Investment strategies in market uncertainty

The nature of the global economy is one of dynamic change. Shipping is a service industry with its demand related to changes in international trade levels and patterns. As a consequence shipping is subject to sometimes unpredictable swings in demand so that the operator is required to make strategic planning decisions while navigating through boom or bust environments. While boom economies generate rising freight rates which are welcomed and encourage investment, ship operators may also have to face falling freight demand and declining freight rates that may have significant impact on profitability, often falling to uneconomic levels for extended periods. In such a period of uncertainty and declining profitability management will make operational decisions to reduce costs. However, shipping lines operate in a market environment so any decisions made to rationalize the trade may have significant long-term competitive implications. For example, traditional micro economic theory might suggest that the prudent strategy to adopt would be to close down the operation and reopen when the market conditions improve. In a world of certainty or when costs of taking this action are zero, this would be a valid strategy. However, because of fear of competitors taking up a line's market share if the shipping company exits, even temporarily, this strategy cannot be valued simply in terms of shut-down and start-up costs. A further consideration is the fact that standard capital budgeting techniques, such as Net Present Value (NPV), cannot incorporate the flexibility to respond to new information and strategic responses explicitly into their investment analysis. This paper will demonstrate the use of Real Option Analysis (ROA) to provide guidelines for decisions about closing operations in adverse market conditions.     

Integrated Coastal Management in the Philippines: Testing New Paradigms

With fisheries declining, coral reefs battered, mangrove forests under threat, pollution levels rising, and coastal communities experiencing increased poverty, the Philippines faces severe challenges in managing its coastal resources. Coastal management efforts began in the Philippines more than 20 years ago through various community-based projects. Now, integrated coastal management is expanding in the country and holds the potential to reverse the trends. This article analyzes the situation in relation to new approaches for coastal management being undertaken through the Coastal Resource Management Project supported by the United States Agency for International Development implemented by the Department of Environment and Natural Resources. This project, drawing on the lessons generated by past and ongoing coastal management initiatives, is emphasizing integrated approaches to management over narrowly focused fisheries management and habitat protection efforts. It highlights the increasingly important role of local governments and the changing roles of national government to effectively support integrated coastal management. Multisectoral collaboration is explained as standard procedure to achieve outcomes that are broad based and sustainable. Local and national level activities are contrasted and shown as essential complements in building institutionalization of resources management within all levels of government. A practical result framework is explained for measuring relative success at the local government level of implementing best practices for coastal management. Finally, lessons being learned related to collaboration, level of focus, education, and communication; who is responsible; and expansion of the project are highlighted.     

A numerical model of the long term flow along the Malin-Hebrides shelf

A three dimensional hydrodynamic model of the Malin-Hebrides shelf region is used to investigate the spatial variability of the wind and tidally induced residual flow in the region and the influence of flow from the Irish Sea and along the shelf edge. By this means it is possible to understand the spatial variability in the long term observed flow fields in the region and the range of driving forces producing this flow. The model uses a sigma coordinate grid in the vertical with a finer grid in the near surface and near bed shear layers. The vertical diffusion of momentum in the model is parameterised using an eddy viscosity coefficient which is derived from turbulence energy closure models. Two different turbulence models are used to compute the eddy viscosity, namely a two-equation (itq²−q²ℓ) model which has prognostic equations for both turbulence energy and mixing length and a simpler model in which the mixing length is a specified algebraic function of the water depth.The wind induced response to spatially and temporally constant orthogonal wind stresses, namely westerly and southerly winds of 1 N m⁻², are derived from the model. By using orthogonal winds and assuming linearity, then to first order the response to any wind direction can be derived. Computed flows show a uniform wind driven surface layer of magnitude about 3% of the wind speed and direction 15 ° to the right of the wind, in deep water. Currents at depth particularly in the shelf edge and near coastal region show significant spatial variability which is related to variations in bottom topography and the coastline.Calculations show that tidal residual flows are only significant in the near coastal regions where the tidal current is strong and exhibits spatial variability. Flow into the region from the Irish Sea through the North Channel although having its greatest influence in the near coastal region, does affect currents near the shelf edge region. Again the spatial variability of the flow is influenced by topographic effects.A detailed examination of wind induced current profiles together with turbulence, mixing length and viscosity, at a number of locations in the model from deep ocean to shallow near coastal, shows that both turbulence models yield comparable results, with the mixing length in the two equation model showing a similar dependence to that specified in the simpler turbulence model.Calculations clearly show that flow along the shelf edge area to the west of Ireland and from the Irish Sea entering the region, together with local wind forcing can have a major effect upon currents along the Malin-Hebrides shelf. The flow fields show significant spatial variability in the region, comparable to those deduced from long term tracer measurements. The spatial variability found in the calculations suggests that a very intense measurement programme together with inflow measurements into the area is required to understand the circulation in the region, and provide data sets suitable for a rigorous model validation.