MODULE 1

INTRODUCTION TO RISK MANAGEMENT

First Semester AY 2023-2024

LEARNING OBJECTIVES

After the completion of the chapter, students will be able to:

1. define risk management;

2. identify the process of risk management in ISO 31000;
3. explain hospitality risks: keeping pace with emerging exposure;
4. identify risks in hospitality industry

CONTENT

TOPICS:

✔ Risk Management defined

✔ Identifying ISO 31000

✔ Hotel Insurance

✔ Hotel Security Design

✔ Risk in Hospitality Industry

 Lesson Proper

LETS STUDY!
Risk Management - The identification, analysis, assessment, control, and
avoidance, minimization, or elimination of unacceptable risks.

An organization may use risk assumption, risk avoidance, risk retention, risk transfer,
or any other strategy (or combination of strategies) in proper management of future
events.

WHAT IS ISO 31000

ISO 31000 specifies principles and guidelines for risk management for identifying,
assessing and mitigating risks faced by organizations.

-It recommends organizations to develop, implement and continuously improve a

framework that aims to integrate risk management processes into the organization’s
overall governance, strategy, and planning, management, reporting processes,
policies, values and culture.

Benefits of ISO 31000 Risk Management

Benefits of ISO 31000

Why use ISO 31000? What can it do for your business? Well, aside from
streamlining the implementation of a risk management framework by doing most
of the structural and conceptual heavy lifting for you, it can also help with:

Giving you a competitive advantage because ISO is an internationally

recognized symbol for quality standards.

Increasing employee awareness of organizational risks by including them in the

management framework and giving them responsibility for the processes they
commonly use

Reduce the frequency of, and ultimately eliminate risks by educating employees
and stakeholders on identified risks

Improve trust of stakeholders by maintaining transparency and communicating

risks (and demonstrating risk responsibility and mitigation)

Foster forward-thinking mentalities by encouraging employees to envision all

 potential outcomes of a given situation

Improve company culture by bringing disparate departments together to

exchange fresh perspectives, and consider how they might work together more
effectively

Improve success rate in all business operations by focusing on the process,

thinking preemptively instead of reactively, and giving employees ownership of
their work responsibilities

The two primary components of the ISO 31000 risk management process
are:

The Framework, which guides the overall structure and operation of risk
management across an organization; and

The Process, which describes the actual method of identifying, analyzing, and
treating risk.

Framework

The ISO 31000 Framework mirrors the plan, do, check, act (PDCA) cycle, which I
common to all management system designs. The standard states, however, that, “This
Framework is not intended to prescribe a management system, but rather to
assist the organization to integrate risk management into its overall management
system”. This statement should encourage organizations to be flexible in
incorporating elements of the framework as needed.

Major elements of the Framework include:

Policy and Governance

Provides the mandate and demonstrates the commitment of the organization

Program Design

Design of the overall Framework for managing risk on an ongoing basis

Implementation

Implementing the risk management structure and program

Monitoring and Review

Oversight of the management system structure and performance

Continual Improvement

Improvements to the performance of the overall management system

Process

After establishing the risk management Framework, an organization is ready to

develop the Process. The Process, as defined by ISO 31000, is “multi-step and
iterative; designed to identify and analyze risks in the organizational context.”

Major elements of the Process, as seen in the diagram below, include:

 Active Communication

Communication and consultation with all stakeholders

Process Execution

Establishing the context

Risk identification

Risk analysis

Risk evaluation

Risk treatment

10 P’s of Risk Management

POLICY

This may have been placed first on your own list on the basis that theoretically this
should be the starting point. However, in practice this is not necessarily where people
begin, certainly not in smaller firms where practical considerations dictate many of the
subsequent policy decisions. It is, of course, a critical element in developing strategies
that will enable the policy aims to be met.

PLANNING

This includes planning at the strategic management level and the practical operations
level, with all the other elements feeding information back to this stage and priorities for
action being decided. While all the other “P’s” feed into this stage, it is vital that they
are considered in such a way that they are all equally important in the decision making
process. For example, much of the work over recent years to develop tools to help
businesses manage health and safety risks is due to this element being given a much
lower priority than financial issues. Sometimes this may be justified, but recent shifts in
the emphasis of regulations covering the workplace mean that all risks must be
considered

PRODUCT OR SERVICE

There are several risk factors associated with the product or service itself that then
feed into questions about purchasing, production, waste management etc. These
include

PROCESS

Risks associated with the process itself can vary enormously, of course, depending on
the type of business being considered. However, the fundamental questions will be
related to the techniques used, and inherent risks associated with them controls in
place to reduce risks potential impact of technological developments, both positive and
negative changes in legislation and their impact on choice of techniques government
initiatives to support and encourage firms to consider using new technologies skill
levels of available staff, both in house and more widely available in the geographic
area

PREMISES

This is often a significant risk factor for smaller firms, as they frequently have limited
 access to suitable premises either at start-up stage or when expanding production. At
the other end of the scale, larger concerns with a variety of sites have additional risk
factors to consider and must fully optimize the facilities available at each.

PEOPLE

It is important to consider workers at all levels in the firm, especially those with non-
traditional forms of work contract and temporary workers. There are broader
considerations for some firms, as risks to visitors to the site and the wider public in the
vicinity may need to be identified.

PROTECTION

This is much broader than just protection of people from health and safety risks, and
includes identifying risks associated with the protection of people etc.

PROCEDURES

This element relates to others in the 10 P’s quite closely, particularly the Product,
Process and People.

PURCHASING

This is a significant element in the management of risks that is often isolated from
consideration of the other elements.

PERFORMANCE

As a risk factor, this relates to the criteria and performance measures chosen by the
firm. Who are the stakeholders who actually want to know about performance, and
what are these different groups actually looking for? Clearly, these questions will then
impact on the type of measures chosen for a specific element of business
performance, and how effectively risks are actually being managed.

Performance can be viewed at individual worker/ department/ company level, and may
just be related to the individual firm or be part of a “benchmarking” exercise. Again,
questions of health and safety, accidents and injuries, insurance claims, quality and
environmental standards will all be part of the evaluation of risk management.

INTRODUCTION
-The hospitality is a complex group of different types of businesses.
Their commonality is they provide a service to visitors.
-1,800,000,000
-An increase in demand for hotel accommodations is expected with global
projected to grow to 1.8 billion by 2030

HOTEL INSURANCE
-Obtaining a hotel insurance quote is one of the main considerations before you
start running your hotel business. Insurance for a hotel should be one of your most
important business considerations to ensure adequate protection for your livelihood.
-The insurer will require a certain number of minimum sections to be
purchased. Whilst many of these sections will be a matter of personal choice and
budget, some will be compulsory to enable you to trade legally.

Hotel Insurance for Buildings

Stock, Trade Contents and Tenants Improvements
Business Interruption (Loss of Income)
Loss of Money
Personal Accident and Assault
Breakage of Glass
Goods in Transit

Hotel Insurance for Buildings

Loss of License
Deterioration of Stock
Tenants Liability
Liabilities
Theft by Employee
Legal Advice

Hotel Insurance Preventing Fires

Hotel Fire Safety Equipment
The Hotel Kitchen
Hotel Furnishings

Hospitality Risks: Keeping Pace with Emerging Exposures

Food-Borne Illness

Food safety remains one of the biggest risks for the industry.
The growing trend of multinational food sourcing has made it an
even greater challenge.

Food-Borne Illness
Among the common infections are salmonella, campylobacter from contaminated
chicken, vibrio from raw selfish and E. coli.
Norovirus remains a leading cause of illnesses from contaminated food.
Food-Borne Illness
Restaurant personnel should be thoroughly trained in food handling,
sanitation and health safety procedures.
Risk management best practices extend to the sourcing of food products.
 Legionella and Carbon Monoxide
Legionella pneumophila
Legionnaires' disease is a severe form of pneumonia — lung inflammation
usually caused by infection. Legionnaires' disease is caused by a bacterium known
as legionella. You can't catch legionnaires' disease from person-to-person contact.

Instead, most people get legionnaires' disease from inhaling the bacteria.
Carbon monoxide poisoning occurs when carbon monoxide builds up in your
bloodstream. When too much carbon monoxide is in the air, your body replaces the
oxygen in your red blood cells with carbon monoxide. This can lead to serious tissue
damage, or even death.
Carbon monoxide is a colorless, odorless, tasteless gas produced by burning
gasoline, wood, propane, charcoal or other fuel. Improperly ventilated appliances
and engines, particularly in a tightly sealed or enclosed space, may allow carbon
monoxide to accumulate to dangerous levels.
If you think you or someone, you're with may have carbon monoxide poisoning,
get into fresh air and seek emergency medical care.
Liquor Liability
Establishments that serve liquor face a host of potentially expensive and
damaging exposure involving alcohol.
It is essential that employees who serve alcohol have the appropriate
licenses and training.
It is important for hotels and restaurants to develop procedures for
maintaining control over liquor service at group events

Access for the Disabled

Republic Act 7277, otherwise known as the Magna Carta for Disabled
Persons, as amended, provide that the state shall promote the mobility of persons with
disabilities (PWD) and guarantee indiscriminate access to public transportation,
providing accessibility features such as ramps, signage, and stickers in terminals,
stations, or depot.

Courtesy Transportation
Risk management considerations may vary depending upon whether hotel
employees are performing the service or if it is contracted out to third parties.
If the service is performed by a vendor, it is crucial to know what measures they take
to screen their drivers, what background checks are performed and what the vendor’s
insurance limits are.

Premises Security
Keeping guests safe remains a very high priority for the industry.
The security staff should be thoroughly vetted by the company and
provided with adequate training.
Security systems, such as cameras, also should be properly maintained.

Risk transfer and third-party relationships

A clear, written contract articulating the assumption of responsibility along with
proof of adequate insurance coverage is critical when allowing third parties to conduct
 business on a hotel’s premise or in its behalf.

Cyber Security
any business that accepts credit cards has an exposure to liability if the security of
personal financial information is compromise. In the hospitality industry, facilities may
record not only credit card information but also personal data such as drivers license.

Hotel Security
The importance of providing a safe and secure environment for all hotel
assets (people, information, property and reputation) is undeniable.

Physical and electronic security measures are perceived as unwelcoming, intrusive

and overbearing. Evidence continues to demonstrate that minimizing or omitting
security from the hotel design process can result in disastrous consequences for as
stakeholders

Risk Assessment in Hotels

External Risk Assessment
An outside consultant can add some integrity to your risk assessment.
The professional has the experience and the resources to do a thorough job and
the resume to add credibility to the finished product. The only reason not to have this
contracted out is the cost

Risk Assessment in Hotels

Internal Risk Assessment

 Besides saving money on hiring this process out, the education you will gain
and the knowledge of your own property will be priceless for you.
A Risk Assessment is quite simply a calculation of severity and probability.

Risk Assessment Process

1. Divide the property into sections
2. List all possible threats and hazards
3. Determine Severity
4. Determine Probability
5. Determine Risk

Types of Safety Equipment Used in Hotel Industry

Smoke Detectors
Smoke and heat detection units vary in their characteristics; some have the ability
to report a heat buildup prior to evidence of smoke or flame. While others respond only
to smoke and other products of combustion.

Fire Extinguishers
Four classes of fires
Class A – ordinary combustibles
Class B – flammable liquids
Class C – electrical equipment
Class K – cooking oils and fats
 Carbon Monoxide Detector
a device that detects the presence of the carbon monoxide (CO) gas in
order to prevent carbon monoxide poisoning

Sprinkler Systems
A fire sprinkler system is an active fire protection method, consisting of a water
supply system, providing adequate pressure and flow rate to a water distribution
piping system, onto which fire sprinklers are connected

Accident Prevention Signs

OSHA classifies accident prevention signs into three categories:
Danger signs
Caution signs
Safety instruction signs
Danger Signs indicate immediate danger
Red should be the basic color for identification of all danger signs

Danger Signs
indicate immediate danger
Red should be the basic color for identification of all danger signs
 Caution Signs
The color yellow has been used to advantage for marking physical hazards.
Used to warn against potential hazards or to caution against unsafe
practices

What is Risk Management in Hospitality?

In the travel, restaurant, and lodging industry, also known as “hospitality,” risk
management involves keeping abreast of rapid and often dramatic change, especially
as new technologies emerge.

Potential risks

in the hospitality industry include innovation, safety issues, natural disasters,

and reputational risk.

Innovation

The fourth industrial revolution has brought about unprecedented digital

connections. With them comes cybersecurity risk. The internet of things; the
use of mobile applications to procure services, unlock hotel room doors and
perform other tasks; artificial intelligence, and other technologies may give
cybercriminals increased opportunities to access customers’ personal
information, payment card information, and valuables.

Safety issues

These include food safety, slips and falls, and other physical hazards.

Common hazards and injuries for hospitality workers

Slips and falls: Scrubbing floors of bathtubs, showers in bathroom floors create
Ideal conditions for slip-and-fall accidents.

Respiratory: Exposure to chemical cleaning agents that can cause long-term

respiratory problems.

Infectious diseases: Waste disposal can expose hotel housekeeping staff

to pathogens, broken glass, and other body waste.

Stress: Excessive workload and exposure to other hazards can cause

occupational stress.

Job Stress: Stress related to work occurs when the demands of the jobs
(job duties and Responsibilities) and the resources and capabilities of an
individual worker ( job specification) differ.

Muscle Injuries: Repetitive movements of vacuuming, scrubbing,

dusting, etc. of hotel rooms require housekeeping staff to move their body in
ways that can strain and even tear muscles and tendons.

Harassment and violence: An increasing amount of workplace

harassment and violence has been reported in hotels across Canada and the
United States.

Violence and harassment can be defined as any act in which a person is abused,
threatened, intimidated or assaulted in his or her employment.

Safety authorities suggest hotel cleaners take the following precautions for their
workers:

Muscle Injuries –To prevent unnecessary muscle tension, workers are

encouraged to ask for help from co-workers if they need to lift heavy mattress to avoid
and injuries while changing linens and making beds or moving heavy furniture. Staff is
encouraged to switch arms to avoid overexertion of muscles and tendons of one arm.

Take Regular Breaks – Hotel shifts can be long and exhausting; employees are
encouraged to stretch and take regular breaks.

Preventative Technology: Hotel housekeeping workers are considered lone

workers, and employers are responsible for the health and safety of workers,
including procedures or a system in place to ensure workers are safe when working
alone while cleaning rooms.

Natural disasters

Natural disasters include volatile weather events and disease

epidemics, both becoming more common as the global climate warms.

Hurricanes, flooding and severe storms set businesses back and alter their
performance. Hotels, like any other establishment, can suffer from natural
 disasters.Resorts and hotels in locations prone to natural disasters take steps to
protect themselves. While proactive measures and planning can establish a
plan for your hotel, in the midst of the disaster, attentive management and
action are crucial.

Reputational risk

As consumers increasingly rely on online customer reviews, reputational risk is

a key area to monitor for hospitality. Hotel Keepers Act

The Hotel Keepers Act allows an accommodation provider to place a

lien on guest property for unpaid bills, limits the liability of the hotel keeper
when guest property is stolen and/or damaged, and gives the provider the
authority to require guests to leave in the event of a disturbance (Hotel
Keepers Act, 1996).

Hotel Guest Registration Act

The Hotel Guest Registration Act requires hotel keepers to register guests
appropriately, which includes noting a guest’s arrival and departure dates, home
address, and type and license number of any vehicle (Hotel Guest Registration
Act, 1996).

Occupiers Liability Act

The Occupiers Liability Act specifies the responsibilities of those that occupy a
premise such as a house, building, resort, or property to others on their
property. It includes a definition of a premise, as well as the duty of care the
occupier has to care for the condition of the premises, activities on the
premises, and the conduct of other people (third parties) on the premises. It
also outlines when occupiers liability is excluded, such as on Crown land or
private roads (Occupiers Liability Act, 1996).

Managing Risks

Staff and employees of a downtown Atlanta hotel are looking to implement new safety
measures following the death of one of their colleagues onsite in 2016. The employee
was trapped in a walk-in freezer at the hotel, prompting calls from other workers for
enhanced safety measures to prevent another tragedy. It's an extreme example, but it's
one of many risks faced by businesses operating in the hospitality industry, a service
profession where the business is all about people and customer service.

An effective risk management strategy is essential for members of the hospitality

industry. Risk management helps employees to identify, analyze, assess, and
hopefully, avoid or mitigate risks coming from a variety of sources, such as financial
upset, legal ramifications, accidents, natural disasters, data or cyber security breaches,
and many more. In this lesson, we'll talk more about some specific instances of risks in
the hospitality industry and how to implement procedures to successfully deal with
them before they become a bigger problem.
 TO REMEMBER

Other important benefits of risk management include:

● Creates a safe and secure work environment for all staff and customers.

● Increases the stability of business operations while also decreasing legal liability.

● Provides protection from events that are detrimental to both the company and the
environment.

● Protects all involved people and assets from potential harm.

● Helps establish the organization's insurance needs in order to save on

unnecessary premiums.

Risk management in tourism and hospitality is complex, involving

aspects of adhering to statutory requirements, taking steps to ensure occupational
health and safety requirements are met, and undertaking an analytical approach to
mitigating potential liabilities. Most of the actions required need to be proactive by the
operators; failing to do so may result in negative impacts to reputation, damage to
property, fines, lawsuits, or in the most tragic result — injury to guests or employees.
Companies not only have a moral and ethical responsibility to practice effective risk
management, failing to do so can result in financial ruin and the cessation of
operations.