Topic 8 Risk Management in Travel Agency Business PDF

TOPIC 8 RISK MANAGEMENT IN TRAVEL AGENCY BUSINESS  INTRODUCTION In the risk management process, companies recognize, calculate, and acquire approaches for impending threats (Young & Tippins, 2001). As survival is the chief aim of businesses, threats serve as the pressures that...

TOPIC 8 RISK MANAGEMENT IN TRAVEL AGENCY BUSINESS  INTRODUCTION In the risk management process, companies recognize, calculate, and acquire approaches for impending threats (Young & Tippins, 2001). As survival is the chief aim of businesses, threats serve as the pressures that companies face. Harland et 2003 described three classifications of corporate risks (operational, strategic and financial ) Sadgrove (2005) emphasized that a company experiences operational risks in its failure toward service and product performance comprising of limitations caused by personnel and infrastructure (Harland et al., 2003) Strategic risk occurs when the company faces its business strategies (Slywotsky & Drzik, 2005). Finally, thancial risk develops when there is an adverse impact on the cash flow (Nordin et al. 2011)  TYPES OF BUSINESS RISK 1. Economic Risk - The fluctuating market is driven by economic changes. There is the positive impact of booming purchases yet negative events can slow down revenues. Maintaining fixed cash flow helps mitigate financial risk in an economic downturn. 2. Compliance Risk - Business owners confront an array of laws and regulations to be able to perform. Staying well versed in applicable laws from the government agencies regarding permits, licenses, taxations, insurances, and other similar national and local can help minimize compliance risks. Non-compliance may cause some significant fines and penalties. TYPES OF BUSINESS RISK 3. Security and Fraud Risk - As more customers use online and mobile channels to share personal data, there are also more significant hacking opportunities. Recent stories about data breaches, identity theft, and payment fraud connote how this risk is growing for businesses. 4. Financial Risk - This business risk involves credit beyond customers of your own company's debt load Interest level fluctuations can also cause harm. Creating modifications to your business plan avoids harming cash flow or creating an unforeseen loss. Keep debt to a minimum and make a plan to minimize that debt load as soon as possible. 5. Reputation Risk - There has always been a risk of unhappy customers complaints either through social media or word of mouth. However, social media has magnified the rate and extent of reputation risk, Consequently, an unhappy customer, product failure, negative press, or lawsuit can negatively impact a company's brand character.  TYPES OF BUSINESS RISK 6. Operational Risk - This business risk can occur internally, externally, or include factors that could unexpectedly cause business continuity loss. An unforeseen event could be a natural disaster or fire that destroys the physical business. It might be a server failure brought by technical problems, people, or power interruptions. 7. Competition or Comfort Risk - A business manager is highly aware that competition exists in the industry. It is convenient to miss out on what other businesses offer that may entice customers. Some company leaders feel so assured in their achievements that they don't explore continual improvements in such a context. Developing competition added with a lacking desire to change, may lead to a loss of customers. RISK INDICATORS IN THE TOUR AND TRAVEL AGENCY BUSINESS Gerald and Lyngstad (2015) explored risks from the perspective of Madagascar's travel industry suppliers Perl and Israeli (2011) and Nasr (2017) explored external environment risk factors that affect travel agencies operations. As can be seen, most globel quantitative studies on travet agency risk management focused on the external environment. They do not give attention to the trave agencies structural problems and neglected Internet competition that arose fron repid technological development. Therefore, the availability of an established travel agency operating risk indicator system is essential External risks for the tourism industry include natur disasters such as floods, tornadoes, droughts, fires and tsunamis, climate change, health issues and infectious diseases. Social environmental risks impacts are crimes, terrorist activities, international exchange rates, economic recession, aging market and family structure. Perl and Israeli (2011) found that human resource risk, marketing channel risk, infrastructure risk, and government support risk are sources of crisis for Israel travel agencies. Oroian and Gheres (2012) constructed a Romanian travel agency risk- management model for single tourism with risk factors appropriate to travel agencies. The study revealed the nine risk factors - organizatinal risk, inherent risk, competitive risk, economic risk, political risk, infrastructure risk, environmental risk, business capability risk, and national image riskm Rogers (1977) believes that strategy is an action plan for allocating limited resources, gaining competitive advantage, and achieving goals Caves and Porter (1977) delineated two types of company resources tangible assets and intangible assets. Grant (1991) divided resources into six main types financial aid, physical help, human resource, technical resource, reputation and organizational resource. Saffu et al. (2008) explored the impact of entrepreneurial human capital and corporats resources on smal-and medium-sized tourism enterprises in Ghana, a western African country. Lynch et al. (2010) used the resource-based theory to explore how small tourism companies manage and redistribute resources and address environmental change through their innovative capabilities Wang and Fesenmaier (2007) used the resource dependence theory to study tourist destinations in Elkhart County, Indiana. Indicators such as operating cost risk, operator philosophy, lack of excellent business talent, lack of product innovation, information security risk, honrizontal competition threat, replacement by OTA, competition from new tourism platform, airline supply capacity, and service quality of domestic tour operators showed a high degree of consensus and importance. These are essential sources of operational risk for travel agencies. It indicates not only to confront competitive Threat brought about by rapid internet development but also take advantage of technology to create product and service innovation, reduce financial and human resources cakes, and improve coordination and cooperation with suppliers. IMPROVING RISK-MANAGEMENT STRATEGIES In terms of financial risk, travel agencies should improve their accounts receivable management through contracts and insurance to facilitate their physical assets' capital turnover and stabilize their financial management. In terms of human resources risk, travel agencies should change their traditional concept of Taiwan's travel industry and actively seek excellent business talents and cultivate employee enthusiasm and retention skills. In terms of product risk, travel agencies should confront their company's core resources and develop unique market products to stabilize consumer loyalty. In terms of a competitive threat, rapid Internet development has resulted in diversified tourism patterns that cater to consumer demand changes. In terms of supply chain risk, regardless of the intermediary role of traditional travel agencies or the re- intermediary part of OTAs, coordination between travel agencies and suppliers is significant. In the critical improvement zone, indicators such as accounts receivables risk, capital turnover risk, lack of product value, lack of product uniqueness, and impact of intelligent tourism showed a relatively low degree of consensus but high importance. It was indicating that travel agencies do not widely recognize the risk items in this zone. However, these items are essential sources of risk for travel agencies and should be improved and brought to travel agencies" attention Travel agencies can redistribute resources to other areas to optimize operational management. In the resource waste zone, the risk indicators showed a high degree of consensus but a low degree of importance, indicating that travel agericies are overly investing their resources, resulting in waste, and should therefore, stop and pay attention. Travel agencies should move resources invested in the third and fourth quadrants to the risk areas in the first and second quadrants and strengthen their operating strategies and management model. NEW SERVICES DEVELOPMENT THROUGH CO-COMPETITION, LEARNING AND BUSINESS STRATEGY The travel agency industry confronts an unstable environment where certain significant transformations occur, including changes in its business models. To remain competitive amidst industry changes, travel agencies must develop strategic business models focused on superior service attributes and innovative offerings to differentiate themselves and extend market share (Caro & Garcia, 2008; Zeithaml & Bitner, 1990; Das & Josh, 2007; Li & Zhou, 2010; Kinstrōm, 2010). Travel agencies must prioritize New Service Development (NSD) to drive innovation, competitiveness and growth, amidst increasing customer demands, revenue pressures and competitive markets (Aldebert et al., 2011; Kindatrōm, 2010; Burton et al., 2017; Yang et al., 2016; Tajeddini, 2011; Lin & Kuo, 2018; Sigala, 2012). Travel agencies confront significant challenges, including intense competition, pressing them to cultivate entrepreneurial intention, foster innovation, collaborate with rivals, and implement effective business strategies to design and deliver novel services, ensuring competitiveness and survival (Fitzsimmons & Douglas, 2011). SMEs, particularly travel agencies, benefit from cooperating with competitors, leveraging organizational learning to: 1. Capture market opportunities (Liu, 2018; Li et al., 2014) 2. Enhance innovation and knowledge transfer (Tzoka et al.,2015) 3. Improve firm performance through integrated internal resources and external knowledge (Liu, 2018) 4. Boost strategic growth and competitiveness (Abebe & Angriawan, 2014) Co-competition helps travel agencies or SMEs pursue benefits (Khanna et al,.1995) and protect and share knowledge (Ho & Ganesan, 2013). They access resources embedded in other firms (Makadok, 2001) from intra-firm learning relationships (Kale et al, 2000), transforming their outstanding ideas into outstanding outcomes. Co-competition helps firms integrate there resources immerse themselves in organizational learning (Mowery et al., 1996), and facilitates their scientific growth (Liebeskind et al 1996). Firms can stimulate product research and development through co-competition, significant cost reductions, sales increases, product and service portfolio diversification, and high customer loyalty and satisfaction (Bengtsson & Kock, 1999). Consequently, organizational learning is essential for travel agencies helps them develop the competency to outperform their competitors (Lopez el sl. 2005). Many new firms acquire advanced management strategies from other firms (Meyer & Peng 2005. Yiu et al., 2005); enhancing their competitiveness and performance (Dai & Liu, 2009). Therefore, travel agencies network with their competitors to develop synergies and scale effects augment their existing learning conditions, seek information, and enhance their business strategies to build better services. Their rewards may depend on how they contemporaneously manage co- competitive relationships with other firms. Different service-related firms can achieve differentiation objectives by introducing new services, customizing standard services, and offering fast customer service (Das & Joshi, 2007). Several practical studies have focused on service offerings in the travel agency industry. Travel agencies are service firms and pioneers in the tourism market. To provide better service to attract customers, they must increase their existing capabilities by being sensitive to the changing environment and enhancing competitive advantages by assimilating new knowledge (Bao et al., 2012), Johnson et al. (2000) suggest that innovative firms create new services for undefined or current marketplaces or provide new services for existing customers. Many companies consider service a key growth area and change their long-term traditional business approaches to offer more and new services (Kindström, 2010). Therefore, travel agencies must change how they do business if they want to develop new services and stay competitive Assuming that a business strategy has a fundamental role in shaping a firm's direction. It is most likely associated with service development. Furthermore, travel agencies vary in their operation tendencies and NSD to attract customer consumption, maintaining good relationships with competitors, suppliers, and customers. There are thres distinctions of travel agency business in the tourism industry according to the operation and service activities they perform: Consolidated travel agency (e.g., a service provider focusing on the Internal and overseas tourism markets); Class A travel agency (e.g., a customer service provider focusing on the foreign tourism market, including the introduction of cultural and regional traditions), and Class B travel agency (eg, a customer service provider that focuses on the domestic tourism market) The peculiarity of travel companies' activities is the presence of different risk factors that directly impact the tourists' and travel companies' actions. Its financial condition determines the features of the management of a travel company and its economic security. The characteristics of tourist products and tourist services Include the following: 1. Various suppliers deliver the assembled travel products and services 2. Inability to feel the product or service before consumption 3. Continuity of production and consumption in tourist services, since production occurs in parallel with the consumption 4. Dependence on the time and place of receiving the tourist product or service 5. Impossibility of preservation 6. High elasticity of demand for a tourist product by income and price 7. Seasonal fluctuations in demand for tourist services 8. Subjectivity of assessing the quality of tourist services 9. Variability of service brought by human service delivery and emotional labor 10. Efforts of many companies to create a tourist product 11. Other internal and external forces (PESTEL) that can affect travel products and services Website and email become essential digital marketing tools (Taiminen & Kajaluoto, 2015) not only to information but also to create trust with customers (Kim et al, 2011) as an initial representation of th (Christodoulides, 2009). Facebook, WhatsApp, and Instagram are prominent social media tools SMS blogging, unlike Twitter (microblogging), are the least popular among travel agencies. Travel blogs enhance word-of-mouth communication (Garcia, 2006), thereby making it a relevant ap gain a strategic advantage over competitors. However, small travel agencies have not been fully uti Small Travel agencies have realized that digital marketing is beneficial as they experienced its convenient (ease) means to introduce and promote their offerings to potential consumers (Parise et al., 2016) It also permits them to tailor their offerings based on feedback and reviews of first-time and repeat clients (Ashley & Tuten, 2015) in a cost-effective manner (Karjaluoto et al., 2015) Methods of digital marketing are more economical in terms of reach and costs than traditional marketing per most travel agencies' experience. RISKS AND OPPORTUNITIES OF DIGITAL TRANSFORMATION IN TOURISM Several of the highly advanced and high-value digital businesses perform in the tourism sector. However, most have counted themselves as tech start-ups, not tourism businesses (Airbnb, Uber, Booking.com, HomeAway, etc.). These digital giants are tech-driven, possess global know- hows, invite project and significantly differ from traditional tourism SMEs regarding growth trajectory They perform together with a "long tail" of prevalling tourism businesses with complex tasks in their digitalization flight (OECD, 2019, PATA, 2018), resulting in diverse degrees of improvements and good advantage. An example can be accommodation-sharing platforms using technologies to resourcefully balance at minimal cost and acquire a market advantage to immediately become leading players in the accommodation sector. Exposing the possibility of digital technologies and digitalization in tourism necessitates a distinct attempt to meet the unique issues in the various parts of the tourism sector and diverse kinds of tourism ventures. Tourism businesses differently confront the challenges they face in their digitalization journey depending on the type, size, and nature of the tourism business. The subsectors they quality for include transport, accommodation, and personal services (Calvino et al., 2018; OECD, 2019); their access to technologies, data, skill, instruction, mentoring, and other resources and assistance (European Commission, 2017); their management and strategy-making competencies which influence the extent to which business owners identify opportunities, distinguish risk, and are motivated to capture opportunities (Rachinger et al., 2018) and the business setting, the societal and economic background, and the access and convenience of digital technologies (Dredge et al., 2018).  Application of technologies: Constraint to the application includes access to digital infrastructures, such as high-speed internet and Wi-Fi networks, which are essential to access more sophisticated technologies such as cloud computing and data analytics. Internet rate influences booking services, marketing, and other business procedures. Among other countries, Austria, Chile, France, Greece, Spain, and Sweden, among other countries, note that SMEs and micro-enterprises tend to have inferior applications, which upsets business image and status The on-site delivery of visitor experiences may necessitate high-speed mobile broadband. Novel walking tours, for example, might depend on Wi-Fi access to cloud services, geotagging (identifying location), and augmented reality to bring to life visitor encounters and replications such as those curated by the Heritage in Motion initiative. Local governments are gradually offering Wi-Fi in public areas back up the delivery of smooth visitor experiences, evidenced in Korea.  Access to resources: Deficient access to finance, information, knowledge networks, skills, and time can hinder digital transformation (OECD, 2019d). Tourism SMEs may have a shortage in capital reserves, struggle to obtain traditional loans or credit, or recognize the investment as too uncertain. It affects SMEs' willingness to partake in digital technologies as they become worried about return on investment To manage these obstacles, programs such as Scotland's Digital Development Loan or Spain's Digital Agenda provide funding support to motivate investment. Other prevalling issues pertain to skill gaps and lack of access to initial and ongoing training and business support. Besides, limited time, awareness, and knowledge among SMEs may influence such schemes' weak involvement. For example, Norway provides a one-day training conference for tourism professionals to advance their digital skills at beginner and expert proficiencies (Digital Competence 2.0). The condensed setup is an excellent way to urge upskilling despite the limited time and resources of tourism SMEs. Information exchange, learning, and research: The different business models, practices, cultures, and strategies of tourism SMEs influence their confidence and enthusiasm to undertake digital transformation. The United Nations World Tourism Organization (2019a) anticipates the most required competencies by businesses in the tourism sector across the next five years as digital/IT, customer focus, data analytics, operations, commercial, leadership/ management, and administration/finance. However, tourism businesses may not be equipped with the financial or management capacity to hire tech professionals or capitalize on workforce training. Instead, they may depend on obtaining services that can be expensive and tailor-made, and higher education institutions are often not funded to engage in small practical capacity-building projects. The Austrian government has tackled this gap by creating the Research Expertise for the Economic program in partnership with the Austrian Research Promotion Agency to encourage the economy’s digitalization, including tourism businesses. Business Innovation: The different business models, practices, cultures, and strategies of tourism SMEs influence their confidence and enthusiasm to undertake digital transformation. With the support of new technologies, the typical cost of doing business has significantly lessened, providing some companies to expand at an unprecedented pace (UNWTO, 2019b). Most lifestyles and micro-enterprises In the sector are directed to business sustainability, are risk reluctant and have minimal interest innovation. In contrast , more prominent firms have the ability financial and otherwise, to start a significant venture. The differences between the essential kind of some tourism bus subsectors such as accommodation, transport, and reseller industries clic persuade their capacity and pace to adjust to the digital ecosystem. These trends have added to an efficiency gap between traditional tourism SMEs and their digitally empowered counterparts. There is a need to improve openness to innovation and knowledge exchange through incubators, accelerators and labs that promote partnerships between tech and tourism companies. However these prevailing supports often emphasize the startup tech dimensions such as business model innovation, enticing venture capital investment. They do not meet the challenges faced by tourism businesses in going digital. These supports have initiated high-value companies in ride-sharing and accommodation-sharing existing accommodation SMEs, for example, may have challenges in allocating value from these kinds of programs. The purposes of such Incubators, labs, and accelerators should be carefully communicated to reveal the needs upfront. Prescription of Risk and Management: Deficiency of resources, unreliable services and the unknown’s anxiety serve as barriers to tourism businesses embraong advanced, costly, or novel digital technologies, such as cloud computing services Altering privacy requirements on data protection across the globe can worsen data collection, analytics, and storage. At the same time, private decision makers confront opposing urgencies between capital investment in technolog and operational methods. However, data-driven companies can arrive at better judgments (Brynjolfsson et al., 2011). MANAGEMENT OF RISK IN TOURISM The tourism industry must be involved in risk management and disaster risk management processes, namely: identify, analyze, evaluate, treat, monitor and review risks in the destinations. Primarily, it is essential to manage risks to increase the company value, guaranteeing fluidity and wealth. Strategies include: Risk mitigation strategies Risk prevention and transfer Risk reduction RISK MITIGATION Basis of risk mitigation are rules, regulations, education, and safety measures further divided into avoidance and resistance. Avoidance minimizes the hazardous ampact and forbids the development of at-risk areas On the contrary, resistance is managed by safety measures in risk area. RISK PREVENTION AND TRANSFER typical strategies are insurance, catastrophe bonds, derivatives, and hedging A tourism company exposed to the risk of loss from catastrophic risk can acquire a hedge that provides payment if a natural disaster occurs and creates damage at the tourism facility RISK REDUCTION The risk reduction strategy is further divided into withdrawal and diversification. Withdrawal prompts partial or complete leaving of a business, activity, or location that causes a particular risk exposure. In diversification, cross- sectoral integration focuses on partnership risk and conflict mitigation to ensure efficiency and internal collaboration between partners.  SWOT ANALYSIS Performing a SWOT analysis of the tourism business is a valuable business tool. The acronym refers to STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS This step relates to establishing the policies, systems, procedures, and relationships with stakeholders pertinent to the organization.  SWOT ANALYSIS STRENGTH The travel agency's strengths are the business attributes that cause a distinct market advantage which the company can capitalize on in its marketing plan. They are the internal qualities of the company practices. WEAKNESSES The identified weaknesses of any travel agency require an extraordinary level of honesty and humility from an insiders perspective. However, constructive criticism from outsiders can also be helpful. Insiders are reliable sources of this attributes to discuss deficiencies during SWOT analysis.  SWOT ANALYSIS OPPORTUNITIES The opportunities are external prompts or indicators that the market provides which can offer profit and growth when the company position jtself to utilize them, Indeed, most companies are searching for opportunities to take advantage of as inputs to their profitability THREATS A SWOT analysis's importance is to identify the current and advance threats to prepare for countermeasures and employ the company's strengths. Initiating the right action is essential in dealing with threats.  KEY CONCEPTS ENTERPRISE RISK INTERNAL AND RISK MANAGEMENT AND MANAGEMENT EXTERNAL RISKS DISASTER RISK MANAGEMENT This implies a company must Travel agencies must analyze the The tourism industry must be continuously reassess its opportunities and advantages in involved in risk management and performance, refine da strategy, their internal and external disaster risk management and maintain health interactive environment and set long-term processes, namely: identify, relationships with its audience business strategies to enable analyze, evaluate, treat, monitor, and customers. sustainable operation. and review risks in the destinations.  KEY CONCEPTS NEW SERVICE SWOT ANALYSIS DEVELOPMENT (NSD) Performing a SWOT analysis of the tourism business is a valuable This includes innovation in both business tool. The acronym refers market and growth opportunities to STRENGTHS. WEAKNESSES, to create value against the OPPORTUNITIES, and THREATS. This threats of declining profits, step relates to establishing the growing market demands, and policies, systems, procedures, and competition to augment their relationships with stakeholders existing expertise. pertinent to the organization THANK YOU FOR LISTENING! GROUP 8 Del Rosario, Judeah Despabeladeras, April Despi, Glacy Mae Domasig, Jobelle Doringo, Aiben Hebres,Jonabie Lanuza, Lyka That was so 🔥