• Maersk’s Sailing Routes: Reroute, Reorganize, or Relax

    A.P. Møller – Mærsk A/S (Maersk) dominated the shipping business as the world’s second-largest container shipping company in terms of fleet size and capacity of handling cargo. In December 2023, Houthi attacks on various Maersk vessels passing through the Red Sea interrupted supply chains from Asia to Europe. One Maersk vessel was hit by a missile while travelling from Salalah, Oman to Jeddah, Saudi Arabia. Maersk temporarily halted all its container shipments via the Red Sea route. One week after resuming travel, a second Maersk vessel was hit. Container ship operations in the Red Sea were again forced to stop. The US Central Command and other co-operative groups such as the Combined Maritime Forces intervened to help normalize the unrest created by Houthi rebels but their efforts had little impact. Maersk’s share price fell by almost 5 per cent in December 2023. Maersk was wondering how to resolve its situation and move forward. Should it evaluate alternative routes or transportation modes to continue providing seamless shipping services to its clients? Should Maersk continue or enhance its recently implemented policies for transit disruption fees? Or should Maersk follow a demand-driven route, in addition to the disruption fees, to maintain vessel and crew safety?
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  • Silicon Valley Bank: Victim of Risk, Regulation, or Governance?

    By 2023, Silicon Valley Bank (SVB) in Santa Clara, California, had been successfully providing financial services to venture capitalists and private equity firms for 40 years. The bank, which catered to clients from the innovation and technology sectors, ran into problems and was taken over by the Federal Deposit Insurance Corporation (FDIC) on March 10, 2023, becoming the second largest US bank to fail after Washington Mutual collapsed in 2008. The US Federal Reserve System (FRS), while being criticized for having lax standards that contributed to the catastrophe, maintained that it had provided several warnings. The United States Senate Banking Committee planned to organize a formal congressional hearing to investigate the nature of SVB’s failures and flaws and to question the FRS and evaluate the regulator’s response to the same. Everyone involved was shocked by the collapse of a large bank like SVB. Was it an erroneous business model that concentrated on sector-specific clients that had led to SVB’s downfall? Or was the failure due to lax banking rules? Could a poor regulatory environment be held responsible? Another possibility was that SVB’s weak risk management oversights and controls could be blamed. What could SVB have done to avoid the disaster? What lessons could the banking sector learn to avoid such collapses in the future?
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