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Risk, according to UNWTO, is a situation
that exposes someone or something to danger or
loss.
Risk can be a physical safety matter , a risk
of property loss or a financial business risk.
From the moment a person engages himself in the
business of tourism and hospitality, whether a sole
proprietorship, partnership, or corporation, the risk
immediately attaches.
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The business dictionary has defined risk as 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.
In the point of view of economics, risk implies future
uncertainty about deviation from expected earnings
or expected outcome. Risk measures the uncertainty
that an investor is willing to take to realize a gain
from an investment.
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Hazard pertains to any source of potential damage,
harm or adverse health effects on something or
someone, while risk is the chance or probability that
a person will be harmed or experience an adverse
health effect if exposed to a hazard.
According to workSMARK, a hazard is something that
can cause harm while risk is a chance that any
hazard will cause harm to somebody.
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Risk (as defined in
ISO3100),
Management, is the identification,
evaluation, and prioritization of risks.
It is followed by coordinated and economical application of
resources to minimize, monitor, and control the probability of
unfortunate events to achieve the desired output.
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Risk can come from different sources like the
following:
1. Uncertainty in financial markets;
2. Threats from project failures (at any phase in
design, development, production, or
sustainment life-cycles);
3. Legal liabilities;
4. Credit risk;
5. Accidents;
6. Natural causes and disasters;
7. Deliberate attack from an adversary; or
Events
[Link] Management of uncertain or unpredictable root cause
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Risk Management in tourism and hospitality industry
is a two-way process:
1. The safety of the guests and employees, which
includes avoidance to emotional and
physical harm is a moral and ethical
responsibility of the operators;
2. Protection to business operations which includes
protection against damage to property
persons and property and future litigation.
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Credit is another source of risk that could impact the
tourism and hospitality industries.
Credit Risk is the potential that a bank borrower or
counterparty will fail to meet its obligation following
agreed terms. (As defined in Principles for the
Management of Credit Risk)
The goal of credit risk management is to maximize a
bank’s risk-adjusted rate of return by maintaining credit
risk exposure within acceptable parameters.
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Risks and accidents are sometimes being used
interchangeably, but they are different, though they
complement each other.
Accidents are reactive while risks are preventive.
Accident management is necessary to reduce costs
pertinent to the accident, to wit: damage to property,
costs of rental, maximization of subrogation
recovery.
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1. Slip-and-fall injuries;
2. Musculoskeletal injuries;
3. Skin reactions.
4. Respiratory illnesses
5. Security-related accidents
6. Food Poisoning
7. Elevator and escalator accidents
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1. Accidents due to fortuitous events or acts of God
- Earthquakes
- Volcanic eruption
- Flood
- Landslides
- Erosion
- Fire
- Storm
- Typhoon
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2. Transportation accidents
- Air;
- Water;
- Land
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3. Accidents due to Activities
- Pool accident
- Animal bites or attack
- Drowning
- Electrocution
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The natural disasters maybe categorized into three
broad groups;
1. Caused by movements of the Earth
2. Disasters related to weather
3. Floods, mudslides, landslides, and famine
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Terrorism has become one of the more and more active and
threatening calamities that affect the international community.
It is the use of violence or threat of violence in the pursuit of
political, religious, ideological or social objectives.
It can be committed by governments, non-state actors, or
undercover personnel serving on the behalf of their respective
governments.
It reaches more than the immediate target victims and is also
directed at targets consisting of a larger spectrum of society.
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Two Types of Events in Risk Management
1. Negative events or risks;
2. Positive events opportunities
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The following are some strategies that can be of help to manage
threats:
1. Avoid the threat;
2. Reduction of the adverse effect or probability of the threat;
3. Transfer of all part of the threat to another party;
4. Retaining some or all part of the potential or actual
consequences of a particular threat, and the opposites
for opportunities.
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The different strategies of managing uncertainties can
be dealt with using the following elements in order:
1. Threat identification or characterization;
2. Assessment of the vulnerability of critical assets to
specific threats;
3. Risk determination;
4. Identification of the techniques to reduce
those risks;
5. Prioritization of the measures
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The following are some of the risk management
principles enunciated by the International
Organization for Standardization:
1. Risk management should create a value
wherein
the resources expended to mitigate risk should be
less than the consequences of inaction;
2. It should be an integral part of the
organizational processes;
3. The risk management should become part of the
decision-making process;
4. It should explicitly address uncertainty
and assumptions;
5. It should be placed in a systematic and structured
process;
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7. The best available information should be
the bases of risk management;
8. Risk management should be tailorable;
9. It should take human factors into account;
10. It should be transparent and inclusive;
11. The dynamism, interactivity, and responsiveness to
change must be evident on the risk
management;
12. Risk Management should be capable of continual
improvement and enhancement
13. There is a need for continuous and periodic
re-
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assessment
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The following are the steps for the implementation of
the risk management process based on ISO 31000:
1. Context establishment;
2. Identification of the potential risk;
Good managers must possess ability to
the forecast the problems that
may arise.
3. Risk assessment;
4. Creation of risk options;
5. Identification of potential risk
management
treatments;
6. Make a risk management plan;-
security is another
aspect in the hotel and tourism industries that must
be attended
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Execute the plan
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Establishing the context of risk management involves
the following:
a) Risk identification in selected domain of interest;
b) Planning the rest of the whole risk
management process;
c) Plotting out the:
- Scope of Risk Management
- Identify and objectives of stakeholders
- Bases of risks evaluation and constraints
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e) The framing of risk management activity and
agenda for identification;
f) Analysis of risks involved in the process;
g) Giving of a solution of risks using available
technological, human, and
organizational resources.
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Classification of Risk Sources;
1. Internal; and
2. External
The following factors could be considered as determinants
in choosing a method of identifying risks;
3. Culture
4. Industry practice
5. Compliance
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The methods of identifying risks are as follows;
1. Objectives-based risk identification;
2. Scenario-based risk identification;
3. Taxonomy-based risk identification;
4. Common-risk checking;
5. Risk charting- is one method of identifying risk
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Risk assessment is the stage wherein the severity of
the impact of the said risk is being weighed to make
the most intelligent decisions for the full
implementation of the risk management plan.
Risk assessment is the determination of a
quantitative or qualitative estimate of risk related to a
clear situation and recognized threat (also called as
hazard).
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The following are some options to mitigate risks:
1. Project a novel business procedure with sufficient built-
in risk control and containment measures from the start.
2. Conduct a periodic reassessment of risks that
are acceptable in ongoing processes as a regular
feature of business operations and modify mitigation
measures.
3. Handover risks to an external agency like an insurance
company
4. Avoid risks altogether
5. Potential risk treatments
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The techniques in managing risk may be categorized
into the following;
1. Avoidance withdraw from or not
(eliminate, become
involved) –
-elimination of hazards, activities, and
exposures that can negatively affect an
organization’s asset.
2. Reduction (optimize –mitigate)
3. Sharing (transfer – outsource or insure)
4. Retention ( accept and budget)
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Thank you.
Reference:
RISK M A NAGE ME N T
For Tourism and Hospitality Management
j.m.d.m/ m.h.m./c.n.c.
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