Disaster related risk management practices in IHG - Essay Example

?Where Are They Now? INTRODUCTION Risk is an inherent part of any business which creates certain negative impacts on the overall organizational performance. Thus, every organization must possess proper risk management plan so that it can deal with uncertain events such as natural disaster or terrorist attacks among others. Risk management in this context can be stated as an ongoing process which sustains throughout organizational life cycle. With these considerations, the essay discusses disaster risk management practices in an organization namely InterContinental Hotels Group (IHG) in Japan. Disaster usually follows natural threats and its severity depends on the level of impact on the organization. On the other hand, the level of impact is subjected to the choices made by organizations (U.S. Department of Health and Human Services, “Risk Management Plan”). THESIS STATEMENT The essay is based on understanding the disaster related risk management practices in IHG which faced losses due to recent earthquake in Japan, in the year 2011. The objective of the study is to discuss the event along with its consequence on the risk management activities of IHG. Furthermore, it also describes the learning gained from the incident. BUSINESS OF THE ORGANISATION IHG is a British hospitality organization and is also considered as one of the biggest hotel brands in the world. IHG operates in excess of nine hotels under its name and its business strategies concentrate on driving the demand of the brand. IHG operates the business in three different ways namely franchising, joint venture and ownership. Franchising is the biggest part of the business of IHG, however, it also uses the bricks and mortar model of business (InterContinental Hotels Group, “Overview”). In Japan, IHG had started its business through joint venture with All Nippon Airways (ANA) and established ANA Holiday Inn. It is considered as one of the biggest global hotel operators in Japan. ANA Holiday Inn is located in the key cities of Japan namely Toyama, Nagoya, Sendai, and Hiroshima among others (ANA, “InterContinental Hotels Group”). OUTCOME OF THE DISASTER TO IHG In the year 2011, IHG in Japan had faced a scenario of critical business risk due to a natural disaster i.e. tsunami. This natural disaster had created a drastic impact on the performance of IHG. Its ANA Holiday Inn, which is situated in Sendai, had to be closed down for new reservation. The organization also became vulnerable in terms of safety of its people and guests due to the disaster. Furthermore, the property of ANA Holiday Inn which was situated in the close proximity to Fukushima Daiichi nuclear plant also faced the risk of disruption. The share price of the organization also fell drastically after the incident occurred in Japan (Telegraph Media Group Limited, “Japan Earthquake: The Companies Most Affected by the Disaster”). RISK MANAGEMENT IN IHG IHG has an established international risk management procedure and outline which is entrenched in every operation and activity of the organization. The objectives of risk management of IHG are to create a vigorous, reactive and strong procedure along with a successful, respected and liable business over the long run. With respect to risk management, the key objective of the organization is to recognize and manage risks, in line with the strategic objectives and long-term value of the business (InterContinental Hotels Group PLC, “Corporate Risk Management”). Risk Screening The risk management process is characterized by risk screening procedure which determines the risk severity and frequency. According to risk severity and frequency, risks can be separated into minor risks which do not necessitate much management attention and significant risks which require considerable management attention. There are two types of risks an organization can face such as internal risks and external risks. Internal risks comprise management, cost and cash flow related risks. On the other hand, external risks are usually related with different incidents and can be of two types which include incremental risks and discrete risks. Incremental risks are characterized by high frequency and low consequence risk. Conversely, discrete risks are based on low frequency and high consequence incidents (US Department of Transportation, “Risk Assessment”). In this context, it can be stated that the tsunami incident is a low frequency and high consequence event for the organization. This incident resulted in changes in the risk management practices of IHG. OUTCOME OF THE DISASTER The disaster has resulted in the improvement of risk management practices of IHG. In the year 2012, IHG had launched a new program namely ‘IHG Shelter in a Storm’. Through this program, the hotels of IHG received pertinent guidance on the best possible ways to react to natural or human-made disasters. In relation to the program, a disaster fund has been apportioned to allow the hotels to react quickly and efficiently to support the visitors, employees and the society with financial assistance and vital provisions as well as lodgings (InterContinental Hotels Group PLC, Annual Report and Financial Statements 2012”). The disaster also influenced the financial aspect of the organization. In the year 2012, IHG had donated about US$428,000 to the IHG Shelter in a Strom Program and the fund was used for supporting the six cities which were affected by the disaster. As a part of risk management, the organization has also formalized a partnership with CARE, a non-profit organization which provides emergency support to the survivors of war or natural disasters. The disaster also influenced the social aspect of IHG. Through the IHG Shelter in a Storm program, the organization has continued to enhance awareness and involvement with respect to disaster along with providing required methods to employees to prepare for any kind of disasters. It also facilitates to assist the society when needed because often during disaster conditions people desire to take shelter in hotels (InterContinental Hotels Group PLC, Annual Report and Financial Statements 2012”). CONCLUSION The disaster related experiences faced by IHG have provided significant lessons to deal with any kind of risks. It has assisted in comprehending the notion that the development of new culture can foster instinctive, attentive, receptive, steady and responsible behavior. The risk management activities of IHG actively pervade the entire organization, rather than the ANA Holiday Inn of Japan. The organization has been able to recognize and consider every possible outcome of the low frequency and high risk events. The analysis of the risk management practices of IHG provides an understanding that in low frequency and high risk events there is a need to work cooperatively with other organizations as it can provide support and guidance to risk management practices. Works Cited “InterContinental Hotels Group”. Partner Hotels. ANA, n.d. Web. 18 Sep. 2013. . “Corporate Risk Management”. Business Review. InterContinental Hotels Group PLC, 2009. Web. 18 Sep. 2013. . “Annual Report and Financial Statements 2012”. Reports. InterContinental Hotels Group PLC, 2012. Web. 18 Sep. 2013. . “Overview”. About Us. InterContinental Hotels Group, 2013. Web. 18 Sep. 2013. . “Japan Earthquake: The Companies Most Affected by the Disaster”. Markets. Telegraph Media Group Limited, 2013. Web. 18 Sep. 2013. “Risk Management Plan”. Public Health Emergency. U.S. Department of Health and Human Services, n.d. Web. 18 Sep. 2013. . “Risk Assessment”. Office of International Programs. US Department of Transportation, 2013. Web. 18 Sep. 2013. . Read More