Facility Assessment And Risk Management Strategies In Hospitality Operations

Risk concept

Discuss About The Facility Assessment Hospitality Operations?

Sofitel Sydney Wentworth Hotel is located in the Sydney’s CBD. Its strategic location in the heart of Sydney, where there are a majority of commercial office buildings, makes the hotel a favorable spot for hospitality. The hotel is as well near various tourist attraction sites such as the Royal Botanic Gardens, the Hyde Park, the Sydney Harbour Bridge, the Circular Quay, and the Pitt Street Mall. It becomes necessary, therefore, for the hotel to undertake risk management strategies to provide a secure and safe environment for their customers. It is also crucial to deal with potential hazards related to hotel operations given that its open to all sectors of legal, government and financial segments (both international and domestic tenants). This paper, therefore, analyzes the Executive boardroom layout of the Sofitel Sydney Wentworth Hotel in consideration to facility and risk management strategies.

In business operations there is always the possibility of getting unexpected outcome. Risk has been defined as unintended outcome or any effect of uncertainty on the objectives (Jaeger, et al. 2013). Many people tend to think that risk is only a negative deviation from the expected, but it also includes the positive deviation from the initially expected outcome. Due to such unexpected results, the importance of risk management strategies jets in business operations (Hallikas et al. 2004). It helps the company’s management to develop a coherent and a structured approach to identifying the possible hazards, assessing and managing them when they occur. Due to the improvement in the global economy recently, the hospitality sector is enjoying the benefits that come with many people going for vacation and business trips. However, the higher the activity, the greater chances of risks. As such, the hospitality industry need to be prepared to deal with any potential threat that may come their way.

Risks are always present in business operations. They include; risks to physical, human, financial and non-physical assets. Every risk in corporate operations is different from another and requires to be handled differently. It is essential for organizations especially those in hospitality industry to understand these risks (Borde 1998) and manner in which they can prevent them from occurring.

A physical asset is any item of commercial, exchange or economic value that has a material or a tangible existence. They include assets such as equipment, cash, inventory, buildings, land (bridges, fencing, roads and landscaping) and other business owned property. Some of the physical assets can be liquidated to pay off debts in case of a default (Quélin & Duhamel 2003). In hotels and restaurants, chairs, refrigerators, tables, tables and foods are some of the physical assets which can be liquidated. Some physical assets however, can go through depreciation, depletion, shrinkage or deterioration through the process of storage. Some business people tend to believe that physical properties have more value diversification as compared to others when it comes to economic uncertainty. However, all assets are exposed to some level of risk (Culp 2002) and overall financial plan should be put into consideration when investing.

Types of risk

Intangible assets include agreements, leases, computer programs, intellectual capital, workforce motivation, company reputation, and customer relations. Corporate intellectual property of a company such as trademarks, patents, business methodologies, and copyrights also encompasses the intangible assets (Lambin 2014). These intangible assets undergo wear, tear and depreciation and as such they need to be accounted for (Moroz & Kuzin 2016). Higher paying for these assets may cause a significant loss during redeeming process eventually leading to poor financial ratios.

Financial assets play a key role in hospitality business operations. They include; foreign currency, internal and external vouchers, debit and credit cards, and money orders. These generally pose a potential risk since they involve various transitions between the customers and the staff (Nocco & Stulz 2006). Financial risk for Sofitel Sydney Wentworth Hotel includes money such as cash flow, capital variability, credit default, and investment evaluation. Global economic crisis remains to be the most critical risk that can face a restaurant. Economic downtown affects hospitality industry enormously (Zhong & Hara 2014). If customers do not spend, then the hotels and restaurants fail to achieve sales targets and revenue to run their operations go down.

Risk to human assets on the other hand include; staff, patrons, and personnel. It is very crucial to determine the risks associated with human capital since they influence directly the operations of a business especially in hospitality industry. Hotels and restaurants deal with people directly and it is important to be able to handle them correctly, manage them and meet their needs (Laue et al. 2014). Many companies are failing today while others are experiencing significant challenges due to the lack of clarity on the responsibilities involving human capital risk assessment and management. Risks to human assets are related to human resource organizations, aligning rewards, prevention of fraud, promoting ethical behavior, and designing talent strategies.

Risks are inevitable outcome of a business process. It is therefore, crucial for each restaurant and hotel to have a strategic risk management plan in place so as to circumvent any unexpected outcome. The primary objective usually is to manage the hotel efficiently and risk swiftly to avoid interruption of normal business operations (Benavides-Velasco et al. 2014). It also protects the assets of the hotel, both tangible and non-tangible hence continuity in business operations is guaranteed. Business reputation can as well be protected by ensuring the laws and regulations are followed. Some business objectives can only be realized by having proper risk strategies. Through these, a company can avoid falling into various pitfalls and experiencing surprises along the way (Leon 2017). In day to day activities of a restaurant, there is a probability of either an opportunity that would result to be beneficial to the company or a threat that would negatively affect the success of the enterprise. Risk management implementation process consequently is concerned with both the negative and positive perspectives of a risk. The ultimate goal of risk management process is to achieve a maximum sustainable value for each and every activity of an organization (McNeil et al. 2015).

Risks to physical assets

Risk management also reduces the probability of uncertainty and failure in an organization while increasing the likelihood of success. It leads to accountability amongst the employees, supports performance measurements as well as reward hence increasing operational and tactical efficiency to all levels (Haimes 2015). It mainly falls in place when dealing with risks associated with human assets. Knowing how to handle employees and the rest of the staff in a restaurant is very crucial for the success of a restaurant and other hospitality-related organizations (Lugosi 2014). Carrying out performance appraisal for the staff, rewarding them when necessary, giving them promotion and minding about their welfare can improve their morale hence perform better.

Performing risk assessment for a place is very important to the success of any company. Some fraud cases leave a company vulnerable, and as such, it is crucial for an organization to take a preventive and proactive approach to preventing any possible outcome of risk. Performing full audit, financial control management, operational and project risk assessment ensures the company is prepared to tackle any unforeseen event (Wu et al. 2014). This section will analyze the risk analysis process put in place by the management of Sofitel Sydney Wentworth Hotel with a particular focus on Executive Boardroom.

One of the luxurious hotels in Sydney is Sofitel Sydney Wentworth Hotel. It offers a venue for meetings and conferences across the globe. It’s a five-star hotel that is known for his contemporary amenities and features. Also, its charm and character, as well as personalized services it offers for the delegates and guests is of excellent standards. The hotel houses the Executive Boardroom and other meeting rooms which are used for conferences. The Executive Boardroom is one of the rooms of the hotel found in the Conference and Events Department. In a usual style set up for a Boardroom meeting, it can house 16 people. It is fully furnished and up to standards with leather chairs and 46 square meters in size. Recently, the room received new Ipads, and in the year 2012, it underwent an audio-visual upgrade.

Assessment of possible risks which could occur in any organization is vital to the success of a business. Risk ranking involves the sequence in which hazardous elements are placed in a sequentially to enhance decision-making (Haimes et al. 2002). The criteria in which the system is applied is usually based on a qualitative or quantitative information. The risks are first identified, and those having the greatest likelihood of occurring identified as well as those that have the utmost consequence of occurrence (Morgan et al. 2000) After identification, they are ranked in order of importance which influences decision making. It is important for a hotel to go beyond the risk ranking and perform risk prioritization. Here, the identified hazards are compared and weighed using multiple criteria. Some of these criteria are; political will, level of public concern (Morgan & Fischhoff 2001), cost, practicality, feasibility, and effectiveness of control measures, and certainty in the estimates.

Risks to non-physical assets

The room is fitted with an audio-visual equipment which is enclosed once a door is pulled making speaker system and a projector accessible. The room also has other equipment such as a cabinet, fridge, screen, and credenza. There is exit fire route in case of a fire break out. The stove is made up of ceramic glass which has the inbuilt electric system fitted in the marble credenza. In the attached risk ranking system provided, the likelihood of the risk occurring has been categorized from 1-5. The same case applies to the potential impact.

Table 1: Likelihood of risks occurring

5	Almost certain: Where the probability of the risk occurring is very high (Numerous times in a year)
4	Likely: Where the probability of occurrence is high (once a year)
3	Possible: Reasonable likelihood (can occur for over a five-year period)
2	Unlikely: Plausible (occurrence could be within five-ten year period)
1	Rare: Very unlikely although it’s not impossible (the probability of occurring is unlikely in a ten year period).

Potential impact or effect on the other hand can be categorized into; catastrophic, major, moderate, minor and negligible.

Table 2: Potential impact

5	Catastrophic: Most of the company’s objectives could not be achieved
4	Major: Most of the company’s objectives threatened or one of them could be affected severely
3	Moderate: Few of the objectives affected but with considerable effort, they can be rectified
2	Minor: The affected objectives can be remedied easily. With a considerable effort it is easier to achieve the objectives
1	Negligible: The impact is very small and can be rectified through normal processes

Table 3: Risk Ranking table

Likelihood	Potential Impact
Negligible	Minor	Moderate	Major	Catastrophic
Rare	1	2	3	4	5
Unlikely	2	4	6	8	10
Possible	3	6	9	12	15
Likely	4	8	12	16	20
Almost certain	5	10	15	20	25

The table give the risk factor value of various risks. It also shows the possible combinations of likelihood and potential impact of the risks.

Venue Risk Analysis gives the hotel or any other organization the information that helps them to predict future or potential threats and thereby, take an action that can minimize the maintenance costs (Silvers 2009) while maximizing the quality of the venue. Due to the upgrade that the Boardroom underwent in the year 2012 and 2016, the room is relatively furnished. The drawers and cabinet for storage of food and drinks are quite large which offers enough space for storage purposes. The three windows bring in natural light which keeps the room quite light. The room is normally checked before any function starts and the maintenance is performed twice a year. The number and quality of storage, tables, chairs, fridges, and stoves are structured correctly. The Risk assessment form of the Executive Boardroom is attached as an excel form.

The risk assessment for the Executive Boardroom, shows that the major risk falls under the non-physical category. Operational risk and breakdown of computer systems rates high as compared to others. The Executive Boardroom is specially for conferences and other meetings. The moment all the operations of the room are affected, then it is expected that the Boardroom would lose its reputation. It therefore, becomes crucial for the Boardroom to maintain high standards of all equipment’s in ensuring smooth operation of activities. Breakdown of computers and their programs is another risk that has a high chance of occurring. The management of the Executive Boardroom have not invested much in IT. Due to the rapid change in technology systems globally, it is crucial for an organization to invest in IT. Breakdown of computer systems leads to disruption of entire organization operations. The Boardroom depends largely on IT since most of the activities during conferences require use of computers and others are computer-programmed. Breakdown of computer system, therefore, means the operations are affected and in turn the image and reputation of the Boardroom.

Risks to financial assets

Risks to human assets also, such as dissatisfaction of the guest is very key in affecting the operations of the Boardroom. For instance, when the guests are dissatisfied with the overall condition of the room as well as its usual operations, there is a probability of future failure of meetings taking place here. Since the hospitality industry in Sydney is growing, they could face stiff competition from their competitors. For instance, the technological advancement and IT infrastructure on the room is not up-to-date with the current technology world. This can make the guest feel uncomfortable and dissatisfied. On the other hand, the least risks to occur falls under the risks to physical assets. Recently, the Boardroom has undergone office upgrade especially on the physical assets. Therefore, the chairs, tables, carpets and other machinery are in good condition.

Generally, the technology systems of the room need to be upgraded. It is vital to ensure the technology is up-to-date with the current global technology systems. If the technology of the hotel is not at per with the current systems, the day to day operations of the hotel will be affected. Consequently, the overall quality of the room, as well as the profitability of the entire hotel, will be downgraded. Therefore, technological tools need to be upgraded since faulty wires are a potential cause of unseen hazards. The room condition of the entire room also needs to be put into consideration. Sofitel Sydney Wentworth hotel is a five-star hotel and as such the state of the room should be at par with other international five-star hotels. Sufficient air conditioning and spacious area for all the required equipment is as well essential. (Other specific recommendations for each risk are given in the risk assessment form).

Conclusion

It is important to design a conference room with multiple displays to achieve international standards. This can be achieved through proper equipment, teleconferencing systems, suitable lighting system, speakers, sounds, projector, and screens. Executive Boardroom of the Sofitel Sydney Wentworth Hotel has been furnished appropriately, and the management has implemented risk management strategies to deal with probable risk outcome. It’s worth noting that risk can be caused by either an internal or external vulnerabilities but can be avoided by use of a preemptive action.

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