Why Third-Party Risk Management Matters to the Cruise Industry

Cruise lines rely heavily on third-party vendors and contractors for various services, including port services, catering, medical care, and IT infrastructure. While these third-party relationships make sure the ship sails smoothly, they can also introduce risks that are hard to manage. 

What Is Third-Party Risk Management?

Third-party risk management (TPRM) is the process that enables an organization to identify, assess, manage, and monitor risks associated with third-party vendors, contractors, and other partners. It involves:

• Establishing a framework for risk assessment
• Due diligence
• Risk mitigation
• Ongoing monitoring 

Following the TPRM lifecycle is the best way to achieve comprehensive risk management throughout the vendor relationship. The lifecycle stages include onboarding, ongoing, and offboarding. Effective TPRM ensures that every step and required activity within each lifecycle stage is properly addressed and managed.

Following the TPRM lifecycle helps cruise line organizations reduce non-compliance risk and deliver quality products and services from third parties.

Why TPRM Matters for Cruise Lines

Unfortunately, several high-profile incidents involving third-party vendors have affected the cruise industry, resulting in financial and reputation damage, making TPRM extremely important.  

Examples of Third-Party Vendor Incidents Impacting Cruise Lines  

1. Norwegian Cruise Line suffered a data breach in March 2020, potentially caused by a third-party vendor or partner. The breach impacted their customers, and hackers were claimed to be selling the data on the dark web. The breached database contained almost 30,000 records, and the data in question related to travel agents, including Co-operative Travel, Hays Travel, TUI, and Virgin Holidays, which had used a regional Norwegian Cruise Line partner portal. The breach occurred through Norwegian's travel agent portal, which suggests that the breach may have been caused by a third-party vendor or partner.
2. Carnival Corporation, the world's largest cruise line operator, was fined $40 million in 2016 for pollution violations related to its third-party vendors. A vendor was found to have been illegally discharging waste and oil from its ships, using "magic pipes" to bypass pollution controls.
3. Carnival Cruise Line was fined for a data breach in 2022 that involved the personal information of approximately 180,000 Carnival employees and customers. The breach was the result of a cyberattack on an unsecured email provider. The Federal Trade Commission fined the cruise line $20 million for inadequate data security measures. Carnival Cruise Line was fined $20 million by the U.S. Federal Trade Commission for inadequate data security measures.

Five Benefits of Having a TPRM Program

By implementing a TPRM program, cruise lines reduce the risk of incidents and breaches caused by third parties. It also protects their reputation and the safety of their passengers and crew members.

Here are five benefits to an effective TPRM program:

1. Mitigating Operational and Reputation Risks
   The cruise industry is highly susceptible to operational and reputational risks. Any incidents that occur onboard, during shore excursions, or involving third-party vendors can significantly affect the cruise line's reputation, financial performance, and future bookings. With a TPRM program, the industry can identify, assess, and mitigate these risks. TPRM ensures that third-party vendors are also following the operational standards of the cruise line.
2. Ensuring Compliance with Regulations and Standards
   The cruise industry is subject to various national and international regulations and standards, including:
   
   • International Maritime Organization Safety of Life at Sea Convention 
   • International Ship and Port Facility Security Code 
   • United States Centers for Disease Control and Prevention Vessel Sanitation Program
   Cruise lines must ensure that their third-party vendors comply with these regulations and standards. With a TPRM program, cruise lines can check if third-party vendors follow regulations, reducing the risk of fines.
3. Managing Cybersecurity Risks
   Cruise lines and their third-party vendors are also vulnerable to cybersecurity risks, such as data breaches and cyberattacks. Cybersecurity risks can result in financial losses, reputational damage, and potential legal liabilities. With a TPRM program in place, cruise lines can assess the cybersecurity posture of their third-party vendors and work with them to address any vulnerabilities.
4. Addressing Health and Safety Risks
   The COVID-19 pandemic brought health and safety risks to the forefront of the cruise industry. Cruise lines must ensure third-party vendors implement appropriate health and safety protocols to protect passengers and crew members. With TPRM, you can conduct regular health and safety audits and assessments to ensure that third-party vendors comply with industry and government regulations, reducing the risk of COVID-19 and other outbreaks onboard.
5. Improving Efficiency and Reducing Costs
   A TPRM program can help cruise lines improve efficiency and reduce costs. Cruise lines can avoid costly disruptions and downtime by identifying and addressing potential risks before they become major issues or make headlines. By leveraging vendor risk assessments and performance management data, they can also negotiate better contracts with third-party vendors.

Implementing TPRM in the cruise industry ultimately ensures the safety of passengers and crew members, whether it’s their personal data, health, or safety. Cruise lines can also keep their reputation secure while avoiding costly fines and litigation.