the other hand, shipping companies that do not follow the characteristics described in high reliability management, would be driven by alternative goals in their decision making-process, such as economic incentives and cost efficiency (cheaper MSCs and insurance premium discount), rather than high reliability, and their selection of an MSC would mirror this attitude.

contingencies and crisis management 4, no. 2 (1996): 61.

45_{LaPorte, Todd R., and Paula M. Consolini. "Working in practice but not in theory: theoretical}

challenges of" high-reliability organizations"."Journal of Public Administration Research and Theory:

J-PART1, no. 1 (1991): 19-48.

nuclear submarine." Journal of management 21, no. 4 (1995): 643.

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Normal Accidents Theory

While High Reliability Theory “looks for organisational factors and processes that contribute to reliability, Normal Accidents Theory focuses on organisational properties that lead to accidents”48. Charles Perrow is undoubtedly the leading scholar of this theoretical approach,

and his book “Normal Accidents, living with high risk technology” is still influential.49

The core essence of this theory is that catastrophic accidents are inevitable in presence of high risk technological systems, characterised by ‘complexities’ and ‘tight coupling’.50

“Complex interactions” are defined as “those of unfamiliar sequences, or unplanned and unexpected sequences, and either not visible or not immediately comprehensible”. 51 Different

factors can contribute to complex interactions such as components that have a multiple function, physical proximity of components; specialised knowledge of the personnel that limit their awareness of components etc.52 In a tightly coupled system “the initial failures

cannot be contained or isolated and the system is halted; failures will cascade until a major part of the system, or the entire system, will fail”.53 Consequently, although very rarely,

complex systems can suffer major accidents due to multiple failures that connect with each other in an unpredictable disorder, making the chain of failures almost impossible to predict and anticipate.54 “The alarm rattles the bell; the bell shatters the whistle; the whistle explodes;

and suddenly the whole system collapses”55.

48_{Shrivastava, Samir, Karan Sonpar, and Federica Pazzaglia. "Normal accident theory versus high}

reliability theory: a resolution and call for open systems view of accidents." Human relations 62, no. 9 (2009): 1365.

49_{Sagan, Scott D. "Learning from normal accidents."}_{Organization & Environment}_{17, no. 1 (2004):}

15-19.

university press, 2011. Chapter 3

university press, 2011. P. 78

52_{Shrivastava, Samir, Karan Sonpar, and Federica Pazzaglia. "Normal accident theory versus high}

reliability theory: a resolution and call for open systems view of accidents." Human relations 62, no. 9 (2009): 1360.

53_{Perrow, Charles. "The limits of safety: the enhancement of a theory of accidents."}_{Journal of}

contingencies and crisis management2, no. 4 (1994): 216.

54_{Sagan, Scott D. "Learning from normal accidents." Organization & Environment 17, no. 1 (2004):}

15-19.

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Perrow identified different situation at risk of catastrophic accidents such as nuclear power stations, petrochemical plants, aircraft and airways, marine shipping, mines, dams and many others. Particular attention is given to Marine accidents and a fundamental factor for increased risk is the production pressure (which applies to other industries as well).

Rasmussen, in line with Perrow, sustains that today’s competitive environment pushes decision-makers in to seeking cost efficiency and short term financial and survival criteria instead of investing in welfare, low environmental impact and safety.56 57 Both Rasmussen and

Perrow believe that commercial success, “implies exploitation of the benefit from operating at the fringes of the usual, accepted practice”.58 These factors are witnessed in the marine

shipping industry, where the pressure of competition is experienced by ‘blue-collars’ and ship officers alike under the form of tight scheduling and ‘efficiency’.59 In addition, naval safety is

under the risk of decreasing, since shipping companies are increasingly operated by banks and investors instead of shipping professionals who understand the complexities of marine operations.60

Production pressure in decision making, concludes Perrow, can increase “the proximities of subsystems and reduce the amount of slack available, moving it towards the complex, tight coupled systems”, which can potentially lead to catastrophic accidents.61

Considering the context of this research, an excessive concern over cost efficiency in the decision making process of the shipping industry, related to the selection of PMSCs, can lead to poor security practice on board of merchant vessels, oil tankers, and bulk tankers. Consequently, following the ‘Normal Accident Theory’, the employment of low quality, low standards PMSCs, in a tightly coupled and complex environment, ‘steer’ the management of

56_{Rasmussen, Jens. "Risk management in a dynamic society: a modelling problem." Safety}

science 27, no. 2-3 (1997): 183-190.

57_{Rasmussen, Jens. "Risk Management and the Concept of Human Error."}_{Joho Chishiki}

Gakkaishi5, no. 1 (1995): 39-70.

58_{Ibid., P.189}

university press, 2011. Pp. 179-184

science 27, no. 2-3 (1997): 187.

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shippers toward an accident prone system. The burden of an eventual accident will be carried by the society and by the workers, who will pay the cost of efficiency above security.

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Chapter 3

Research design

Introduction

The previous chapter illustrated the current academic debate regarding piracy and the theoretical framework that allows for analysis. Whereas this chapter shows the research design, created to answer the research question. Research design can be defined as the overall strategy and plan implemented in order to answer the research question in a logical, coherent manner. This chapter is organised with the following structure. The first section revisits the research question and the elements of the theory that are selected to address the research problem. Details concerning the research design are illustrated in the second section, such as the choice of qualitative research, multiple case studies (including explanations of why), embedded design etc. The third part describes the data collection phase, which has been done through semi structured interviews and through the use of a questionnaire. Following, there is a detailed report on the participant of the questionnaire. The fourth section talks about how the analysis has been conducted and which analytical method was employed to elaborate the data obtained through the interviews and the questionnaire. The final part (section 5) illustrates the limits of the study.

3.1 Research question and elements of the theory

The thesis is set out to understand the factors that shipping companies take into account when they hire private security companies to secure their ships against piracy. In the current market of the shipping industry, including oil and gas, it is possible to identify two different decision making approaches to security management, on board of merchant vessels. On one side there are some shipping companies that resemble a rational approach to security management and seek ‘high reliability’. These companies are likely to hire regulated and more expensive PMSCs as they want to be ‘free of chink in their armour’. On the other side, other shipping companies seem to be driven by a cost-efficiency rational approach rather than high reliability and are more prone to hire unregulated PMSCs with low operating standards

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and preparation. Both of them have a rational approach to decision making, one that seek high reliability and the other high cost-efficiency. Each approach can be supported by a different theoretical framework namely ‘High Reliability Theory’ (for high reliability seekers) and ‘Normal Accidents Theory’ (cost-efficiency seekers).

The thesis focuses on only specific aspects of the theories that will allow the research question to be answered.

In the case of High Reliability, two elements can help to identify a ‘HRO’ and further understand its rationale for decision making. Firstly, a ‘HRO’ does not consider reliability as probabilistic property that can be left aside for other organisational goals such as cost-efficiency and market competitiveness62. In other words, reliability above profit is a core

essence of an ‘HRO’. Secondly, another element taken into consideration is the ‘organisational culture’ of companies that should show a “culture of reliability that distributes and instils the values of care and caution, respect for procedures attentiveness, and individual responsibility for the promotion of safety among members throughout the organisation”63.

In the case of ‘Normal Accidents Theory’ the main element to be borrowed/considered is the cost-efficiency factor. The concerning factors of the theory (among others) regard the fact that today’s competitive market environment pushes decision-makers to focus on “short term financial and survival criteria rather than long term criteria concerning welfare, safety and environmental impact”64. This tendency has the potential to dramatically decrease the safety

of the operations undertaken by a company. This decrease of safety procedures takes place in a ‘dynamic society’ (a consideration shared by HRT theorists) characterised by large scale industrial installations, tightly coupled high-tech systems that further increase the risk of large scale accidents.

To sum up, these two theories and selected elements will help to understand the decision-making rationale of different shipping companies in regard to the selection of PMSCs to secure their ships against piracy.

62_{Boin, Arjen, and Paul Schulman. "Assessing NASA’s safety culture: the limits and possibilities of}

high-reliability theory." Public Administration Review 68, no. 6 (2008): 1052.

63_{Ibid., P. 1053}

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3.2 Research design

The research is designed as a multiple case study. There are a number of reasons why this design is best suited for the problem that this theses addresses. Firstly, the research focuses on different units of analysis, namely shipping companies, PMSCs and insurance firms.

While the role of the shipping companies and Private Maritime Security Companies are essential in the context of this dissertation, other actors should be considered as well. In particular, insurance firms play a crucial role in providing insurance for the risks related to piracy and, for this reason, have a certain leverage over shipping companies.

The units of analysis coincide with the different case studies.65 By involving multiple actors

(case studies) in the research, it is possible to reach a better understanding of the topic by answering the research question from different angles. “Multiple-case design allows examination of processes and outcomes across many cases, identification of how individual cases might be affected by different environments, and the specific conditions under which a finding might occur.”66 A single case study to understand the factors that shipping companies

consider when they hire private security companies, cannot be a comprehensive and accurate piece of research. There are other actors (thereby other case studies) that contribute to influence the decision making process of the managers of shipping companies, and they must be taken into account to answer the research question.

Another incentive for the choice of a multiple case study is that “case studies seek to study phenomena in their contexts rather than independent of context”67. The context of this thesis,

the hiring of PMSCs for the protection against piracy, is the essential element that bands together all the units of analysis, and the contextual conditions are closely connected to the phenomenon under examination68.

65_{Baxter, Pamela, and Susan Jack. "Qualitative case study methodology: Study design and}

implementation for novice researchers." The qualitative report 13, no. 4 (2008): 545.

66_{Mills, Albert J., Gabrielle Durepos, and Elden Wiebe, eds. Encyclopedia of case study research:}

L-Z; index. Vol. 1. Sage, 2009. Pp. 583-584

67_{Gibbert, Michael, Winfried Ruigrok, and Barbara Wicki. "What passes as a rigorous case}

study?" Strategic management journal 29, no. 13 (2008): 1467.

68_{Baxter, Pamela, and Susan Jack. "Qualitative case study methodology: Study design and}

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An important characteristic of this research is the ‘explanatory’ character. “An explanatory case study consists of: (a) an accurate rendition of the facts of the case, (b) some consideration of alternative explanations of these facts, and (c) a conclusion based on the single explanation that appears most congruent with the facts.”69 This choice has been made

considering the aim of this research, which is to explain a phenomenon; how do shipping companies select PMSCs and why do they use such criteria.

Another feature of the dissertation is the embedded design of the multiple case study. This is particularly advantageous as each individual case study is formed by a number of subunits that are individually analysed.70 Subsequently, the results are collated together to draw an

overall picture of the specific case study.71 In other words, the multiple case study is formed

by PMSCs, shipping companies and insurance firms (more details will be illustrated subsequently, in the data collection section). Each actor is represent a different case study. The embedded design in multiple case studies fits well in this thesis as it allows the additional implementation of surveys within each case and the gathering of quantitative data.72

Consequently, although this research is essentially a qualitative study, it also integrates a quantitative approach. Further details about the data collection are available in the next section.

3.3 Data collection

The methods that allowed for the gathering of primary data are semi structured interviews and questionnaires.

69_{Yin, Robert K. "The case study crisis: Some answers." Administrative science quarterly 26, no. 1}

(1981): 61.

70_{Gable, Guy G. "Integrating case study and survey research methods: an example in information}

systems." European journal of information systems 3, no. 2 (1994): 112-126.

71_{Rowley, Jennifer. "Using case studies in research."}_{Management research news}_{25, no. 1 (2002):}

22.

72_{Yin, Robert K.}_{Case study research and applications: Design and methods. Sage publications,}

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Interviews

Two risk consultancies have been interviewed, an independent consultant of G4S and two members of ‘Proximity Risk Consultancy’ (Leusden, Netherlands). Risk Consultancies have the important role of advising companies, on the best solutions for improving their security at different levels (physical but also financial), which allows them to operate in critical circumstances, helping them to protect their assets.

The technique of ‘Semi-structured interviews’, was employed for this thesis. This method entails the creation of several questions, in advance, that formed a basic structure for the interviews.73 During the interviews, there was a high level of interaction with the interviewee,

with follow-up questions raised from the answers given.

The interview questions were partially framed alongside the structure of the guidelines that are provided by the documents which illustrate the best security procedures, in case of piracy, such as the ISO standards (28007) and BMP4.The interviews covered themes that were necessary to answer the research question like: Communication and awareness; Operational Planning; Command and Control; Incidence and emergency response; the main security challenges; the factors considered for hiring a security company; preparation for dealing with piracy attacks; insurance coverage. Their perspective was extremely useful for understanding the security challenges that maritime shipping companies face, their limitations and what they really seek to enhance in their security apparatus. In addition, several questions were asked regarding Insurance companies and PMSCs.

An ulterior interview was conducted with a CEO of a British PMSC. This interview was focused on the ISO standards and the locations that represent a higher risk exposure for shipping companies and PMSCs.

Questionnaires

The other method employed in this research, for the gathering of data, is through questionnaires. “By studying a representative sample of organisations, the survey approach seeks to discover relationships that are common across organisations and hence to provide generalisable statements about the object of study”74. Three different types of actors are

73_{Harrell, Margaret C., and Melissa A. Bradley. Data collection methods. Semi-structured interviews}

and focus groups. Rand National Defence Research Inst Santa Monica ca, 2009.

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involved in this research; therefore, a questionnaire has the advantage of consulting more people in a relatively small amount of time. In addition, the questionnaires require less time for the participants and are ‘less intrusive’ compared to interviews. Considering the time restraints experienced by managerial personnel, a questionnaire makes the research more flexible and the process of gathering the data less time consuming. The questionnaire was designed to be economical with time, which should have incentivised the chosen participants to complete all the questions and was designed to reduce the risk of individuals ‘dropping out’.

The questionnaire was designed for several categories of participants, and it was created and administered using ‘Google Docs’. The first section is a general overview and applies to every group of participants involved in the research. The subsequent sections differ, depending on the category of the respondents involved (insurance company, maritime private security company, shipping company and crewing company). The participants were asked to complete only two sections of the questionnaire, designed for their sector. Consequently, it was possible to discern which actors completed a specific form, although the questionnaire was essentially anonymous. In addition, the questionnaire offered space for further written comments to be added to clarify the answers given or to add further thoughts.

Respondents of the questionnaire

A total number of sixteen participants returned feedback for this research, however, two of the questionnaires remained blank (N. 1 and 5). The participants who completed and returned the questionnaire were shipping companies (2 in total) and MPSCs (12 in total). No insurance company were willing to partake.

The questionnaires provided a multitude of information, although in two cases the participant filled only the ‘general-introductory section’. It was possible to assume that the two participants were PMSCs because of the timing with responses as the forms were sent to PMSCs first, by the risk consultancy that supported this dissertation using their networks.

An essential clarification has to be made with the results of shipping companies. As previously specified, only two ship owners completed the forms, however, their responses were comprehensive and illuminating, enabling an insight that allowed conclusions to be drawn. The small sample size and type of shipping company must be taken into consideration when drawing conclusions from this research. The questionnaires were completed in an

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anonymous fashion, designed to protect the participating companies. Once they received the on-line questionnaire, a shipping company replied to a senior manager of the risk consultancy (that supported my research with their network) confirming that they successfully sent back the form. By doing this I could deduce which company they represented and although I cannot name the companies involved it may be useful to understand that these two shipping companies are among the most important in the world, they are among the top in the industry and thus represent a particular aspect of the shipping market.

The methodological approach of case studies usually refers to qualitative studies. “It provides the opportunity to ask penetrating questions and to capture the richness of organisational behaviour”75. Nevertheless, the embedded design allows for the integration of both qualitative

and quantitative methods.76 “While qualitative research prioritises the depth and quality of

data collected, quantitative research focuses primarily on the number and volume of data collected”.77 Instead of being considered as a pitfall, the combination of quantitative and

qualitative study should be considered as a strength78. “Through the use of multiple methods,

the robustness of results can be increased; findings can be strengthened through the cross-validation achieved when different kinds and sources of data converge and are found to be congruent or when explanation is developed to account for divergence”79.

Other data collected

The previous section showed that the primary data was gathered through interviews and a questionnaire. In addition, this research widely employs official documents such as the ISO standards (ISO 28007-1:2015) and BMP4 (‘Best Managerial Practices’ for the Somali based piracy 4th version) that concern procedures for PCASPs (and their companies) on board of

merchant vessels and the best procedures to adopt against piracy. Moreover, the paper

75_Ibid.

76_{Yin, Robert K. Case study research and applications: Design and methods. Sage publications,}

2017. P. 51

77_{Anyan, Frederick. "The Influence of Power Shifts in Data Collection and Analysis Stages: A Focus}

on Qualitative Research Interview." Qualitative Report 18 (2013): 1.

systems." European journal of information systems 3, no. 2 (1994): 115.

79_{Kaplan, Bonnie, and Dennis Duchon. "Combining qualitative and quantitative methods in}

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employs a wide range of academic articles and web articles (newspaper and maritime related websites) to support the findings of the research. Furthermore, all the theoretical aspects of the thesis are built using academic secondary data.

To conclude, the gathering of data through a questionnaire shared among different actors, interviews and official documents (ISO standards, BMP4) allow for an effective ‘triangulation of methods’.

3.4 Analysis

The analysis of the data collected in this research has been done through two different methods; content analysis for the interviews and statistical analysis for the questionnaire. “Qualitative content analysis is defined as a research method for the subjective interpretation of the content of text data through the systematic classification process of coding and identifying themes or patterns”80. The interviews have been analysed using the ‘conventional

content analysis’ method that entail no preconceived coding scheme. Instead, the coding scheme emerges through a carful ‘immersion in the data’81. The data analysis started through

the careful reading of transcripts of the interviews to understand the whole picture. Then, the data was re-read, word by word, in search for patterns and key words. This phase highlighted the first ‘factors’ directly related to the research question such as: risk exposure, costs and risk appetite. The main theoretical concepts that were used in the analysis were ‘reliability above profit’ and evidence of a ‘culture of security and reliability’ for the high-reliability theory; for the ‘Normal Accident Theory’ the main concept considered was cost-efficiency. In addition, the key actors emerged such as PMSCs, shipping companies and insurance firm. All these key words were colour coded and sorted into categories in order to relate the different codes and links.

The quantitative data has been analysed through the method of statistical analysis. The questions and measurements of the survey are ‘the variables’ while the actors or participants are the ‘units’. Once the questionnaire was completed by a sufficient number of participants, ‘Google Forms’ allowed for an automatic elaboration of the data in graphs. In addition, some

80_{Hsieh, Hsiu-Fang, and Sarah E. Shannon. "Three approaches to qualitative content}

analysis." Qualitative health research 15, no. 9 (2005): 1278.

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of the questions of the shipping companies have been re-elaborated through Microsoft Excel to achieve clearer results.

This research combines different methodological approaches for the collection of the data, therefore, it can be defined as a ‘mixed method study’ (although more emphasis is toward the qualitative character of the research). The ‘mixed method study’ has received considerable academic interest and the results obtained through this method are often considered more reliable.82 Nevertheless, the analysis of the data obtained through different methods and its

integration in a single body requires particular attention. Consequently, the ‘concurrent data analysis approach’ was adopted. This approach entails that “each data set is integrated during the analytical stage to provide a complete picture developed from both data sets, after the data has been converted into either qualitative or quantitative form so that it can be easily merged”83.

3.5 Limitations

One of the most important limiting factors in this research is the questionnaire itself and its design for efficient completion. Since the possible answers are already given, in a multi-choice style, it could be argued that the questions are leading-questions and the participants may be swayed to answer in a steered direction, this method might compromise the quality of the results. Nevertheless, the questionnaire does allow the participant to add further comments and thoughts for the participants willing to. In depth qualitative interviews with all the actor involved would certainly allow for the gathering of a great quantity of information. Nevertheless, such a research is not time feasible within the scope of a master thesis.

Another key limit was the complete absence of participants related to the insurance business. Although the research relied on alternative sources to mitigate their absence, direct

82_{Some of the literature concerning ‘mixed methods’:}

Johnson, R. Burke, and Anthony J. Onwuegbuzie. "Mixed methods research: A research paradigm whose time has come." Educational researcher 33, no. 7 (2004): 14-26.

Yin, Robert K. "Case study research: Design and methods (applied social research methods)." London and Singapore: Sage (2009).

Johnson, R. Burke, Anthony J. Onwuegbuzie, and Lisa A. Turner. "Toward a definition of mixed methods research." Journal of mixed methods research 1, no. 2 (2007): 112-133.

83_{Östlund Ulrika, Lisa Kidd, Yvonne Wengström, and Neneh Rowa-Dewar. "Combining qualitative}

and quantitative research within mixed method research designs: a methodological review." International journal of nursing studies 48, no. 3 (2011): 370-371.

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information would have increased the academic value of the research since insurance firms are fundamental actors in the context of this case study.

A further limit is the reliance on the feedbacks of only 2 shipping companies that completed the questionnaire. In addition, as explained in the ‘data collection section’, the shipping companies belong to the higher strata of the market, which does not offer a broad view of the entire market. It would be ideal to extend the research to all strata of the shipping market and involve a greater number of participants belonging to the shipping industry.

An additional limit of this research is that only ‘private’ actors are involved; shipping companies, insurance firm and PMSCs. More actor could be involved (such as NATO and the EU) but due to the time constraints it is necessary to set some limits in order to make the research feasible.

Another potential issue to be considered are bias. All the other actors involved in the questionnaires might be reluctant to answer the questions openly. Two additional interviews with security consultancies mitigate this pitfall since they are aware of the actual security standards in the maritime shipping business. In addition, documents such as ICOC (International Code of Conduct), the ISO norms and BMP4 allow the information of the questionnaires and interviews to be verified and compared.

A further source of potential limits is related to the ‘case study design’, which has been criticised in terms of internal and external validity. Yin, reports that one of the main issue with case studies is that the researcher often draws a ‘sloppy’ research design.84 Internal

validity refers to “the causal relationship between variables and results”85 and the goal is to

provide “a plausible causal argument, logical reasoning that is powerful and compelling enough to defend the research conclusions”.86 The internal validity, in the case study, deals

with the issue of inferences of the researcher. Therefore, a clear research design that shows the collection of the data and its processing, and a clear chain of evidence that allows the reader to rebuild the rationale from the research question to the conclusion, fosters the internal validity. Internal validity, in this multiple case study, is achieved through the triangulation of methods, a clear research framework, and a clear explanation of data gathering and it’s processing.

84_{Yin, Robert K. "Case study research: Design and methods (applied social research}

methods)." London and Singapore: Sage (2009). Chapter 1-2

85_{Gibbert, Michael, Winfried Ruigrok, and Barbara Wicki. "What passes as a rigorous case study?" Strategic}

management journal 29, no. 13 (2008): P.3.

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The concept of ‘external validity’ lies in the fact that studies and theories should be ‘generalised’ and account for phenomena not only in the circumstances of the study but also in other different cases. Case studies and multiple case studies do not allow for statistical generalisation, which has been considered as an essential issue in the case study design.87

Nevertheless, it is still possible to achieve a ‘different’ external validity even in a case study. ‘Analytical generalisation’ is a process that differs from statistical generalisation as the former refers to the generalisation from empirical observation to theory, and the latter statistical generalisation.88 The multiple case study, with an embedded design, ‘triangulation

of methods’, and supported by a solid theoretical framework, increases the external validity of the research.

87_{Yin, Robert K. "Case study research: Design and methods (applied social research}

methods)." London and Singapore: Sage (2009). Chapter 1-2

Black Sails in Sight: Shipping Companies, Private Security and Piracy

Black Sails In Sight.

Acknowledgments

Table of contents