RISK MANAGEMENT MIDTERM REVIEWER

RISK MANAGEMENT CONCEPTS

 RISK (Preventive)
 Risk provides opportunities while exposing us to outcomes that may we may not desire.
 Implies awareness that risk is something foreseeable in every kind of business even in the tourism
and hospitality world.
 Risk, according to United Nations World Tourism Organization (UNWTO), is a situation that
exposes someone or something to danger harm or loss.
 the probability of threat of damage, injury, liability or any other adverse occurrence that is caused by
external or internal vulnerabilities and that may be avoided through preemptive action.

 Food Handling (Food Borne)

 R.A. 10173

 Source of Risk
1. Uncertain in financial markets;
 Managers must be vigilant enough in determining those uncertainty in the financial markets
2. Threats from project failures
 Another source of risk that could hamper the success of the tourism and hospitality business
is the threat usually embedded in the project.
3. Legal liabilities (2 way process)
a. The safety of the guest and employees, which includes avoidance to emotional and physical
harm is a moral and ethical.
b. Protection to business operations which is includes protection against damage to property
person and property and future litigation.
4. Credit Risk
 is the potential that a bank borrower or counterparty will fail to meet obligation following
agreed term.
5. Accidents
 Reactive
 Effect are well known
 There is a possibility of shock

COMMON INJURIES
1. Slip-and- fall
2. Musculoskeletal
3. Skin Reaction
4. Respiratory illnesses
5. Security- related accidents
6. Food Poisoning
7. Elevator and Escalator Accident
ACCIDENTS IN THE TOURISM INDUSTRY
 Accidents occur when there is an unintentional external action at a particular time and place,
with the non-apparent and deliberate cause but with marked effects.

Due to fortuitous Events or Acts of God

1. Flood
2. Earthquakes
 3. Landslide
4. Storm
5. Erosion
6. Typhoon
7. Volcanic Eruption
8. Fire
Transportation Accidents
1. Air
2. Water
3. Land
6. Natural Causes and Disasters (3 broad groups)
a. Movement of the Earth
b. Disaster related to weather
c. Floods, mudslides, landslides and famine
7. Deliberate attack from an adversary
 Terrorism, according to Albu (2016), has become one of the more and more active and
threatening calamities that affect the international community.
8. Events of uncertain or unpredictable root-cause
- The strategies to manage risk typically include transferring the risk to another party, avoiding
the risk, reducing the adverse effect of probability of the risk or even accepting some or all of the
potential or actual consequences of a particular risk.

 Strategies to manage threats

1. Avoid threats
2. Reduction of the adverse effect or probability of the threat
3. Transfer of all or part of the threat to another party
4. Retaining some or all of the potential or actual consequences of a particular threat, and the
opposites for opportunities.
 How to implement the strategies to Manage Uncertainties (Method)
1. Threat identification or characterization
2. Assessment of the vulnerable of critical assets to specific threats
3. Risk determination
4. Identification of the techniques to reduce those risks
5. Prioritization of the measures of the measures

RISK MANAGEMENT PRINCIPLES

1. Risk management should create a value wherein the resources expanded to mitigate risk should be
less than the consequences of inaction;
2. It should be an integral part of the organizational process;
3. The risk management should become part of the decision-making processes;
4. It should explicitly address uncertainty and assumptions
5. It should be placed in a systematic and structured process
6. The best available information should be the bases of risk management
7. Risk management should be tailor able.
8. It should take human factors into account
9. It should be transparent and inclusive.

10. The dynamism, interactivity and responsiveness to change must be evident on the risk management
11. Risk management should be capable of continual improvement and enhancement
 12. There is a need for continuous and periodic re-assessment of the risk management.

 Step on Risk Management Process as per ISO 3100

a. context establishment
b. Identification of the potential risk
c. Risk Assessment
d. Creation of risk options
e. Identification of potential risk management treatments.
f. Make a risk management plan
g. Execute the plan

Risk Management Applicable to the Industry of Tourism

 The following are some of the essential guidelines to manage the risks confronting the tourism
sector.

1. Risk Identification

A. Natural Hazard - A natural hazard is an extreme event that occurs naturally and causes harm
to humans – or to other things that we care about, though usually, the focus on humans.

B. Civil or Political Hazard - The hazard being confronted by investor, corporations, and
governments brought about the political decisions may be consider as political hazard. Sex
tourism as one of example of civil hazard. Brazil, Costa Rica, the Dominican Republic, the
Netherlands (particularly Amsterdam), Kenya, Colombia, Thailand, Cambodia, Cuba, and
Indonesia (particularly Bali).
Terrorist Attack - Terrorism is the unlawful use of force or violence against persons or property
to intimidate or coerce a government or its citizens to further certain political or social objectives.

 Terminologies that a HM and TM students need to know concerning political

risk:
1. Trade Barriers - Are regulations or policies that would restrict
international trade like: Tariff, Quotas, Customs

2. Taxes are the bread and butter of the government - Without taxes
the government cannot survive

3. The legislation is the process of giving effect to a proposal or policy

for everybody’s observance - It could be national legislation which
could affect the entire country or local legislation which is applicable
only to specific localities

4. Administration - The ability to manage plus the political will are

essential to the proper administration of any agencies for the effected
and efficient service to people

5. Political instability - a country can be vastly affect the tourism of a

country.
 C. Technological Hazard - Although technology may be considered as beneficial to the tourism
industry in most of it facet, this technology however, could produce negative impact to the
industry.

D. Biological Hazard - Biological hazards are organisms, or substances produced by organisms,

that pose a threat to human health. They are a major concern in food processing because they
cause most food borne illness outbreaks.
What are the 5 example of biological hazard?
Sources of biological hazards may include bacteria, viruses, insects, plants, birds, animals, and
humans. These sources can cause a variety of health effects ranging from skin irritation and
allergies to infections (e.g., tuberculosis, AIDS), cancer and so on.

2 essential risk concepts that a student must understand:

1. Inherent Risk - Refers to the exposure arising from a specific risk before an action is to be
made by the manager.
2. Residual Risk - Exposure arising from a specific risk after manager has made any, and in
case such action has proven useful.

2. Determining or creation of management plan to address risk that could affect the tourism business.
 Risk management plan is necessary for the conduct of tourism activities to lessen the
possibility of the risk being accomplished or at least to lessen impact of the risk at hand.

There are some sources which classified the plan and strategies:
A. Preventive Strategy is designed to lessen the possibility of impact before the risk
becomes realized.
B. Is designed to address the issues of risk at time of the happening of the event.
 Risk Avoidance - Refers to the complete elimination of risk by merely avoiding the activities
with attaching the potential risk.
 Risk Reduction - Refers to reduction of risk level though the implementation of precaution
measure, risk controls or treatments.
 Observance of the safety standards
 The tourist accommodation providers are duty bound to assure the health
and safety of the guest while they are on their premises.
o Facility - (faulty electrical wiring, clutter on stairs, wet floor and
others)
o Hotel Policies - (pool policies, key card policies, amenities and
Facilities policies)
o Attending Guest Needs - (Guest with special needs, Children, VIPs
and others)
o Awareness in the Environment - Part of the rest management is the
anticipation that a particular risk would come, although uncertain as
to when it would happen. In this connection, it would been better if
the manager would engage in insurance system to convert future
liabilities in connection with the insured covered.
 Use of safety devices
 The basic safety equipment a lodging establishment should have and be
aware of includes such things as smoke detectors, fire extinguishers,
sprinkler systems, and accident prevention signs.
o Smoke Detectors
o Fire Extinguishers
o Sprinkler System
o Accident Prevention Sign
 o Carbon Monoxide Detectors
 Risk Transfer - There is a risk transfer when the burden is being shifted from one party
to another, from individual, from individuals to an insurance company or from insurers to
reinsurers.
 Risk Retention - There are instances wherein the managers instead of looking for
somebody that could help them attend to issues of risk would rather keep it and resolve
them from for themselves.
 The Principles of Adhesion - One of the parties is being left with no choice except to
adhere to the terms and condition of the insurance prepared by the other party.

 Earthquake – proof building/ proper water management

 Qualification requirements

3. Collaboration with the stakeholders

 All the preventive and contingency plan of the management to address risk would be considered
as an exercise of futility if the stakeholders affected will not involve.
 Stakeholders - Is anybody who can affect or be affected by the strategy or project
of an organization.
 Stakeholder’s Issues Safety and Security - It is important to make a committee that would
address the significant aspect of a risk management which is the safety and security.
1. The administration of tourism department
2. Police Authority
3. Security Agency
4. Government bodies
5. Transportation associates
6. Hotel Associates
7. Tour operators
8. Tourism and travel representative
9. Consumer groups

4. Provide training for the staff

 It is also essential in the management of risks in the tourism and hospitality industries to
provide training for the staff for them not to be caught unaware on the things that they
have to do should the event happens.
  Lockdown Drill - This practice is done in anticipating of an intruder or
criminal act within the vicinity of tourism-related establishment or
activities.
 Earthquake Drill - This drill is used as a way of preparation for the coming
of an earthquake.

5. Test the plan

 Risk management process does not stop with the identification of a solution to a problem and
training the staff for the execution of the plan should the event comes.
 Risk Analysis - Risk analysis which is aimed at the study of how different errors can lead to
accidents and other things which can lead to danger for people and the environment. The
purpose of a risk analysis is to identify the risks and thereby make it possible to reduce the
occurrence of disturbances as well as to be able to suggest solutions to reduce the extent of
damage.
 Business Intelligence - Business Intelligence, BI, refers to gathering of information to be able to
predict the development in the world surrounding a business and reduce the insecurity found in
decision making.

6. Provide transparent and honest crisis communication

 It has been said that communication is
vital to the success of crisis management
initiatives of the tourism and hospitality
industry.
 Risk communication maybe define as the
information exchange involving risk-
related factors among the assessors,
managers, and the public and other
interested parties.
 According to UNTWO (nd), crisis
communications is a crucial element of a
good crisis management system. It helps
limit the negative impact of a crisis by
addressing the information needs of all
industry stakeholder in an efficient, timely and responsible manner.
 7. The revival of the business after crisis
 Many businesses spent the first several weeks of the
crisis reviewing continuity plans, establishing crisis
command centers, and ensuring the safety and
security of their workers. We thus would expect these
businesses to be entering the “stabilize” wave of a
three-wave crisis model (see “The three waves of a
COVID-19 crisis response”), in which companies are
learning to operate in “the new normal” yet are
continuing to respond to immediate fires. Much of the
focus in the stabilize wave is on implementing tactical
steps to preserve business value, including liquidity analysis, operational scenario planning, and
an assessment of the various government stimulus programs.

8. Reposition of the business after crisis

Data Privacy
Patterson (2015) had identified four risks which the hospitality industry faces. It includes:
1. Data Privacy
 Hotels and similar industry are prone to hackers and cyber criminals considering the bulk of information
that they have been getting from the guests
 Single breach by the hotel management on the data protection could compromise the information’s
personal to the guests
 Hotel management is expected to make sure that all the information gathered from the guests are
protected because breach of security produce damages to them.
 It should be the responsibility of the management to inform the present and previous guests if the data
have been compromised even if it would mean expense in the part of the management
 The management of the hospitality industry should have more understanding of the fundamental right
of the guest for privacy and security of information

2. Guests Behavior
 Guest may be considered as the lifeblood of the hotel industry.
 Without happy and contented guests who have been patronizing the services of the hotel, survival of
the industry would be up to the lowest extent.
 There are, however, some instances where the guests are becoming the threat to the profitability of the
hotel.

3. Staff
 Staffing is another risk that hospitality industry usually faces with as the quality services that clientele
desire may only be given to them at any given situation, place, and time
 Best Practices for Hotel Service Recovery
 Deal with guest’s complaints the very moment they arise;
 Ensure the complaints can reach the right person;
 Build a full picture on guest preferences.
 Keep tabs on recovery service costs;
 In-depth analysis of the service recovery efficiency
 Liability of Hotel in Personal Injury Claim
 The Hotel may be held liable in a lawsuit due to negligence or carelessness of
hotel employees. The liability may arise if it can be proved that the hotel
management acted negligently.
 Duties of Hotel to the Guests
1. Inspect the hotel grounds and maintain the property in a reasonably safe
condition
2. Maintain adequate lightning, a duty to keep steps dry and unobstructed, and a
duty to repair hotel defects.
3. Control insect infestation.
4. Maintain proper security to avoid theft and assault on guests.
5. Exercise reasonable care in hiring staff.
6. Train Hotel pool staff to prevent injuries to guests.
7. Maintain stairs and elevators.
8. Maintain lock on hotel rooms.
9. There is also a duty to reasonably construct hotel steps or warn guest of unusual
staircase locations.
4. Branding
 Is essential to the decision of prospective guests to avail services of a hotel
 Buying Decisions
a. Functional Risk: Product performance does not fulfill customer
expectations
b. Physical Risk: Product affections of the physical well-being of the user or
others
c. Financial Risk: Poor price/Quality ratio
d. Social Risk: Others do not accept the product.
e. Psychological Risk: Product affections of the user’s mental well-being.
f. Time Risk: Opportunity cost of alternative seeking due to product
failure