Risk Management: Principles and Guidelines for Implementation - Case of Riverview Park Hotel - Example

Riverview park hotel risk management plan Executive summary Risk management is a necessary for every business organisations since businesses are faced with differing levels of risk on a daily basis. As such, they must come up with various risk management strategies that will ensure they are able to handle any levels of risk that they face. Where they are unable to handle risks, they may either choose to avoid it by not engaging in the activities exposing them to risk. On the other hand, they may choose to transfer it to a third party. In this regard, this risk management plan has been prepared to help Riverview hotel come up with various strategies for managing risks the hotel might be exposed to. Table of Contents Executive summary 1 Table of Contents 2 Introduction, 3 Stakeholders’ analysis 3 Scope of risk management 4 Riverview park hotel SWOT analysis; 4 Risk context 6 Risk management objectives and critical success factors 7 Risk identification 8 Risk analysis and evaluation 9 Risk level analysis 11 Risk Treatment 11 Risk action plan 14 Implementation of the plan 15 Monitoring and evaluation of the plan 16 Compliance with relevant legislation, codes of practice and national standards 17 References 17 Introduction, Riverview Park Hotel is a medium sized hotel located near Margaret River that positions itself not only as a tourist hotel but also as a conferencing facility. Of late, it has also become a family’s choice especially for weekends when significant numbers of visitors have been received. As such, the hotel is worth millions of dollars in investments. In addition, the hotel’s activities involve service to the people from different areas of the country and to a limited extent from other areas of the world. As such, the way we conduct this activities significantly affects not only our reputation but also that of Australia and national interests. As such, risk management forms an integral part of the accountability requirements in all our activities. The establishment of a risk management plan is seen as a safeguard to our interests while ensuring efficient use of resources. The hotel recognizes risk management as a core part of good corporate governance practices and a vital tool in strategic and operational planning with numerous benefits in terms of changing the operating environment of our core business. This is the reason behind the development of this risk management plan. Stakeholders’ analysis The hotel’s stakeholders are either internal stake holders or external stakeholders. These may include the shareholders, the employees and the management, the customers, the suppliers, the government and the community. The major stakeholders include; a) The shareholders- they are the hotel owners as they have provided capital. Thus, they are interested in good returns over their investments. b) Customers- they keep the business going by purchasing our products and services. As such, they deserve quality goods and services so as to realise value for their money. c) Supplier- they supply us with goods and services we require in serving our customers. As such, the y deserves to be treated fairly and paid on time. d) Employee- they run the hotel on the day to day basis. As such, they deserve respect and fair treatment if they are to offer quality services to all other stakeholders. e) The management- they include the board of directors and the executive officers. They are involved in the day to day management of the hotel. For good returns, they should be motivated. f) The government- this is the regulatory authority. There is need to adhere to all regulatory requirements and pay all necessary taxes on time to guarantee ourselves a conducive working environment. g) The general community- they give us the chance to exist and they are potential employees, customers, suppliers etc. as such; there is need for good corporate social responsibility. Scope of risk management This risk management plan encompasses all risk categories (i.e financial, operational, hazard and compliance) across all levels i.e (business, process and strategic). Riverview park hotel SWOT analysis; Strengths Strong brand values that can be communicated to the public through internet and the media 24 hour operation Multiple cultural diversions- Dedicated and well trained employees Multiple fine dining restaurants, kids clubs, disability accessible facilities, convention facilities, gym and spa facilities Beautiful view of the city Weaknesses - High prices - Very little family orientation as has concentrated on business orientation - Website not well developed -outdated technology -too old furniture Opportunities Easy access to many tourist sites could help us market the hotel as tourist hotel With increasing number of conventions and meetings, we can market the hotel as a conventions facility. Enroll in hotel.com to yield additional guests Positioning the hotel as luxurious but affordable Threats Increasing competition in the industry Very high turnover in the industry Big budgets required for investments Parking could be an issue during busy times. Risk context This section establishes the basic parameters within which risk will be managed and also sets scope for the entire risk management process. As such, the context will include Riverview Park hotel’s external and internal environment as well as the interface between the internal and external environment. The external context for Riverview park hotel includes the social, regulatory, cultural, political and financial environment, external stakeholders as well as key business drivers. On the other hand, our internal context will include our organizational culture, internal stakeholders, capabilities and resources such as people and processes as well as our goals and objectives and the strategies put in place to achieve them. This implies that different circumstances will call for different activities and hence personnel need to consider internal and external environments associated with their areas of work while implementing this risk management plan. RISK MANAGEMENT PLAN Risk management objectives and critical success factors The following have been identified as the critical success factors for the hotel; a) Customer service –this is an integral part of hotel experience and hence the need to ensure our employees are courteous, knowledgeable and able to handle customer concerns at all times. This will ensure memorable experiences by customers hence promoting return visits and attracting more customers. b) Advertising- we intend to market ourselves as ideal location for business travelling and business travelling as well as a tourist hotel in a bid to increase our profitability. c) Cost control- we see cost control as a critical factor in the success of our hotel as this will help improve profitability and hence offer better services to our customers. d) Product differentiation –we intend to offer unique experiences to our customers not found anywhere else. This stems from our ideal location as well as from offering differentiated services. Improvement in the above areas will see us become one of the best hotels in the country. However, for us to succeed there is need for an effective risk management plan that may hinder us from pursuing the critical success factors. The risk management plan will have the following objectives; i) Identify the risks that the hotel is exposed to and hence be prepared to withstand their financial impact to the greatest extent possible. ii) Minimize the chances of the adverse effects occurring through implementation and enforcement of safety measures. iii) Minimizing the impact of the adverse events if at all they occur. iv) Where possible shifting the financial burden of risk through insurance. Risk identification The risk identification process involved the risk management team appointed by the management and other appropriate stakeholders and involved evaluation of both internal and external environmental factors to come up with potential risks that the hotel might be exposed to. The methods used in aiding identification of risks associated with Riverview park hotel included brainstorming sessions, interviews as well as conducting a SWOT and PEST analysis of the hotel. The process of risk identification involved all concerned stakeholders in a bid to make them own the process so as to ensure the success of the plan. Consequently, the following risks were identified; -market risks involving declining demand -competition -Declining brand reputation -Technology risk -financial risk -employees and management -customers -security Risk analysis and evaluation This will entail risk evaluation to determine risk events, assign likelihood and consequences of each risk event, creation of risk index. Both internal and external environment and stakeholders will undergo risk analysis. Note that risk consequences could be to specific work responsibilities and outcomes for the hotel. Risk could be to the aims of particular management operations, to individual activities objectives, particular strategies etc. Consideration of risk likelihood will enable us rate the risks in order to determine the best method of handling the risk by prioritizing resources to risk elements considered most significant. The above risks have been analysed and evaluated as follows; Risk description Impact Likelihood Technology risk- we rely on technology and systems in operating the hotel. Disruptions and slow down in our information systems can cause valuable in formation loss. Unauthorized access to information is also a major risk. High High Market/industry risks –factors beyond the hotel’s control such as the global economic crisis, changing travel patterns as well as increased terrorism may adversely affect levels of business and hence our revenues. High Medium Financial risks- these includes risks associated with finances such as inability to satisfy debt covenants as well as fluctuating exchange rates. Medium Low Security- this includes security as to our properties as well as the security to our guests (physical and safe food). If guests feel insecure or their food is poisoned, this will greatly ruin our reputation Very high Very low The employees – failure to retain our employees as well as senior executives due to lack of motivation may threaten the success of our hotel. They must also be motivated and trained in order to offer high quality services. High Very low Declining brand reputation- the hotel risks loosing its good reputation if its services are unsatisfactory. High Low Competition – there is risk of loosing business to competitors hence the need to offer superior services given the increased level of competition. High Medium In addition, the following matrix has been identified for analyzing and prioritizing risks. Risk analysis will be conducted on inherent risks, residual risks and on the level of risk after application of proposed risk controls. consequences Likelihood Negligible(1) Minor(2) Moderate(3) Major(4) Severe(5) Almost certain (5) medium High high Very high Very high Likely (4) Medium High High High Very high Possible (3) Low High High High High Unlikely (2) Low Low Medium Medium High Rare (1) Low Low Medium Medium Low Risk level analysis a) Very high-this level of risk would curtail the achievement of objectives result in unacceptable cost overruns and needs close executive attention. b) High –this level can result in substantial delays in project schedules and significant impact on cost and technical performance and will need close management attention. c) Medium- this calls for identification and control of contributing factors through monitoring conditions and reassessing project milestones. d) Low- this level calls for normal control and monitoring measures. Risk Treatment Different risk resolution techniques have been considered for different level and types of risks. They include; a) Risk acceptance- where risk levels are deemed insufficient to justify incurring cost or effort or where it’s deemed uneconomical to resolve residual risk, we will adopt a risk acceptance approach. b) Risk avoidance- this approach will be adopted where risk levels are unacceptable and control means is not viable or worthwhile by failing to undertake the risky activities. c) Risk reduction –this will be done through implementation of preventive strategies through training and education. d) Mitigation of impact- consequences of risk will be reduced through efforts aimed at ameliorating and dealing with risk impacts such as public communication strategies and contingency planning. e) Risk transfer- this will entail allocating risks to parties best able to handle them. Klower will do this by contracting with third parties. Consequently, the following risk treatment plan and schedule has been prepared for the risks already identified. Risk treatment plan The following has been identified as the risk identification plan for the hotel; Risk Hazard & Effects Treatment Date required Responsible officer Date completed Technology Risk -system failure -unauthorized access to information -obsolete systems -create back up systems -create authorization codes -timely replacement of systems 31st January 2014 Hotel’s IT manager-Mr. Gregory Market/industry risk -Reduced guests and hence revenues. -intensify marketing activities -intensify security measures -Increase marketing budget 10th October 2013 Mrs. Ashton- Head of marketing department Financial risks -default risk leading to debt refinancing -Foreign exchange losses -proper financial management measures -Regular monitoring of the hotel’s funding needs including monitoring of financial covenant ratios on a regular basis 27th August 2013 The board of Directors, Mr. Young-the finance director. Security risk -Loss of guests -Loss of property - Hire more security personnel -Refresher courses for catering departments staff -Renewal of property insurance policies. 31st March 2014 Mr. Johansen-Hotel’s operations manager. Unsatisfied employees -high turnover -poor customer service -decline in number of guests and hence revenues - improved salaries and benefits -regular seminars and refresher training -Avail opportunities for career development 30th August 2014 Mrs. Wright-The head of human resources The following risk action plan has been designed to help the hotel and those given the responsibility of risk resolution mitigate the risks identified. Risk action plan Risk Item Recommended response Proposed actions Resources required Responsibilities throughout implementation of the plan Timeframe for implementation of action Reporting and monitoring requirements Person responsible to overall implementation of the plan Date Reviewer Date Implementation of the plan This risk management plan will be implemented with the immediate effect. As such, a risk management committee composed of all the senior executives of the hotel as outlined in the risk treatment plan has been computed. Their role is to come up with training manuals for risk treatment. Various seminars and training sessions will also be undertaken to ensure that every stakeholder understands his/her role in risk resolution and prevention in a bid to ensure proper implementation of this plan. Monitoring and evaluation of the plan Risk monitoring will entail learning lessons from risk management process through review of events, treatment plans as well as their outcomes. As such, there will be need to record each stage of risk management process appropriately. The timing and extent of documentation requirements will be determined by accountability and communication needs. Management of risk will be recorded according to the requirement of Riverview Park Hotel’s risk management procedures and guidelines as constituent of management planning and reporting. Appropriate documentation of every risk management practice will be carried out so that risk management process at the hotel holds up to both external and internal scrutiny. The documentation of risk management process will also benefit the hotel personnel and will aid in risk monitoring. Senior managers will be responsible for ensuring implementation of risk management practices in their respective areas of operation and ensure proper communication of the standards and practices to personnel. The overall responsibility for oversight and provision of corporate assurance on the risk management procedures adequacy across the hotel will be left to the audit committee supported by the audit section. However, River View Park Hotel’s personnel have the responsibility for risk management practices within their respective areas of work. Compliance with relevant legislation, codes of practice and national standards The preparation of this risk management plan has ensured full compliance with all relevant legislation, codes of practice and national standards. References Hubbard, D2009, Risk management: Principles and guidelines for implementation, Englewood Cliffs, Prentice Hall. Read More