TH1802

RISK MANAGEMENT PRACTICES AND PLANNING IN TOURISM AND HOSPITALITY

Risk
The description of risk is often associated with danger or chances of loss. However, such a description is very
simple that it puts limitations on the analysis and assessment of different kinds of risk. When analyzing and
assessing risks, it may be surprising for the managers to see the many variations of its definition among
different sectors where risks are examined. Piekarz, Jenkins, and Mills (2015) made a list of the different
variations on how risk is defined:
 Asymmetric definition – description of risk that focuses more on harm and loss (negative).
 Symmetric definition – description of risk that focuses more on gains and benefits (positive and
negative).
 It can be defined on the notion of chances, probability, or likelihood.
 It can be described with the concepts of consequences, severity, and magnitude of outcome.
 It can be defined in the association with the uncertainty of things.
 It can be related to the concept of hazards.
 Risk can also be described as a vital part of adventure, sport, or business.
These definitions are based on the number of observations regarding risk. However, the common denominator
of the definition of risk lies down to the uncertainty of outcomes (Papaioannou & Shen, 2018).

Risk Management
Risks are always involved in every activity within an organization. Risk management is a process that involves
anticipating, understanding, analyzing, and addressing the risks involved in achieving the objectives set by an
organization.
In a more thorough description, risk management is the coordinated activities of all members of the
organization in directing and controlling risks. This is where all involved departments systematically set the
best course of action on how to handle the risk involved to meet their objectives (Papaioannou & Shen, 2018).

Risk Management Process

This process involves two (2) components: assessment and management. It is in the assessment component
that risk identification and risk analysis are done, while the management component involves both risk control
and risk treatment (Canadian Tourism Commission, 2003).
1. Risk Identification – It involves systematically identifying risks facing an organization. This step is also
known as “risk assessment.” Below are the ways on how an organization can identify risks:
o On-site inspections and discussions with management and staff
o Review of products, services, processes, and contracts
o Review of historical activities and losses
o Identification of possible risk scenarios.
2. Risk Analysis – It involves comparing the probability of any risk by the consequence if it does occur.
3. Risk Control – After risk identification and analysis, next is the implementation of mitigation strategies
for any unacceptable risk. This comprises two (2) primary concepts:
o Exposure avoidance involves any mitigation strategies used to avoid the exposure to risks (e.g.,
eliminating particularly hazardous activities or services, avoiding certain areas due to
environmental threats, and changing tour destination due to political unrest).

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o Loss reduction is where an organization assumes that risk is already acknowledged for a
particular activity or service, and chooses to continue to offer it, but will take steps to mitigate
the severity of damage that may occur.
4. Risk Treatment – If the control of all identified risks fails, the next step in the process is risk treatment.
This includes the concepts of risk transfer and risk retention.
o Risk transfer refers to the transfer of responsibility to another party (e.g., fire insurance for
hotel properties and travel insurance).
o Risk retention refers to the level of risk that a company retains through a conscious decision-
making process (e.g., waivers for tourists doing extreme activities).

RISK ASSESSMENT
Risk assessment, according to the Canadian Centre for Occupational Health and Safety, is a term used to
describe the overall process or method where an organization does the following:
1. Identify hazards and risk factors that may cause harm (hazard identification).
2. Analyze and evaluate the risk associated with that hazard (risk analysis and risk evaluation).
3. Determine appropriate ways to eliminate the hazard, or control the risk when the hazard cannot be
eliminated (risk control).

Concepts of Risk
There are three (3) theoretical concepts of risk:
 Real Risk – It is the actual statistical likelihood of an incident occurring, which is established through
reviews of statistics and other relevant data (e.g., the risk of injuries in extreme activities without
protective gear).
 Perceived Risk – It is the perception of risk by those undertaking or evaluating something. It may vary
greatly based on the level of apprehension, anxiety, or experience with a specific risk (e.g., the risk of
accidents in amusement park rides even though these were already tested for safety compliance).
 Inherent Risk – It is the risk that is impossible to eliminate and must exist for an activity to occur (e.g.,
the risk of drowning when swimming or the risk of falling when skiing).

Catastrophic Occurrence Classifications

Catastrophe is defined as “a sudden and widespread disaster.” Its occurrence often results in extraordinary
levels of mass casualties, damage, or disruption that affect the population, environment, and/or economy
(Ural, 2015).
 Non-repetitive catastrophe occurs only once in a particular area and can never be repeated in the
same location to yield the same results.
 Irregular catastrophe does not appear with any degree of statistical regularity, but which can
repeatedly occur in a general location.
 Regular catastrophe occurs regularly and can be accommodated with a statistical framework, but the
precise timing of event remains unknown.
 Seasonal catastrophe occurs regularly in a general location during a given period, but the precise
location, severity, and moment of occurrence remain unknown.

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Hazards for Tourism

Hazards are “a damaging event, phenomena, or human activity that can occur in every geographical setting
and can cause harmful effects to society, environment, etc.” (United Nations Environment Programme, 2008).
Table 1 shows the classifications of hazards in tourism.

Atmospheric Earth (Geological) Biologic Human

Cyclones Earthquakes Human epidemics Industrial accidents
Tornadoes Tsunamis Plant epidemics Traffic accidents
Storms Landslides Animal epidemics Crime, terrorism
Floods Volcanoes Plagues Economic
Frosts Erosion Fires Political Conflict
Table 1. Hazards for tourism
Source: Tourism and Risk Management, n.d.

TORT LAW
Tort law is the body of the law which will allow an injured person to obtain compensation from the person
who caused the injury (Civil Code of the Philippines). There are two (2) categories of torts:
 Intentional torts consist of assault, battery, trespass, false imprisonment, nuisance, and defamation.
 Unintentional torts primarily consist of negligence. Negligence is defined by Article 1173 of the Civil
Code of the Philippines as “the omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the time and of the place.”
In tourism, most lawsuits involve negligence, with one (1) party seeking financial compensation. In the
Philippines, the word “tort” is never used; instead, the term “quasi-delict” is used, which is the nearest
counterpart of the Roman law concept of tort law.
Article 2176 of the Civil Code of the Philippines states that:
Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to
pay for the damage done. Such fault or negligence if there is no pre-existing contractual relation
between the parties is called a quasi-delict and is governed by the provisions of this chapter.

The Law of Tort in Tourism Risk Management

In the tourism industry, one’s exposure to unintentional torts, specifically negligence, must be considered. For
instance, if a tourism/hospitality safety standards fall below an established or mandated standard and an
injury occurs as a result. The injured person can sue for negligence.
Example: In 1999, the Steveston Hotel was held liable for 50% of the damages that occurred when it permitted
a patron to drive home drunk. The case demonstrated that the hotel had a duty of care to stop
serving an already intoxicated person and to prevent the intoxicated party from driving.
References:
ASEAN LAW ASSOCIATION. (n.d.). Chapter 7 Tort Law. Retrieved from https://www.aseanlawassociation.org/papers/phil_chp7.pdf on May 17, 2018
Fotiou, S. (n.d). Tourism and risk management. Retrieved from
http://www.unep.fr/shared/publications/pdf/ANNEXES/3.2.4%20Risk%20assessment%20and%20vulnerability%20maps/Tourism%20and%20Risk%20Manage
ment_UNEP.pdf on May 17, 2018
Papaioannou, E., Shen, S. (2018). Risk management in tourism ventures. In M. Sotriadis (Ed.), The emerald handbook of entrepreneurship in tourism, travel and hospitality:
Skills for successful ventures (pp. 224–225). UK: Emerald Publishing LTD.
Piekarz, M. J., Jenkins, I. S., Mills, P. F., (2015). Risk and safety management in the leisure, events, tourism and sports industries. Oxford: CABI.
Ural, M. (2016). Risk management for sustainable tourism. European Journal of Tourism, Hospitality and Recreation, 7(1). doi:10.1515/ejthr-2016-0007
United Nations Environmental Programme. (2008). Disaster risk management for coastal tourism destinations responding to climate change. Retrieved from
https://www.onecaribbean.org/wp-content/uploads/Disaster-Risk-Management-Coastal-Tourism-UNEP-CAST.pdf on December 4, 2018
Webster, D., Owens, D., Thomlinson, E., Bird, G., Tripp, G., Knowles, H., … Hood, T. (2015). Introduction to Tourism and Hospitality in BC (M. Westcott, Ed.). Victoria, BC:
BCcampus.

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