Relevance of Hotel Policies, Procedures and Operations to Risk Management - Case Study Example

Risk management Student’s Name University Affiliation Element 1: establish risk context a. How will a manager establish the context in which the risk will be identified (in a hotel) Give examples A professional hotel manager who is well versed in risk management principles can identify risk context by using six key steps. First, the hotel manager will have to note a domain of interest, for instance relationship with external parties, responsibilities, quality of services and organizational efficiency. The second step should involve planning the entire process of risk management. Third, the hotel manager will have to map out basis on which risks will be evaluated, social scope of the operation and objectives of stakeholders. Fourth step involves establishing a framework for required activities and objective of identification. In other words, the manager will have to create an implementation strategy to enable realization of desire to establish risk context. The fifth step involves formulating an analyzing specific risks involved in the entire process. Lastly, the manager will have to identify a solution for various kinds of risks based on available human, technological and financial resources. The solution will be factored into organizational operations via budgets, work schedules and reengineering of operations to cushion against uncertainties (Philip, 2009). For example, a hotel can set aside funds in its budget to assist in financing certain operations in case market price of supplies increase beyond expected limits. b. Relevance of hotel policies, procedures and operations to risk management In risk management, organizational policies, procedures and operations play a key role. In hotel management, procedures and policies are put in place to ascertain that duties and services are undertaken in a consistent manner. Errors in formulation and implementation of hotel policies and procedures expose the organization to a variety of risks. The reason is that employees will fail to comprehend what is required of them. In addition, the hotel will experience a number of disputes because clients will not be satisfied. For example, if there is laxity in creation or implementation of existing policies, then it will be difficult to protect image of the organization because performance will be lower than industry standards. Hotel policies, procedures and operations influence various activities and relationships with various stakeholders. In that respect, they are relevant to risk management because they influence employee screening and hiring, employee training, contingency plans, inspection and maintenance of premises, incident and accident reporting, privacy, financial management, employee discipline, employee dismissal and ethics. Such areas are sensitive because every hotel will be expected to be operated based on codes of ethics, legal requirements, industry standards and desires of core stakeholders. Element 2: Identify risks Part a: How might research and data collection be undertaken to identify risks Before identifying risks, hotel management must undertake a research to collect data. Some of the ways that could be used to collect reliable data for identification of risks are briefly discussed below. Past records Hotel management can consider past information concerning risks within the organization or industry. Past records can provide a wealth of information because numerous case studies have been documented. Such records can aid in highlighting areas of interest, common mistakes made when planning or implementing risk management strategies and can give suggestion on expected future trends. Market research Market research is crucial for collecting data that could be used to identify risks associated with various market conditions. Market research involves analyzing different elements associated with external stakeholders, such as customers, competitors, government agencies, suppliers and financial partners (Youngberg, 2011). Use of research and development Organizations that have research and development departments can benefit immensely from data acquired via internal research. Research and development department can undertake analysis on various issues including quality of products, product design, technological needs and expected future trends. Such research greatly assists in identifying risks that an organization is likely to meet. Internal meetings at all levels Having regular, open meetings, at all levels of an organization, play a key role in bringing new ideas and opinions concerning operations and functions of an entity. Open meetings provide a chance for managers to see areas of strengths and weaknesses and make necessary policy changes. Subordinate staffs are experts in their areas of specialization and have capacity of advising top management. If effective strategy for regular meetings could be put in place, then an organization could access vital data. Part b: What are some of the key aspects of how a hotel maybe structured and systems maybe integrated that might be source of risk? Give at least two examples Numerous post-modern organizational structures may be put in place, but ends up being sources of risks. For instance, using work teams of individuals from different professional backgrounds may be good. Nonetheless, there is a high chance of misunderstanding leading to poor implementation of organizational goals and objectives. Another form of organizational structure where risks may be witnessed is use of democratic leadership where personnel are indiscipline. Use of democratic leadership is fit and truly applicable where personnel are professional, self-driven and understands what they are doing. With young employees, who are still pursuing career development, risks can be reduced by combining democracy with elements of dictatorship. Structures established in an organization may increase risk status if care is not taken. When formulating organizational structures, it is important to maintain cohesion and cooperation between one department or section and another. Failure to which misunderstanding and ineffectiveness may be witnessed. All organizational systems have to be integrated in a manner that will allow exchange of resources, information and ideas for the benefit of the entire organization. Element 3: Describe the process of analyzing risks in a hotel a. Identify and estimate uncertainty When undertaking risk analysis, hotel management needs to understand that their chief goal is identification of every vital source of uncertainty. Thereafter, every source of uncertainty has to be quantified. For instance, after knowing the competitor’s price, ability to create a competitive edge can be calculated based on known marketing and production costs. b. Measure impact of uncertainty It is imperative to cognize how the uncertainties can affect outcomes that the hotel holds dear. For instance, after predicting expected trends on demand, the next step should involve estimating its impact on net profit. c. Complete a risk assessment model Accurate analysis of risks can only be undertaken via use of a risk analysis model. After providing uncertain inputs, the model will assist in calculating outputs. Risk analysis model requires good thinking because outputs are largely uncertain and may take a wide range of values (Rejda, 2008). d. Analyze the model with simulation Inaccuracies associated with model outputs can be handled by use of simulation. A simulation will assist greatly in exploring all possible outcomes. A simulation can undertake thousands of trials or experiments at once and provide a range of outcomes. For example, it can provide expected margins of net profit based on lowest and highest possible areas. e. Analyze the model results Analysis of model results is necessary because many possible values will be provided as outcomes. A risk analyst will have to apply other techniques to arrive at final results. In most cases, risk analysts have to possess statistical techniques to assist in summarizing the range of outcomes. Visualizing results using cumulative frequency charts and frequency charts may is also highly encouraged. f. Make a decision Accurate analysis will yield information that a risk manager will use to make wise decisions. Informed decisions will play a key role in avoiding or mitigating risks experienced by a hotel. Decisions made are commonly based on comparison of risks and returns expected as compensation for taking those risks. Element 4: In developing, implementing and monitoring treatment/ carried out to review success and to plan improvement (in a hotel) what are the key issues to be considered? Give an example of each Part 1 Developing treatments While developing treatments necessary for handling risks, numerous factors have to be considered. Some of them include organizational objectives, nature of risks to be handled, regulatory requirements, industrial standards, market forces among others. Those factors act as a driving force towards formulating effective strategies for handling risks. Implementing treatments Successful implementation of strategies for handling risks requires consultation and involvement of all stakeholders, especially internal stakeholders. For example, implementing a new technology can be impossible if cooperation of concerned department is not secured. Other factors that may be considered during implementation include importance of the risks, effect on key stakeholders and perceived benefits. Monitoring treatments During monitoring, it is important to consider input of internal stakeholders in achieving pre-set goals. Monitoring ensures that operations are aligned with relevant risk management plans. The most important issue during monitoring is ability to achieve vital objectives. In addition, compliance with organizational procedures, regulations and policies should be monitored closely. The reason is that failure to take necessary caution may lead to emergence of litigation risk (Hopkin, 2010). Part 2: how might the risk management process of an organization (a hotel) be effectively communicated to relevant parties? Give at least 2 examples Training Training offers one of the finest occasions for communicating organization’s risk management process to employees. During training, one of the most fundamental aspects is gaining understanding of risks involved and ways of mitigating and reducing their impact. Trainees get a chance to understand current risks, policies in place and expected changes (Stevin, 2004). Circulars Circulars provide a quick way of communicating adopted risk management policies or changes that have been made to existing policies. Circulars can be more applicable where ample time for direct communication cannot be available. Departmental meetings Departmental meetings may also be effective for communing risk management process of an organization, particularly when issues under stake specifically concern the department. Departmental meetings may be instrumental in communicating risk management processes that influence work schedules or operation structures. Case study This case study is based on a hotel organization, which operates in a public sector. Because such organizations are subject to various government policies and legislation, many circumstances may emerge forcing the organization to experience uncertainties. The analysis will consider various elements, including environment where risk management is undertaken, identification of risks, consequences associated with risks among others. Step 1: risk management environment Risk management environment in a hotel organization is divided into two parts, that is, external environment and internal environment. Risk managers in a hotel organization will have to consider certain issues before making decisions. External environment a. Political influence At times, policy makers may come up with policies and regulatory requirements that may be costly to implement within a public hotel organization. In that respect, an organization may fail to achieve its goals since every public organization is mandated to adhere to stipulated regulatory framework. b. Technological requirements The world of technology is dynamic. An organization operating in the hotel industry may invest a huge junk of its financial resources only for the technological product to be termed obsolete after two financial years. Changes in technology are associated with numerous risks that must be closely monitored. c. Customer requirements Customers in the post-modern society are becoming increasingly demanding. Consumer preferences changes more often. It follows that an organization has to keep a close and accurate watch on market trends. Tastes and preferences within the hotel industry has been transforming rapidly because of technology and emergence of personalized services. Internal environment a. Employment of staff Caution must be taken when employing staff to avoid discrimination, which may end up in a court battle. In the past, many renowned organizations have been fined heavily for discriminatory employment practices. b. Interaction between staff and management Services in the hotel industry are customer-oriented, meaning that in most cases supervisors are used to enhance quality. Such circumstances give rise to areas of conflict between subordinate and management. It is also vital to develop and sustain a good relationship between management and subordinate staff to avoid friction. Friction between management and subordinate staff may lead to a number of risks, which will be costly, time consuming and difficult to correct. Step 2- Identify risks Risks that may affect operations in a hotel organization Fraud risk Security risk Privacy protection risk Environmental risks Physical risks Legal risks Regulatory change Price pressure Reputational risk Risks associated with purchase of office furniture in a hotel organization Compatibility risk Injury risk Cost risk Step 3 Compatibility risk Compatibility risk can be rated at level B, which means it possibility of occurrence is likely. In most cases, public organizations, such as hotels, tend to purchase products that may not enhance its operations. In other words, newly acquired furniture may not assist the organization to gain better result in its quest to achieve core objectives. For instance, a public organization can purchase furniture to be used in a project that has not been fully researched and planned. Such problems are common in public companies because budgets are always constraint by inadequate finance leading to scanty research. Injury risk Injury risk can be rated at level C, which means it can possibly occur. Although adults mostly use the office furniture, injuries may arise if damages are not rectified in time. In a publicly owned hotel, procurement procedures tend to be lengthy leading to prolonged time for repair and maintenance. In addition, injuries may arise due to design errors that may make some parts to be weak. Cost risk Cost risks may be rated at level B, meaning that the organization may experience negativities due to high prices. Public organizations mainly use open tenders to procure their resources. Nonetheless, sometimes prices may exceed pre-planned budgets, leading to disruption of other functions. Public organizations operate with low profit margins. Thus, with an increase in prices of furniture, the impact may be greatly felt. Step 3 B: consequence Compatibility risk Consequences associated with incompatible office furniture could be moderate because anticipated operations and functions will not yield optimum result. If furniture will be incompatible with desired functions, then perceived output will not be achieved. Injury risk If an employee can prove that injury was directed associated with laxity in procurement procedures, then the organization will be in danger of facing heavy fines and compensation. In that regard, consequences associated with injury risk will be major since an employee can claim damages due to injury or loss of productivity due to mutation. Cost risk Cost risks may have a minor effect on the organization because it may not be possible to incur too much cost. If the costs are too high, then an organization can always postpone purchase decisions. In the event of experiencing higher cost, margin may not be too high, meaning that effectiveness and efficiency of the organization will not be affected. Step 3 C: Evaluate the risk Compatibility risk- High As mentioned above, it is most likely that many publicly owned companies experiences high compatibility risk. The reason is that policies, practices and regulatory framework pave way for procuring furniture to be used in undertaking an inappropriate activity. For instance, because of low budgets applied in a hotel, new design of furniture may not be selected. That leads to failure in in pressing clients who are becoming increasingly choosy and demanding. Injury risk- High Risk of injuries is thought to be high because most procurement procedures adopted in hotels lead to increase of time between breakage and repair or maintenance. During such periods, injuries are most likely to be experienced, especially if new personnel are introduced. Cost risk- low Risk of inflated risks will be low because every organization has a right to compare prices before making a purchase. For example, when a hotel wants to procure office furniture, it will request for bids from various suppliers or manufacturers. In that respect, it will have a chance to select the lowest price for the best quality. Step 4: Treatment of risks Compatibility risk The first step in treating this risk is consulting intended users to find out their needs. Thereafter, it will be possible to formulate an order that will ensure that right quality, quantity, design will be considered during procurement. The objective of procurement and expected functionality should be clearly stated and applied during selection. The risk can be treated via adopting avoidance strategy. Injury risk The risk can be effectively treated by sharing with insurers. Every organization is advised to insure their employees against risk of injuries within its premises. In the event of injury, the loss will be shared between the organization and insurance company. Cost risk Cost risk can be treated by adopting retention strategy. Such strategy calls for acceptance of prevailing market condition and then integrating possible changes in budgeting process. Hotel management is encouraged to give budgetary provisions for price changes that may inflate budgets. References Stevin, R. M. (2004). Risk management (3rd ed.). Sydney, NSW: Standards Australia International, Ltd. ;. Carroll, R. (2001). Risk management handbook for health care organizations (3rd ed.). San Francisco: Jossey-Bass ;. Hopkin, P. (2010). Fundamentals of risk management: understanding, evaluating, and implementing effective risk management. London: Kogan Page. Philip, L. (2009). Practice standard for project risk management (4th ed.). Newtown Square, Pa.: Project Management Institute. Rejda, G. E. (2008). Principles of risk management and insurance (10th ed.). Boston: Pearson/Addison Wesley. Youngberg, B. J. (2011). Principles of risk management and patient safety. Sudbury, Mass.: Jones and Bartlett Publishers. Read More