Risk Management in a Knowledge-Based Economy

This assignment delves into the realm of risk management, specifically focusing on its application within a knowledge-based economy. It examines different risk management frameworks and models, such as hierarchical holographic modeling and integrated strategic asset management, highlighting their relevance in this evolving economic landscape. The analysis also considers the impact of risks and uncertainties on businesses operating in a knowledge-based environment, drawing upon concepts from risk analysis, corporate strategy, and hospitality management.

FACILITY AND RISK ASSESSMENT FOR HOSPITALITY OPERATIONS
The Executive Boardroom of Sofitel Sydney Wentworth Hotel
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Table of Contents

Executive summary.........................................................................................................................3
Introduction......................................................................................................................................4
Section 1..........................................................................................................................................4
1.1 Risk concept...........................................................................................................................4
1.2 Types of risk..........................................................................................................................5
1.2.1 Risks to physical assets...................................................................................................5
1.2.2 Risks to non-physical assets...........................................................................................5
1.2.3 Risks to financial assets..................................................................................................6
1.2.4 Risks to human assets.....................................................................................................6
1.3 Importance of risk management process implementation in hospitality industries...............7
Section 2..........................................................................................................................................8
2.1 Venue Risk Analysis..............................................................................................................8
2.2 The Executive Boardroom of Sofitel Sydney Wentworth Hotel...........................................8
2.3 Risk Ranking System.............................................................................................................8
2.3.1 Risk Ranking at Executive Boardroom..........................................................................9
2.4 Venue Risk Analysis (VRA) form.......................................................................................11
3.1 Recommendations................................................................................................................12
3.2 Conclusion...........................................................................................................................13
References......................................................................................................................................14
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Executive summary
Conference rooms usually bring great people together in a discussion of various issues. These
issues could be related to legal matters, business-related matters, government matters, social-
economic matters as well religious affairs. As such, it is important for a hotel to invest more in
designing a proper conference room that can accommodate various groups of people from all
walks of life. The Executive Boardroom of Sofitel Sydney Wentworth Hotel is one place that has
invested in designing an international Boardroom. The room is spacious enough to provide
comfortability to the guests as well as offering a proper structure for the arrangement of chairs
and tables. As it is with any other business operations, the Boardroom is faced with a couple of
potential risks. The risks are a combination of various factors that pose a threat to the company if
not managed in time. Due to the weight of the outcome of the unforeseen risks, it becomes
necessary for a business to put proper preventive measures into play. Therefore, risk
identification, assessment, and management process is a must for a business to have smooth
operations. Performing venue risk analysis, which encompasses risk ranking and venue
assessment gives the top administration of a hotel a prior information of the likelihood and risks
impact that can occur.
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Introduction
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.
Section 1
1.1 Risk concept
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,
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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.
1.2 Types of risk
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.
1.2.1 Risks to physical assets
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.
1.2.2 Risks to non-physical assets
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
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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.
1.2.3 Risks to financial assets
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.
1.2.4 Risks to human assets
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.
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1.3 Importance of risk management process implementation in hospitality industries
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).
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.
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Section 2
2.1 Venue Risk Analysis
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.
2.2 The Executive Boardroom of Sofitel Sydney Wentworth Hotel
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.
2.3 Risk Ranking System
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
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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.
2.3.1 Risk Ranking at Executive Boardroom
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
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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
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The table give the risk factor value of various risks. It also shows the possible combinations of
likelihood and potential impact of the risks.
2.4 Venue Risk Analysis (VRA) form
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
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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 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.
Section 3
3.1 Recommendations
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
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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).
3.2 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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