Author: Jordan MacAvoy
Jordan MacAvoy is the Vice President of Marketing at Reciprocity Labs and manages the company’s go-to-market strategy and execution. Prior to joining Reciprocity, Mr. MacAvoy served in executive roles at Fundbox, a Forbes Next Billion Dollar Company, and Intuit, via their acquisition of the SaaS marketing and communications solution, Demandforce.
Businesses in the tourism industry have to thrive in the midst of uncertainty, especially global threats. Case in point, the Coronavirus threat has left the Italian tourism industry in turmoil. Up to 90% of travel and hotel bookings have been canceled by clients who had plans to visit Rome in March 2020.
The coronavirus is only but a contemporary isolated threat. It is a tip of the iceberg when compared to the risks that businesses in the tourism industry need to be aware of and fight against. With such a volatile risk landscape, the need for you, as a business owner in this industry, to have a concrete risk management plan cannot be gainsaid.
Here is what you should know about risk management for the sustainability of your business:
Why Risk Management Matters
As a tourism business, you might have to go through incidents that can pose threats to both your business and key stakeholders. Some common examples of threats include hurricanes, terror attacks, and health-related incidents. Such incidents can impact your tourist destination negatively. Even worse, they can take a toll on the reputation of the destination, an effect that can actually outlast the physical damage to the destination.
Risk management in the hospitality industry helps to identify, reduce, and eliminate disasters and crises. It can also help your business survive long after a crisis. Since some risks come with the silver lining of business opportunities to the unaffected businesses, risk management can help you identify such opportunities and maximize them.
Instead of risk management being a reaction to a crisis, it is supposed to be done early. It helps businesses have a bird’s-eye view of how they can handle crises that can affect their business situation and profitability.
It Starts With Risk Identification and Assessment
The first step to building a formidable risk management plan would be to list out the risks that your business faces.
Ideally, you can start by brainstorming common risks. For risks that might not be obvious, you can consult professionals in the tourism industry, attend workshops, conduct market research, and even study the history of your business. Regardless of the methods you opt for, you should include both low and high severity risks in your list of possible risks.
The next step would be analyzing the risks.
You should quantify the impact as well as the probability of a specific risk affecting your business. These two figures of each risk will make it easy to include them in the risk matrix for easier ranking. With well-defined ranks for the different risks, it becomes easier to identify the risks to prioritize during risk treatment and how to divide resources appropriately.
Pick a Risk Treatment Strategy
There are four ways you can treat the different risks you list down: avoid them, transfer them, mitigate them, or retain them. The option you choose will trickle down to your tolerance for specific risk and the availability of resources to help with risk treatment.
1. Risk Avoidance
This strategy will require you to completely shy away from any activity that could lead to the risk at hand.
For instance, if a specific route is prone to be flooded at certain times of the year, you can consider avoiding using the route or canceling travel during that time of the year.
Although this can be a great solution for some risks, it isn’t possible for those risks that cannot be avoided. If your business is in an evacuation zone, for instance, you will have to look for a better risk treatment alternative.
2. Risk Reduction or Mitigation
Any risk which cannot be completely eliminated or avoided should be mitigated. You will have to implement controls that make it tough for the risk to turn into an actual incident.
For instance, you can purchase fire extinguishers to protect from the risk of fire. You could also hurricane-proof your building to as much as possible.
3. Risk Transfer
This means shifting the risk to an individual or company that can handle it in the best way possible.
It can best be observed in the tourism industry, where businesses purchase liability insurance to rid themselves of the financial risks that come with accidents that might happen. In turn, this insurance helps to pay for damages to visitors’ belongings, their health as well as any cancellations of the tour due to unavoidable circumstances.
4. Risk Retention
This option is ideal for risks that can be considered as ‘part of the job.’ The risks might be too trivial to make an impact.
Risk landscapes are dynamic, especially in the tourism industry. While a risk might seem trivial today, it can easily turn into a huge threat to your business tomorrow.
Other risks might also come up with time. Lastly, the effectiveness of your current risk control measures might change with the changing risk landscape. Instead of leaving things to chance, you ought to continuously monitor your posture in relation to your risk landscape. In case any risk control measures need to be updated, feel free to do so.
Risk management can be a pre-emptive way of protecting your business from threats. It also increases its sustainability as well as ensures that stakeholders remain happy. Make risk management part of every business decision you make to keep threats at bay.