Unit-1-Lesson-2 (1).pdf

Lesson 2. Risk Management and its Process Introduction You may have realized now that at some point in their operations, the hospitality industry and tourist destinations in every corner of the globe are experiencing devastations of one form or another. As a result of a series of major int...

Lesson 2. Risk Management and its Process Introduction You may have realized now that at some point in their operations, the hospitality industry and tourist destinations in every corner of the globe are experiencing devastations of one form or another. As a result of a series of major international events which triggered business and consumer uncertainty, the world tourism industry suffered serious losses. While crises and disasters cannot be stopped, the understanding and management of such incidents can limit their impact on the hospitality and tourism sector. A well thought out risk management plan can be of great importance. This can help managers control damage to the organization's reputation, brand value, financial condition, and market share. enforcesolutions.com Creating a culture of risk awareness and effectively incorporating risk management into business decisions, as well as the organization's culture, is very important. Hospitality managers should create an environment in which the whole organization can support the process of value creation with more focus approached to risk management. In the tourism and hospitality industry, risk management is complex. Managers are required to be proactive in their actions and decision making. Failure to do so may have negative impacts on property damage, fines, lawsuits, or in the most tragic outcome — injury to guests or employees. Not only do companies have a moral and ethical responsibility to practice effective risk management, but failure to do so can also lead to financial ruin and cessation of operations. www.aonecomputer.com 13  Learning Outcomes 1. explained the meaning of risk management; 2. determined the importance of risk management; 3. identified the risk management process; and 4. elaborated the steps for risks identification in the hotel and restaurant context Activate Prior Knowledge Activity: Word Search Find all the words in the Word Search. Words are written horizontally, vertically, diagonally, and some are even written backwards. Loss Reduction Transfer Retention Analysis Crisis Treatment Disaster Mitigation Hazard Risk Process Injury Assessment Harm Damage Financial Identification A M W W H A T R A N S F E R R H T D O V G J A Y A W L M H A S Q U A E L A S T L K C Y Q J V Y P N S O Y D P H K A R T A W W W R S S G Z J B L I K I E H E L M W R D F F I N A N C I A L I V S A L E V I R E D U C T I O N T E Y D N T A D L F V G D A M A G E J G Y N C I M J O S Y M P I D I G V T Z R W B O H E U W U K T V N J Q J M Y U G M E Z I N M S F V R K E P W T X N L Q J S Q L T Y K J U G Q Y D R G Z R F D S I S Y L A N A I R S P D Z Y C R I S I S J C U T C R V Z K W R R G E D N B D O U Z Y Y A I P H D R A Z A H D K C T D X E T S O N F W E P R O C E S S N O I T A G I T I M I X E L Q X C O M H B Y O M K T R B J R T N E M S S E S S A Q N C U U Y W G K E N K C V V G N C V O U Y R I S K S R E T E N T I O N S T B I S C S X Z A E M E C D O U T T N R G C S O S K K Q U I Q V W I V L G F O Y H V B 14  For some individuals, the ability to deal with risk seems to be built on their character, but it seems to be the knowledge that can be acquired through training for the rest of us. It is important to step out of one's comfort zone and be willing to change, learn, develop new skills, or be challenged to manage risk in order to gain the skill set required for one to deal with risk. Risk management is a methodical approach that could be taught and learned by most. Acquire New Knowledge What is Risk Management? Risk management refers to the practices, policies, and procedures aimed at minimizing or eliminating unacceptable risks. Managing risk is a process of determining risk exposure, and then initiating action to either minimize or eliminate risk. Risk management helps employees identify, analyze, assess, and hopefully avoid or mitigate risks from a variety of sources, including financial instability, accidents, legal ramifications, natural disasters, data or cyber security breaches, strategic management errors, and much more. www.eastwoodandpartners.co.uk In the tourism sector, risk management is a proactive process that allows tourism destinations and businesses to minimize losses and take advantage of opportunities. It focuses on ensuring the safety of tourists/guests and staff by managing operational risks effectively through a commitment to leadership, clearly defined responsibilities, roles, processes, and procedures. Additionally, risk management is not an overnight effort. It needs regular and continuous monitoring. Sustainable development of tourism may be achieved by implementing good information and integrated approaches to risk management. The Importance of Risk Management Risk management is an important process, as it empowers a business with the necessary tools to adequately identify potential risks and deal with them. https://www.ihgplc.com 15  It allows organizations to prepare for the unexpected by minimizing risk before they occur, saving money, and safeguarding their future. The entire risk management goal is to ensure the company only takes the risk that will help achieve its primary goals while keeping all other risks under control. Once a risk is identified, mitigation of it is then easy. A dynamic risk management plan will help a firm establish procedures to avoid potential threats and minimize their impact should they occur. Assessment and risk management is the best way for a business to prepare for eventualities that can come in the way of progress and growth. Moreover, risk management provides management with the information they may use to linkedin.com make informed decisions. Their knowledge of the risks they face will give them different options on how to handle potential problems. This understanding and control of risk allow organizations to have greater confidence in their business decisions. Also, strong corporate governance principles that specifically focus on risk management can help a company achieve its goals and make sure the business remains profitable. Other significant benefits of risk management include: creates a safe and secure work environment for all employees and customers; increases the stability of business operations while decreasing legal liability; protects from events that are detrimental to both the company and the environment; safeguards all persons and assets involved from possible harm; and helps establish the insurance needs of the organization to save on unnecessary premiums. The Risk Management Process There are a variety of risk management m odels, all of which generally have a variation on t he same theme, each with a slightly different ana lytical approach. Risk management process is the way decisions are made and implemented that minimize the adverse effects on an organization from accidental business losses. It enables management to identify each risk, quantify its corporatefinanceinstitute.com impact, and take action to prevent it from occurring and reduce the impact if it occurs. 16  The risk management process describes the steps to take to identify, monitor, and control risk. There are four stages to it: risk identification, risk analysis, risk control, and risk treatment. Risk Identification The first stage of the risk management process is a systematic identification of the risks the organization faces. Often this step is called risk assessment. Risk identification is primarily about brainstorming. A business gathers its employees together to be able to review all the different risk sources. A risk assessment may be carried out with varying degrees of detail depending on the type of hazard and the information, data, and resources you have at udemy.com your disposal. The next step is to arrange all the identified risks in order of priority. It is necessary to identify which ones are most likely to occur and which ones would have the most adverse effect on the business. Prioritization ensures that those risks that can significantly affect a business are addressed more urgently. Assigning a monetary value to each risk may help simplify the process. An organization can identify risks in the following ways: on-site inspections and discussions with management and staff; review of products, services, processes, and contracts; examination of historical activities and losses; and identification of possible risk scenarios. Risk assessments should be periodically reviewed. It can be done when new workplace risk information becomes available or the operating environment changes. Risks are identified in the context of a hotel through different means. Hotel management discusses issues at monthly safety meetings and develops action plans. Actions are identified, advanced, and monitored for improvement. The risk assessment may include quality audits, internal audits, intelligence gathering, and risk management assessments. They are also identified as a result of incidents, customer audits, and self- assessment. alarm.com The first step in a restaurant context is to identify each risk. Then, they evaluate the likelihood that it will occur along with its potential consequences. In most organizations, some risks are prevalent while others are unique to a particular restaurant, and the services they provide. For example, liquor liability, slips 17 and falls, and food-borne illnesses to name a few. There is a need to review past accidents, insurance claims, and the industry's loss statistics to get a complete picture of the risks. While it may be impossible to identify any potential threat to an enterprise, a risk assessment process can help identify future issues and minimize potential costs in advance. Once a comprehensive list of risks has been compiled, the next step is to ensure a thorough analysis takes place. Risk Analysis Risk analysis is a process that assists in identifying and managing potential problems that might undermine key business initiatives or projects. It sets out and addresses the impact of documented threats. The identified threats are rated according to the probability of occurrence. Risk analysis is a proven way of identifying and evaluating factors that could adversely affect a company's success. When analyzing risk, you decide on the relationship between the probability of a risk occurring and the identified consequences of the risk. It allows examining the risks that the organization faces, and helps to study.com decide whether or not to move a decision forward. Risk analysis can be complex. Detailed information such as project plans, financial data, security protocols, marketing forecasts, and other relevant information needs to be used. However, it is an essential planning tool and one that could save time, money, and reputations. A risk analysis compares the probability (frequency) of any risks occurring by the consequence (severity) if they do occur. This can be done qualitatively or quantitatively, applying either numerical values or descriptors. For example, an analysis of the risk of the catastrophic failure of a ski lift at a resort resulting in passengers falling to the ground would likely indicate that the probability of this incident occurring is low due to required safety checks and maintenance. However, the consequence would likely be high, given that many visitors could be involved in a significant fall, resulting in multiple casualties. MQL5.com 18  Risk control must be done if the analysis determines the following: the probability of the risk occurring is unacceptable; the consequence of the risk occurring is unacceptable; or the combined impact of the probability and consequence is considered unacceptable. Risk Control Risk control is a step in the risk management process also known as a hazard control. Risks control measures are designed to either reduce the risks or eliminate them. Control measures are actions taken in response to a risk factor that has the potential to cause workplace accidents or harm. In many cases, a controlled risk is still a potential threat to employees, but the dangers associates with it have study.com been significantly reduced. Risk control should form part of the wider health and safety plan of the company which provides a method for identifying, controlling, and reducing the risks present in the workplace. Control measures follow a hierarchical pattern, working through and implementing each step to control and minimize the identified risk. There are two primary concepts of risks control: exposure or risk avoidance and loss reduction. Exposure avoidance is a risk control technique that avoids any exposure to that particular risk. It is about eliminating any risk exposure that represents a potential loss. It includes any mitigation strategies used to avoid risk exposure. Risk avoidance is not carrying out any activity that may bring risk. It is simply avoiding the activity that leads to a loss. It is the approach of not engaging in an activity that gives rise to risk. Risk avoidance becomes an option when the extent of the risk of a business is known. Risk avoidance and mitigation can be achieved through the implementation of policies and procedures, training and education, and technology. Examples are the elimination of particularly dangerous activities or services, the avoidance of certain areas due to environmental threats, or the change of a tourist destination due to political unrest. Loss reduction refers to measures that reduce the severity of a loss after it occurs. It accepts the risk of a specific activity or service but tries to minimize the loss rather of eliminating it. The management chooses to continue offering the activity, but will take steps to mitigate the severity of the possible damage. marketing91.com 19  An example of this is requiring all ski lesson participants to wear helmets. There is still the risk of falling, but actions are taken to reduce the severity of any fall. Another example is the installation of sprinklers in its buildings to reduce the risk of a fire destroying the building altogether by spreading from room to room. Risk Treatments The next step in the process is risk treatment, failing the ability to control all risks identified. That includes the concept of risk transfer and risk-retention. Risk transfer refers to a technique through which risk is transferred to a third party. The risk may be transferred by contract either by entering into a service contract or by requiring a waiver from canstockphoto.com the participants. In other words, risk transfer involves one party taking the liabilities of another party. Buying insurance is a common example of risk being transferred from an individual or entity to an insurance company. Risk is transferred through insurance by paying the premium, in which the financial risk of an accident is absorbed. In general, the individual or entity shall provide periodic payments to the third party. When an individual or entity purchases insurance, they insure against financial risks. An individual who purchases car insurance, for example, acquires financial protection against physical damage or bodily harm that can result from traffic incidents. As such, the individual shifts the risk of large financial losses arising from a traffic incident to an insurance company. The insurance company will typically require periodic corporatefinanceinstitute.co payments from the individual, in m exchange for bearing the risks. Risk-retention refers to the level of risk the company retains via a conscious decision-making process. The risk-retention technique is the organizations' intentional decision to deal internally with a company's opposing risk, rather than to transfer it to insurance or any other third party. It maintains the principle of assuming responsibility for one's actions. That way, the organization’s risk is self- financed and managed. 20  Organizations take decisions to retain risk when a review of cost anal ysis shows that it is cost-effective to handle the risk internally as opposed to the cost of insuring against it in full or in part. When the premium of transferring them is substantially high, companies choose to retain the risk. insuranceopedia.com The risk-retention approach might be renamed as self-insurance. Some initiatives to treat the risk are required by law and enforced by government agencies. This means that tour operators must meet applicable statutory requirements. To determine whether the standard they are operating at is acceptable to society, they should monitor themselves. Failing to do so may lead to a variety of consequences including fines, suspension of operations, or a lawsuit. Risk management for tourism and hospitality is a complicated process. Another example is that companies providing public transportation (such as bus, tourist vans) have clearly defined requirements as set out by the Land Transportation Office. They are required to use properly licensed drivers, submit inspections of commercial vehicles, and ensure their vehicles as required. Failing to adhere to these standards may result in the suspension of operating privileges, fines, insurancelitigatonregulatorylaw.com or even imprisonment. Apply Your Knowledge As the Human Resource Officer of Mount Olympus Resort, you are to deliver a talk on Risk Management and its Importance. To help you in the presentation, you are to prepare an infographic (a visual image such as a chart or diagram used to represent information or data) using what you have learned from this lesson. 21  Rubric for Infographic Exceptional Admirable Marginal Unacceptable Appropriate Most details Few details No details to details support support main idea support main idea support main main idea idea Accurate Lacking accurate Accurate and information for information Information is detailed almost all subject not accurate Content information matter Inadequate information is not Information (50%) Information Information is clearly supportive does not adequately mostly adequate of visual’s support the supports purpose and supportive of purpose visual’s purpose of visual visual’s purpose Topic and title Topic and title are Topic and title Topic and title clear and easily mostly clear and difficult to identify are not clearly identified easily identified identified Main idea not Main idea is Main idea is clearly stated No main idea clearly appropriate to Focus appropriate to topic Few illustrations Illustrations do topic complement not complement (20%) Most illustrations purpose of visual purpose of All illustrations complement visual complement purpose of visual purpose of visual Outstanding use Adequate use of Inappropriate use Little attempt to of color, design, color, design, and of color, design, use color, and space space and space design and space Original and Design is Design lacks appropriately Visual creative design adequate creativity Appeal Design is dull (20%) Overall design is Overall design is Lack of pleasing and mostly pleasing harmonious Project has harmonious design in sloppy presentation appearance Free of Mostly free of Frequent Too frequent grammatical grammatical grammatical grammatical errors errors errors errors Mechanics Words are legible Most words are Presentation is Distractive and pertinent to legible and illegible and elements make (10%) topic pertinent to topic confusing illustration ineffective Career Opportunities in Education and Training Texas Education Agency ( 2015). 22  Assess Your Knowledge Part 1: Short Quiz Direction: Select from the choices given the most correct answer. Write only the letter on the blank provided before the number. _____1. Insurance is a _____ type of risk control. a. Reduction b. Prevention c. Avoidance d. Transference _____2. When a firm chooses not to pursue an activity for fear of a loss, they are practicing _____. a. Reduction b. Prevention c. Avoidance d. Transference _____3. It is the stage of the risk management process that systematically assesses risks facing the organization. a. Identification b. Analysis c. Control d. Treatment _____4. It accepts the risk of a specific activity or service but tries to minimize the loss rather than eliminating it. a. Risk transfer b. Risk analysis c. Risk reduction d. Risk retention _____5. Risk management is the process of identifying, _________, and assessing risks, implementing, and evaluating controls to reduce the impact of risks. a. Controlling b. Analyzing c. Designing d. Selecting _____6. It is the risk that must exist for the activity to occur. Examples include the risk of drowning when swimming and the risk of falling during skiing. a. Risk b. Real Risk c. Perceived Risk d. Inherent Risk 23 _____7. It refers to the practices, policies, and procedures designed to minimize or eliminate unacceptable risks. It is a process of weighing policy alternatives. a. Risk Control b. Risk Assessment c. Risk Management d. Risk Identification _____8. Tour operators must comply with applicable statutory requirements and be sure to self-monitor to determine if the standard that they are operating at is acceptable to society. They should take steps to minimize inherent risk by: a. Training staff b. Informing participants of the hazards of the activity c. Providing appropriate safety equipment for guests d. All of the above _____9. A variety of risk management models exist, with each having a slightly different analytical approach. Which is NOT part of the risk management process? a. Risk management b. Risk assessment c. Risk treatment d. Risk control _____10. Successful management of risk may include operators promoting the risk of activity as high, even if in reality the risk is minimal. Which concept of risk this strategy is most applicable? a. Real risk b. Perceived risk c. Inherent risk d. All of the above Part 2: Journal Writing Based on your belief and reflection who has the moral and legal responsibility of ensuring health and safety in the workplace and why? Why there is a need to implement risk management in the place of work? (Please see Journal Rubric on the previous lesson. You may use additional paper for your insights.) _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 24 Part 3: Case Study Tort Law In January 2015, a Kamloops woman sued Sun Peaks Resort Corporation after breaking her leg on the resort’s tubing terrain. The incident took place in 2013. In court documents, Pamela Boileau said she visited the resort with her husband and two young children to use the tube park, where, she claimed, no signs were posted restricting the age of children allowed to use the facility. She then took a ride with her husband and their baby. According to her filing, “the ride was very fast and bumpy and the tubes went high on the berm and then hit a big bump and the plaintiff’s infant daughter went flying out of her tube” (Petriuk, 2015). To help her daughter, Boileau stopped the tube she was riding in abruptly and broke her leg in multiple places. According to Boileau, the next day the resort erected signage prohibiting children under four years of age from using the tubing park. She sued for general damages, special damages and interest, and money for past and future health care. The lawsuit named Sun Peaks Resort Corporation and four employees in the claim. Based on this description of the claim, as circulated in the media, answer the following questions to the best of your ability: 1. What evidence is there that staff at the resort had engaged in the four stages of risk identification? For each stage, note what the resort could have done differently. ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ 2. What were the real, perceived, and inherent risks of using the tube park? How would these be different for an adult participating in tubing and a small child? ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ 3. Search the internet to find the details of this case and any updates on what happened with the parties involved. How did the outcome differ from what you expected? ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ 25  4. What is your personal feeling about who is responsible for the injury in this case? How does that differ from what the law has to say? ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ Rubric for Case Study Criteria Distinguished/ Proficient/ Basic/Fair Poor Excellent Good Identification Identifies and Identifies and Identifies and Identifies and of the main understands all understands most understands understands issues the main issues of the main some of the main few of the and/or in the case study. issues in the case issues in the case main issues in problems study. study. the case study. (20%) Analysis of Insightful and Insightful and Insightful and Incomplete the key thorough analysis thorough analysis thorough analysis analysis of the issues of most of the of some of the key issues. (25%) key issues. key issues. Alternatives cover Alternatives cover Alternatives cover Incomplete Alternative all the key issues most of the key some of the key analysis of solutions with method to issues with issues with alternatives and/or evaluate all method to method to with no options equally. evaluate. evaluate. evaluation (20%) method. Well-reasoned, Solid, well- Shallow Superficial logical, relevant thought out observations and observations Observations observations and observations and recommendations and and/or recommendations recommendations on effective recommendati recommenda on effective on effective solutions to some ons on tions on solutions to most solutions to many of the effective effective of the of the problems/issues. solutions to a solutions problems/issues problems/issues few of the (20%) problems/ issues. Writing is totally There are few There are several There are free of grammar spelling or spelling or many spelling and spelling grammatical grammatical errors and Writing errors. Clear, errors. Most ideas errors. Some grammatical Skills/Profes concise and are clearly ideas are clearly mistakes. sional creative presented and presented. Ideas are hard Presentation presentation of references are References are to follow. (15%) ideas and used. sporadic or not References are properly used. not used. referenced. MSL Elizabethtown College 26  References Aaron, R. (2018). The importance of risk control measures in the workplace. Retrieved from https://conserve.com.au Akinyomi,T. (2020). Risk retention vs. risk avoidance. Retrieved from https://medium.com Enterprise Risk Management.(2004). A practical guide to risk assessment. Retrieved from www.pwc.com Fitzgerald, P. (2003). Risk management guide for tourism operators. Ottawa, ON: Canadian Tourism Commission (CTC). Hospitality: Risk assessment. Retrieved from https://www.safeworkaustralia.gov.au İçin, T., & Önemi, R.Y. (2015). Importance of risk management for the sustainability of tourism. The Journal of Social Sciences Institute, 18 (33), 163-178. Introduction to tourism and hospitality. Retrieved from https://opentextbc.ca Risk analysis and risk management: Evaluating and managing risks. Retrieved from https://www.mindtools.com Risk control. Retrieved from https://www.safeopedia.com Risk management. Retrieved from https://corporatefinanceinstitute.com Risk management. Retrieved from https://searchcompliance.techtarget.com Somoray, A.M. (2020). Risk management as applied to safety, security, & sanitation. Manila: Unlimited Books Library Services & Publishing. The importance of risk management in an organization. Retrieved from https://www.careersinaudit.com The importance of a risk management program for your restaurant in today’s softening insurance market: what is risk transfer? Retrieved from https://corporatefinanceinstitute.com Tularam, G., & Attili, G. (2012). Importance of risk analysis and management: The case of Australian real estate market. Retrieved from https://www.intechopen.com 27