Risk Management

The Group has a risk management structure in place which is designed to identify, manage and mitigate the principal risks and uncertainties which it faces, details of which are set out below.

Risk

Description of risk

Mitigation

Safety and business continuity The Group is dependent on the safe operation of its vessels and plant & equipment. There is a risk that any of the Group’s vessels could be involved in an incident which could cause loss of life and cargo, and cause significant interruption to the Group’s business. The business of the Group is also exposed to the risk of interruption from incidents such as mechanical failure, or other loss of critical port installations or vessels, or from labour disputes either within the Group or in key suppliers, for example ports or fuel suppliers. In mitigation, the Group ensures that management systems within its compass instil a safety culture throughout all aspects of operations both ashore and afloat through the application of appropriate policies and procedures in place. Regular audits ensure continued compliance to these high standards are maintained. The Group insures its vessels and plant and equipment against loss and / or damages. The Group also carries insurance in respect of third party liabilities in line with industry practice and international conventions. The Group does not carry insurance for business interruption due to the cost involved relative to the insurable benefits. The operation of vessels of the type listed by the Group is subject to significant regulatory oversight by flag state, port state and other regulatory authorities.
IT systems, information security and cyber threats Maintaining adequate IT systems and infrastructure to support growth and development may be affected by:
  • accidental exposure or deliberate theft of sensitive information;
  • loss of service or system availability;
  • significant system changes or upgrades; and
  • cybercrime.

IT standards and policies have been subject to on-going review to ensure they conform to appropriate best practices.

IT disaster recovery and crisis management plans are in place and tested. Dedicated IT personnel with the appropriate technical expertise are in place to oversee IT security.

Commercial and
market risk
The passenger market is subject to prevailing economic conditions, the strength of Sterling relative to the Euro (which impacts positively on both incoming demand to Ireland and on translation of Sterling revenues) and to the competitive threat from short-haul and regional airlines. The freight market is subject to general economic conditions and in particular the level of international trade in North West Europe together with overall capacity offerings. Given the mobile nature of ships there is also the risk of additional capacity arising in any of the Group’s trading areas at relatively short notice. The Group adopts a dynamic pricing approach and utilises pricing initiatives in the passenger market to mitigate against these risks. The Group has commercial arrangements with freight customers which mitigate the immediate effects of additional market capacity but in the medium term the Group is exposed to the dilution of its customer base.

Risk

Description of risk

Mitigation

Commodity price risk In terms of commodity price risk the Group’s vessels consume heavy fuel oil (HFO), marine diesel / gas oil (MDO/MGO) and lubricating oils, all of which continue to be subject to price volatility. The Group must also manage the risks inherent in changes to the specification of fuel oil which are introduced under international and EU law from time to time. The Group’s policy has been to purchase these commodities in the spot markets and to remain unhedged. Bunker costs of the Container and Terminal division are offset to a large extent by the application of prearranged price-adjustments with our customers. Similar arrangements are in place with freight customers in the Ferries division. In the passenger sector, changes in bunker costs are included in the ticket price to the extent that market conditions will allow.
Financial risks Financial risk arises in the ordinary course of business, specifically the risk of default by debtors, availability of credit insurance, fluctuations in both foreign exchange rates and interest rates, and availability of financing. Additional uncertainty arising out of the forthcoming UK European Union membership referendum. Details on mitigation of these financial risks are set out on page 23 under Financial risk management.
Retirement benefit
schemes

The Group's defined benefit obligations are exposed to the risks arising from changes in interest and inflation rates, life expectancy, and changes in the market value of investments.

In addition to normal risks attributable to the Group’s defined benefit obligations, the Group is exposed to the risk attributable to its membership of the multi-employer scheme, the Merchant Navy Officer Pension Fund (MNOPF), where the participating employers have joint and several liability for the obligations of the scheme. The rules of the scheme provide for joint and several liability for employers for the obligations of the scheme. This means the Group is exposed, with other performing employers, to a pro rata share of the obligations of any employers who default on their obligations. The Group is also exposed to the risk of a discontinuance basis debt arising (a “Section 75 debt”) if it ceases participation in the MNOPF. This would be a larger sum than the on-going deficit share and represents a contingent liability.

These risks are mitigated through balanced investment strategies and supported by appropriate employer funding through on-going and deficit contributions.

The Group monitors its exposure to the MNOPF and maintains a dialogue with the Trustees via MNOPF employer group.

Resources

The Group has the following key resources with which to pursue its key objectives:

  • A modern owned ferry fleet and container terminals
  • Access to strategically located ports and slot times
  • Recognised brand names
  • Experienced, qualified staff

Fleet and Terminals

In the Ferries division the Group employed five owned Ropax ferries during the year. Four ferries were operated by the Group, the ‘Oscar Wilde’ (31,914 Gross tonnage (GT)), delivered 1987, the ‘Isle of Inishmore’ (34,031 GT), delivered 1997, the ‘Jonathan Swift’ (5,989 GT), delivered 1999 and the ‘Ulysses’ (50,938 GT), delivered 2001. The ‘Kaitaki’ (22,365 GT), delivered 1995, was chartered out on bareboat charter. In addition, the ‘Epsilon’ (26,375 GT), delivered 2011, was chartered in on bareboat charter during the year and was operated by the Group.

In late 2015 four LoLo container vessels were acquired. Three of the vessels are utilised within the Group’s container shipping operations whilst the remaining vessel is chartered externally to a third party.

The Group has a leasehold over 36 acres from which it operates its Dublin Port container facility which comprises 480 metres of berths for container ships, with a depth of 9 to 11 metres and is equipped with 3 modern Liebherr gantry cranes (40 tonne capacity) and 8 rubber tyred gantries (40 tonne capacity) on a strategically located site within three kilometres of Dublin city centre and within one kilometre of the Dublin Port Tunnel, providing direct access to Ireland’s motorway network. In Belfast following the consolidation of the container terminal operations into 1 site at VT3, the terminal we operate under a Services Concession Agreement with BHC comprises of a 27 acre site, equipped with 3 ship to shore gantry cranes, 3 rail mounted gantry cranes and 3 straddle carriers.

Port access

The Group has access to strategically located ports in Ireland, the UK and France in respect of its scheduled ferry services. A key aspect of such access is appropriate slot times, which are critical for the operation of such services.

Recognised Brand Names

The Group has invested substantially in its brands; Irish Ferries in the passenger and RoRo freight market place and Eucon in the container freight market.

Experienced Qualified Staff

The Group, which has a rich history and origins dating back to 1837, has highly experienced and competent staff. The Group has a decentralised structure giving divisional management substantial autonomy in the management of their own divisions. At the end of 2015, the Group had 316 employees compared with 322 at the start of the year, located in Ireland (Dublin, Rosslare and Cork), the UK (Liverpool, Holyhead, Pembroke and Belfast) and The Netherlands (Rotterdam).

 

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