Understanding And Managing Risks In The Hospitality Industry

Types of Risks in Hospitality Industry

According to current surveys it is seen that the hospitality industry is associated with facing certain type of risks, especially in the early days when it was filled up with various type of dangers as well as events that are entirely unexpected. But it is often seen that the term “risk” is often mistakenly used with the term “Hazard”. Hazard can be described as the dangerous situation or thing whereas the term risk can be described as the possibility or the consequence of the hazard which affects the people or a property (Bessis 2015). Hazard might never become real unless and until he targets is exposed to the hazard whereas the risk is considered to eb the likelihood related to the occurrence of the harmful events along with the scale of damage weather it is unpredicted or happens in an unexpected time or possible to foresee. Due to the fact that the risks in the hospital industry is increasing, the focus upon the risk management strategies are increasing day by day so as to make it much stronger than the past. Venues consisting of small or large crowds consisting of new or former staffs who are associated with the movements of goods might be having potential risks upon the physical, non-physical, finance and human assets.

Risks might be faced by various sections of an organization and this includes the human resources, physical assets, nonphysical assets and financial assets. For this reason, it is very much essential to identify the risks along with the corresponding ways of mitigating the risks.

The major physical assets of the hospitality enterprise include the tangible items which are owned and taken care of by the employees and customers of an organization, which is also spread throughout all areas. Each and every physical asset is connected with all the stakeholders in some way like in case of the restaurant the guests can sit in chairs or drink out of glass or some physical assets might be liquidated so as to pay off the debts and dividends to the shareholders (Hopkin 2018). Identification of the risks along with examining them helps in knowing how they are capable of damaging the physical assets and this in turn helps in the implementation of certain measures which would be helping in the reduction of this critical risks. The risks can be categorized into following categories and this includes the external and the internal risks.

Internal risks	External risks Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
This includes the technical or the economic risks Different human, social or organizational risks	This includes the following: Fire Faulty maintenance Embezzlement Structural damage because of the natural disasters or due to adverse weather Theft related risks Legislative changes and riots Damage by the dissatisfied staffs Crowd crushing due to panic caused because of the numerous violent acts by guests

Physical Assets

In case of the Laporchetta Restaurant, if one new chef is hired who is no trained in a proper way so as to use the equipment in the kitchen then the chef might end up putting the kitchen in fire or breaking the equipment, this would not only be associated with putting the physical assets of the restaurant at risk but would also be causing as severe damage to the peoples as well.

This is the topology which is associated with assisting the managers in preparing a response for the risks that are likely to be faced by the physical assets and involves the focusing upon various sources and forcing the managerial team in discovering the risks which are not seen to be evident for the day-to-day operations. This in turn is associated with prolonging the life of the physical assets and minimization of the risks which happens due to unmanaged assets.

The no-physical assets mainly refer to those intangible resources which are very much valuable for an organization and consists of the customer relationships or the reputation of the organization, or the agreements and leases or the name of the brand and image or the copyrights or the computer programs or the motivation to the workforce or the intellectual property and lastly the cost related to research and development. There always exist the need of creating an awareness about the non-physical assets specially for the managerial team so as to make sure that they are capable of identifying, analyzing and managing the risks which might include the Losing of intellectual capital or IC or becoming a part of the litigation which might be capable of damaging the reputation and image of the organization (Wolke 2017). For example, in case of Laporchetta Restaurant, it has been reported that the guests are more likely to be associated with blaming the restaurant for the food poisoning during the takeaway. This might be the fault of the restaurant or might be the fault of the customers themselves if they are not associated with proper preserving of the takeaway food properly. What the reason might be but the final results are always associated with posing a risk to the reputation and image of the venue which is one of the most important non-physical assets.

This are the assets which generally refers to the instruments that are used for the purpose of exchanging goods and services in the hospitality enterprises. The risks associated with the financial assets can be categorized into four major types and this includes the following:

1. Cash registers and change desks
2. Electronic transactions
3. Safes and storage rooms
4. Financial expenditure controlled by staffs like the cash, cheques, vouchers and many more.

Non-Physical Assets

It is very much essential to take care of the risks faced by the financial assets, but the care that is to taken should be different from the care taken for the risks faced by the profits and profitability. This is one of the major confusions which always occurs while managing the risks of both of the assets and the major reason behind this is that both of this includes monetary dimensions (Jin, Line and Merkebu 2016). In case if something is seen to have wrong with the venues then the loss of profit is the first thing that is always considered. However, the financial assets of an enterprise can be defined as the amount of the revenue which is left from the earned in comparison to the expenses that has been incurred while earning the revenue.

 In case of Laporchetta Restaurant, some of the major risks faced by the financials assets includes the following:

1. The change desk along with the cash register is associated with holding a lot of cash along with going through the same cash register system and for this reason there exist the potential risk related to making attempts by some to steal the financial assets from the cash register when it is unattended or when the cash drawer is unlocked without any kind of supervision.
2. Secondly, there exists many financial transactions as well as business operations of Laporchetta Restaurant which are entirely dependent upon the electronic communications and this is associated with helping the customers in performing transactions in a more efficient and convenient way(Glendon and Clarke 2015). But due to reason that it is a digital platform, the security and the privacy of the customer information are more likely to face a lot of risks from very malicious intruders or hackers.
3. The takings of the restaurant along with the spare financial assets might be kept in the safes or in the storage rooms at particular times. In case is the staff who is authorized to access the safes or the storage rooms is not separated from accessing the financial asset accounting records then they might be associated with accessing the financial assets in a misappropriate way so as to cover up the embezzled money.
4. Petty cash funds and the bankcards which are used by the senior staffs for paying the immediate expenses whereas the cheques are used for the expenses of the enterprise. In case if the petty cash vouchers are not stamped and stapled with the documents which are associated with providing support to it and is not signed by the authorized staffs then they can be used fraudulently (da CUNHA, de ROSSO and Stedefeldt 2016).

Along with the financial assets and the physical assets the human asset is another most important asset for any kind of organization. Without any kind of staff’s members or customers there would exist o business which could survive. For this reason, providing protection to the customers as well as to the employees from various potential risks is very important and certain actions needs to be taken necessarily so as to do this. The risks which are faced by the human assets of the hospitality industry mainly happens to the people or are caused by the peoples (Koh et al. 2018). The risks might be happening in various forms like the staffs getting injured by tripping or due to carrying of the overweight boxes and equipment or when the customer slips and falls due to wet floors. Contrarily the risks can also be caused due to peoples. Besides this the inexperienced staffs might work without being trained in a proper way about the safety procedures and can be considered to eb major risk for example causing of fire due to appointment of new cook. This would not only be liable for the compensation but would also be associated with facing the prospect of the business losses and this is initially responsible for making the hospitality enterprises must be associated with assessing and managing the risks which are involved in the human assets.

Risk is inevitable for each and every business. For this reason, it is crucial for the hospitality enterprises so as to devise the strategies so as to manage the risks in an efficient way and for the purpose of avoiding the unexpected events which are responsible for causing interrupting the day-to-day business operations (Chance and Brooks 2015). This would be helping in protecting the assets of the venue as well as the reputation by means of implementing the various laws a regulation which would be associated with ensuring the the continuity of the business operations. This is the reason when they are taken in a sequence the risk management process would eb associated with supporting in taking a better decision by making contributions to the greater insights upon the risks and their impacts.

Financial Assets

The risk management is also associated with increasing the responsibility amongst the staffs, along with supporting the business performance, measuring the performance and reducing the probabilities related to uncertainly (McNeil, Frey and Embrechts 2015). This in turn is associated with increasing the tactical and the efficiency of the operations at different levels. This is also well fitted in the managing the risks related to human assets as well, and this acts as an integral for knowing the ways of dealing with the employees and the customers in certain situations so as to have a successful hospitality enterprise specially in case of restaurants (Sadgrove 2016). Taking care of the welfare of the employees, providing performance appraisals and opportunities for promotion are some of the method which would be helping in boosting up the morale of the employees and the business productivity.

The venue risk assessment or the VRA is the process which is associated with examining the workplace in three different stages and this includes the following:

1. Identification of the hazards and the potential risks which would be responsible for causing a harm to the assets of an organization
2. After identification of the hazards there is a need of analyzing them which would be done by the managers along with evaluating how likely and severe the risks are (Bromiley et al. 2015).
3. Lastly the determination of the appropriate steps so as to eliminate the hazards or control the risks in an effective way.

The implementation of the VRA the hazards and the risks are likely to eb removed or minimized which in turn would be assuring a safer and healthier workplace that is maintained and can be used by the stakeholders of an enterprise.

The second stage of the venue risk assessment process includes the ranking of the risks and the hazards which is to be done in accordance to their probability of occurrence as well as their impact upon the venue assets (Hillson and Murray-Webster 2017). The risk ranking system which ahs been provided below consists of the likelihood that is the probability and the potential impacts of the risks that are likely to happen and this has been categorized from the score 1 which is the lowest to 5 which is the highest.

5	ALMOST CERTAIN (> 90% chance): will probably occur, could occur several times per year
4	LIKELY (50-90%): high probability, likely to arise once per year
3	POSSIBLE (10-50%): reasonable likelihood that it may arise over a five-year period
2	UNLIKELY (3-10%): plausible, could occur over a five to ten year period
1	RARE (<3%): very unlikely but not impossible, unlikely over a ten year period

5	CATASTROPHIC:  company most objectives may not be achieved, or several severely affected
4	MAJOR:  most objectives threatened, or one severely affected
3	MODERATE:  some objectives affected, considerable effort to rectify
2	MINOR:  easily remedied, with some effort the objectives can be achieved
1	INSIGNIFICANT:  very small impact, rectified by normal processes

Establishment of the ranking system would be helping a lot in the process of assigning the particular importance to a particular risk for taking the further actions which includes the action that are needed most seriously so as to gain a control first and based upon these criteria of probability of occurrence and the consequence of the impact (Ho et al. 2015).

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

The VRA sheet which is to be applied upon the Laporchetta Restaurant has been associated with depicting the fact that slipping and cuts along with burns are some of the most likely risks that are going to happen and can cause severe affects upon the human as well as upon the physical assets and on the daily business operations of a daily basis, besides this the dishonest employees, break-ins and the check/credit/debit/charge card forgery are some of the risks which might be faced by the financial assets and can pose a significant threat upon the profits of the organization as well as upon the cash flow and reputation (Cole, Giné and Vickery 2017). In a similar way the risks faced by the physical assets like the dish’s ad glass breakage, dirty restrooms and worn out floors might be having a negative impact upon the reputation of Laporchetta Restaurant as well however with a higher probability of occurrence.

Human Assets

Falls due to slippage or cuts or burns are considered to be some of the most common and the costly incidents which might be faced by the organization but still it is preventable (Olson and Wu 2015). The slippage and falls can be prevented by keeping all the areas and floors of the restaurant clean all times. Besides this the cleanup might eb very much dangerous in the kitchens. Usage of the cautious signs can help in alerting the customers as well as the staffs about the wet areas. Reduction of injuries can be done by providing of proper protective equipment (Haimes 2015). Besides this regular first-aid kits should be made available along with implementation of floor maintenance with proper training and supervision for the employees acts as the key way of prevention.

Threats to financial assets like the theft can be prevented if the Laporchetta Restaurant’s manager is associated with having a good internal control system. This includes the proper handling and taking over the cashier, reconciling of the beginning cash, transactions and the ending cash daily or simply forcing the cashier to provide the customers with a receipt would be helping in avoiding misappropriation. Security systems is also be implemented along with ensuring that all the doors and windows are locked in a proper way so as to provide the risks related to theft. Proper training is to be provided to each and every employee (Rampini, Viswanathan and Vuillemey 2017). Besides this the bathrooms for the guests and the staffs should be cleaned and maintained in a proper way by having a proper schedule and cleaning services. The floors should be kept clean and covered by means of matting and mopping of the floor should be done every day.

References:

Bessis, J., 2015. Risk management in banking. John Wiley & Sons.

Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk management: Review, critique, and research directions. Long range planning, 48(4), pp.265-276.

Chance, D.M. and Brooks, R., 2015. Introduction to derivatives and risk management. Cengage Learning.

Cole, S., Giné, X. and Vickery, J., 2017. How does risk management influence production decisions? Evidence from a field experiment. The Review of Financial Studies, 30(6), pp.1935-1970.

da CUNHA, D.T., de ROSSO, V.V. and Stedefeldt, E., 2016. Should weights and risk categories be used for inspection scores to evaluate food safety in restaurants?. Journal of food protection, 79(3), pp.501-506.

Glendon, A.I. and Clarke, S., 2015. Human safety and risk management: A psychological perspective. Crc Press.

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Jin, N., Line, N.D. and Merkebu, J., 2016. The impact of brand prestige on trust, perceived risk, satisfaction, and loyalty in upscale restaurants. Journal of Hospitality Marketing & Management, 25(5), pp.523-546.

Koh, Y., Rhou, Y., Lee, S. and Singal, M., 2018. Does franchising alleviate restaurants’ vulnerability to economic conditions?. Journal of Hospitality & Tourism Research, 42(4), pp.627-648.

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