RISK MANAGEMENT

CHAPTER 1

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 1

 Learning Outcomes:
1. Describing the risk encountered in hospitality
and tourism industry
2. Discussing the importance of risk
management
3. Lis<ng and describing the risk management
strategies and processes

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 2

 Topic content
• Introduc<on
• What is risk management
• Importance of risk management
• Risks facing businesses in the hospitality and
tourism industry
• Risk management strategies and processes
• Risk management approaches
• Risk management standards
• General principles of food safety risk
management
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 Introduc<on
• There are risks in any industry. Two of the
industries that face a large amount of risk are
the hospitality and tourism industries.
• Managing these risks is crucial to making sure
these industries will run smoothly.
• Risk management is a planned process
through which organiza<ons manage ac<ve
crises.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 4

 What is crisis?
• A crisis is defined as a <me of difficulty or
danger and is usually a <me when difficult or
challenging decisions must be made. With a
plan in place that outlines the process of
managing a crisis, organiza<ons can adapt
more easily to deal with a crisis.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 5

 TOPIC 2

WHAT IS RISK MANAGEMENT?

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 6

 What is Risk Management?
• Risk management is the process of iden<fying,
assessing and controlling threats to an
organiza<on's capital and earnings.
• These threats, or risks, could stem from a
wide variety of sources, including financial
uncertainty, legal liabili<es, strategic
management errors, accidents and natural
disasters.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 7

 TOPIC 3

IMPORTANCE OF RISK
MANAGEMENT

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 8

 Importance of Risk Management
• By implemen<ng a risk management plan and
considering the various poten<al risks or
events before they occur, an organiza<on can
save money and protect their future.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 9

 Other important benefits of risk
management include:
• Creates a safe and secure work environment for all
staff and customers. Increases the stability of business
opera<ons while also decreasing legal liability.

• Provides protec<on from events that are detrimental

to both the company and the environment. Protects all
involved people and assets from poten<al harm.

• Helps establish the organiza<on's insurance needs in

order to save on unnecessary premiums.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 10

 TOPIC 4

RISKS FACING BUSINESSES IN THE

HOSPITALITY AND TOURISM SECTOR

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 11

 Risks Facing Businesses in the
Hospitality and Tourism Sector
• The following is a non-exhaus<ve list of risk
exposures that are common to the hospitality
and tourism sectors, however it's important to
bear in mind that these will vary depending on
the specific circumstances of each individual
business.
1. Food-Borne Illness
2. Alcohol Fueled Behavior
3. Transporta<on accidents
4. On-Premises Security
5. Cyber Security

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 12

 FOODBRONE ILLNESS
• Food safety is one of the biggest risks for
businesses opera<ng in the hospitality
industry. Common infec<ons include
salmonella, campylobacter from
contaminated chicken, vibrio from raw
shellfish and E. coli. Norovirus is also a leading
cause of illness from contaminated food.

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• In order to reduce your risk in this area,
restaurant personnel should be thoroughly
trained in food handling, sanita<on and health
safety procedures, and food vendors' quality
controls should be put in place to will ensure
that the food they provide is as safe as
possible.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 14

 Alcohol Fueled Behavior
• Businesses that serve alcohol face a range of
poten<ally serious risk exposures.
• Significant consequences may occur if your
business serves alcohol to a minor or an already
intoxicated patron.
• Furthermore, alcohol-fueled patrons are more
difficult to deal with, create more mess such as
spillages and breakages and are more disorderly
which puts staff at greater risk of harm.
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 Transporta<on accidents
• Transporta<on has become a necessity for
many tour and hotel businesses; however,
these vehicles and their drivers present a
whole new variety of risks.
• If someone is injured in one of these vehicles,
the tour operators and hotel may be found
liable for their injuries, or alterna<vely if the
shudle driver's motor vehicle record includes
viola<ons.

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• This risk must be managed. The most
appropriate risk management considera<ons
will vary depending on whether the hotel
employees are carrying out the service or if
they contract it out to another 3rd party. If
the service is outsourced, it is vital that your
business knows that all of the drivers have
been appropriately screened as well as what
the vendor's insurance limits are.
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 On-Premises Security
• Keeping guests safe is a high priority for the
hospitality industry. However due to the
difficult economic environment many
businesses have scaled back on security,
which can result in increased exposures and
heightened liability if it creates an unsafe
environment.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 18

 Cyber Security
• Cybercrime is on the rise throughout the globe,
and businesses in the tourism and hospitality
industry are oeen targeted, as in most cases,
they will accept credit cards as payment.
• If the security of personal financial informa<on is
compromised, the business may incur significant
costs as a result of having to no<fy customers
whose data has been exposed and any resul<ng
compensa<on claims.

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• All hospitality firms should have data
safeguards and procedures in place in order to
mi<gate their cyber exposure.
For example, procedures for how the data is
collected and stored should be well thought out,
or if a third-party stores informa<on it is
important that they have robust security
procedures in place.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 20

 TOPIC 5

RISK MANAGEMENT STRATEGIES

AND PROCESSES

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 21

Risk management process:

1. Establish context. Understand the

circumstances in which the rest of the process
will take place. The criteria that will be used to
evaluate risk should also be established and the
structure of the analysis should be defined.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 22

2. Risk idenNficaNon. The company iden<fies and
defines poten<al risks that may nega<vely influence
a specific company process or project.

3. Risk analysis. Once specific types of risk are

iden<fied, the company then determines the odds
of them occurring, as well as their consequences.
The goal of risk analysis is to further understand
each specific instance of risk, and how it could
influence the company's projects and objec<ves.

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4. Risk assessment and evaluaNon. The risk is
then further evaluated aeer determining the
risk's overall likelihood of occurrence combined
with its overall consequence.
5. Risk miNgaNon. During this step, companies
assess their highest-ranked risks and develop a
plan to alleviate them using specific risk
controls.
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6. Risk monitoring. Part of the mi<ga<on plan
includes following up on both the risks and the
overall plan to con<nuously monitor and track new
and exis<ng risks.
7. Communicate and consult. Internal and external
shareholders should be included in communica<on
and consulta<on at each appropriate step of the
risk management process and in regards to the
process as a whole.

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 Ques<ons that risk management
strategies should be based on
1. What can go wrong? Consider both the
workplace as a whole and individual work.
2. How will it affect the organiza<on? Consider the
probability of the event and whether it will have a
large or small impact.
3. What can be done? What steps can be taken to
prevent the loss? What can be done recover if a
loss does occur?
4. If something happens, how will the organiza<on
pay for it?
1st Sem 2022-2023 Instructor Ms. Kris<n Callang 26
 TOPIC 6

RISK MANAGEMENT APPROACHES

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 27

Different strategies on Risk Management:
• Risk avoidance. While the complete
elimina<on of all risk is rarely possible, a risk
avoidance strategy is designed to deflect as
many threats as possible in order to avoid the
costly and disrup<ve consequences of a
damaging event.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 28

• Risk reducNon. Companies are some<mes
able to reduce the amount of damage certain
risks can have on company processes.
• Risk sharing. Some<mes, the consequences of
a risk are shared, or distributed among several
of the project's par<cipants or business
departments.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 29

• Risk retaining. Some<mes, companies decide
a risk is worth it from a business standpoint,
and decide to keep the risk and deal with any
poten<al fallout.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 30

 • Requires gathering large
amount of data.
• the use of data in decision
making processes may have
poor outcomes
• Adop<ng a decision
throughout the whole
project can lead to
unexpected results.
• Lack of analysis exper<se
and <me.

LIMITATIONS OF RISK
MANAGEMENT
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 TOPIC 7

RISK MANAGEMENT STANDARDS

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 RISK MANAGEMENT STANDARDS

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• The ISO 31000 is designed to "increase the
likelihood of achieving objec<ves, improve the
iden<fica<on of opportuni<es and threats,
and effec<vely allocate and use resources for
risk treatment," according to the ISO website

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 34

The ISO recommends the following target areas,
or principles, should be part of the overall risk
management process:
• The process should create value for the
organiza<on.
• It should be an integral part of the overall
organiza<onal process.
• It should factor into the company's overall
decision-making process.
• It must explicitly address any uncertainty. It
should be systema<c and structured.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 35

The ISO recommends the following target areas,
or principles, should be part of the overall risk
management process:
• It should be based on the best available
informa<on.
• It should be tailored to the project.
• It must take into account human factors,
including poten<al errors. It should be
transparent and all-inclusive.
• It should be adaptable to change. It should be
con<nuously monitored and improved upon.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 36

 TOPIC 8

GENERAL PRINCIPLES OF FOOD

SAFETY RISK MANAGEMENT

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Principle 1: Risk management should
follow a structured approach
• The elements of a structured approach to risk
management are Risk Evalua<on, Risk
Management Op<on Assessment,
Implementa<on of Management Decision, and
Monitoring and Review. In certain
circumstances, not all of these elements will
be included in risk management ac<vi<es.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 38

Principle 2: ProtecNon of human health should
be the primary consideraNon in risk
management decisions.
• Decisions on acceptable levels of risk should
be determined primarily by human health
considera<ons, and arbitrary or unjus<fied
differences in the risk levels should be
avoided.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 39

Principle 3: Risk management
decisions and pracNces should be
transparent.
• Risk management should include the
iden<fica<on and systema<c documenta<on
of all elements of the risk management
process including decision-making, so that the
ra<onale is transparent to all interested
par<es.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 40

Risk management

• Risk management is about choosing the best

way to reduce the risk.
• Risk management was originally considered a
separate part of risk analysis. However, risk
analysis experts now realize that risk
management and risk assessment overlap.

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Risk management
Goals of risk management:
• The primary goal of the management of risks
associated with food is to protect public
health by controlling such risks as effec<vely
as possible through the selec<on and
implementa<on of appropriate measures.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 42

Principle 4: DeterminaNon of risk assessment
policy should be included as a specific
component of risk management.
• Risk assessment policy sets the guidelines for
value judgment and policy choices which may
need to be applied at specific decision points
in the risk assessment process, and preferably
should be determined in advance of risk
assessment, in collabora<on with risk
assessors.
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Principle 5: Risk management should ensure the
scienNfic integrity of the risk assessment process by
maintaining the funcNonal separaNon of risk
management and risk assessment.

• Func<onal separa<on of risk management and

risk assessment serves to ensure the scien<fic
integrity of the risk assessment process and
reduce any conflict of interest between risk
assessment and risk management.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 44

Principle 6: Risk management decisions should
take into account the uncertainty in the output
of the risk assessment.
• The risk es<mate should, wherever possible, include
a numerical expression of uncertainty, and this must
be conveyed to risk managers in a readily
understandable form so that the full implica<ons of
the range of uncertainty can be included in decision-
making.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 45

Principle 7: Risk management should include
clear, interacNve communicaNon with
consumers and other interested parNes in all
aspects of the process.
• On-going reciprocal communica<on among all
interested par<es is an integral part of the risk
management process.
• Risk communica<on is more than the
dissemina<on of informa<on, and a major
func<on is the process by which informa<on and
opinion essen<al to effec<ve risk management is
incorporated into the decision.
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Principle 8: Risk management should be a
conNnuing process that takes into account all
newly generated data in the evaluaNon and
review of risk management decisions.
• Subsequent to the applica<on of a risk management
decision, periodic evalua<on of the decision should
be made to determine its effec<veness in mee<ng
food safety objec<ves.

1st Sem 2022-2023 Instructor Ms. Kris<n Callang 47

 TOPIC 9

RISK COMMUNICATION

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 RISK COMMUNICATION
• Risk communica<on lets the facility iden<fy and
weigh op<ons during the risk analysis process.
• Open communica<on among all stakeholders
(from employees to consumers) will improve the
overall risk management.
• Risk communica<on is very important during
food safety emergencies. However, to help make
sure the message stays constant and clear,
communica<on is also very important when
there is no crisis.
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The main goals of risk communicaNon
are:
• Promo<ng awareness and understanding of
risks (amongst employees, government
officials and consumers);
• Promo<ng consistency and clarity about the
risk analysis process;
• Providing an understanding for risk
management decisions;

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The main goals of risk communicaNon
are:
• Strengthening working rela<onships and
promo<ng respect;
• Promo<ng appropriate involvement of all
stakeholders' groups; and
• Exchanging informa<on, knowledge, altudes,
prac<ces and percep<ons of those involved.

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END OF CHAPTER 1

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