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In the case of a company, for whatever reason, eg small size, appoints another person not a company employee, ie an agency to act as CSO for them, in a similar way as ISM allows this for the DPA function?

The ISPS Code doesn't specifically disallow this therefore it could be a runner. However the Code does impose some executive powers in the CSO such as ensuring the SSA's are carried out (A?11.2.2) etc which would need addressing.
Yacht management
Ensure that your vessel is taken care of from A-Z