Risk Management and Business Strategy

The provided assignment explores the crucial role of risk management in contemporary business strategy. It examines various risk management frameworks, methodologies, and the importance of integrating risk assessment into decision-making processes. The assignment emphasizes the connection between effective risk management and organizational resilience, highlighting how proactive risk mitigation can contribute to sustainable business growth and success.

RISK ASSESSMENT FOR THE MUFFIN BREAK
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RISK ASSESSMENT FOR THE MUFFIN BREAK
Table of Contents
Executive summary.........................................................................................................................3
Introduction......................................................................................................................................4
Part One...........................................................................................................................................4
1.I Concept of risk.......................................................................................................................4
1.2 Types of risk..........................................................................................................................5
1.2.1 Risk to financial assets....................................................................................................5
1.2.2 Risks to human assets.....................................................................................................6
1.2.3 Risks to non-physical assets...........................................................................................6
1.2.4 Risks to physical assets...................................................................................................7
1.3 Significance of risk management implementation process in hospitality business...............7
Part Two:.........................................................................................................................................9
2.1 Venue Risk Analysis (VRA).................................................................................................9
2.2 Risk Ranking System.............................................................................................................9
2.2.1 Risk Ranking at Muffin Break......................................................................................10
2.3 Venue risk analysis form.....................................................................................................12
2.3.1 Discussion.....................................................................................................................12
Recommendations..........................................................................................................................13
Conclusion.....................................................................................................................................13
References......................................................................................................................................14
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RISK ASSESSMENT FOR THE MUFFIN BREAK
Executive summary
The hospitality industry has grown tremendously over the last few years. Hotels, restaurants, and
cafés have a major role to play in the hospitality industry. With the increasing number of
population and economic growth, people need to be provided with high-quality foods. Muffin
Break is one café that has grown over the years. It started in Canada, but now it has established
various stores in several countries all over the world. Muffin Break in Australia is located at the
Westfield Burwood. It is open from 9.00 AM to 5:30 PM every day. It offers high quality-drinks
and foods as well as different kind of snacks. It provides a variety of products ranging from the
muffins, scones, pies, cakes, slices, sausage rolls, toasties, cookies, tartlets, wraps, croissants,
and toasties. Muffin Break has made its name from the scrumptious sweet muffins as well as the
signature blend coffee that has won an award and perfect for the espresso aficionado. In addition,
they are also concerned with the wellbeing of their customers hence cater for their dietary needs.
Therefore, they provide low-fat, dairy-free, and gluten-free products as well as endorsed
products for weight watchers. For smooth operations of this café, it is important for the
management to undertake a risk assessment of the venue. Risk assessment helps one to
determine the probable risk that can occur and hence develop strategies to circumvent those risk.
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Introduction
The concept of Muffin Break traces its origin from Canada back in the 1970s. The Foodco Group
later acquired it in the period of 1980s. In 1989, it arrived in Australia where it started its first
ever café in Coolangatta. The café has branded itself, and it remains to be the leader in its
category. It usually provides their customers with a variety of fresh products which are normally
baked, prepared, and made ready on the site-everyday. As such risk management is necessary to
ensure smooth operations (Hopkin, p. 5) of the firm. It is also important for the café to determine
potential risks that can occur and find mitigation strategies. This paper, therefore, analyzes
Muffin Break with regards to potential risks (human, financial, physical, and non-physical).
Also, it will carry out risk ranking system and Venue Risk Analysis(VRA) of the Muffin Break.
Part One
1.I Concept of risk
Risk has been defined by various scholars in various languages, but all mean the same thing.
Risk occurrence in businesses is a common incidence that happens time from time. Therefore, it
is important for an organization to be prepared to counter the effect of the outcome of a risk.
Risk, therefore, can be defined as uncertainty or unintended outcome of the company’s goals and
objectives (Vinnari and Skærbæk, p. 495). Hazard, on the other hand, is the agent that can cause
harm. The risk usually caused by either internal or external vulnerabilities which cause a
damage, loss, liability, or an injury to the organization. Risk occurrence, however, can be
avoided through preemptive action. Several people usually see risk as only a negative deviation
from the initial results. Nevertheless, positive deviation also is considered as a risk given it was
not the expected outcome from the initial plan (Sadgrove, p. 29). As such, it is always prudent
for the top management of a company to analyze possible risk that may occur in their operation
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and hence find means of curbing them. Hospitality sector such as restaurants, hotels, and cafes,
are enjoying the benefits that come with the growth of global economy. Therefore, Muffin Break
has a high number of customers, and their operations are increasing each day (Watson et al., p.
84). However, the greater the café’s activities and operations, the higher the chances of risk
occurrence. Thus, analyzing possible risk is crucial for the survival of the cafe.
1.2 Types of risk
It is hardly impossible to avoid risk in business operations, and all organizations encounter risk at
one time or another during their operations. Risk varies depending on the business (Spekman and
Davis, p. 421) but, generally they can be categorized into four major groups. They include; risks
to financial, human, non-physical, and physical assets.
1.2.1 Risk to financial assets
Financial assets primarily have a huge role to play in hospitality industry operations. For smooth
flow of business, it is vital to ensure your financial assets are secure. The financial assets include;
credit and debit cards, foreign currency, money orders, and external and internal vouchers (Davis
and Willen, p. 5). Financial assets normally involve numerous transactions between the firm and
the customers (Nocco and Stulz, p. 13). Hence, the reason why they have a high likelihood of
posing a threat to the firm. The financial risks encountered at Muffin and Break involves money
as it’s the primary medium of exchange between their products and services offered to the
customer. They include; credit default, cash flow misappropriation, investment evaluation, and
capital variability. The most critical risk that faces hospitality businesses is the global economic
crisis (Dwyer et al., p. 177). Muffin Break is located in a mall with an open space. Numerous
shops are surrounding the café as well as a large number of people who go for shopping at the
Westfield Shopping Centre. These are their customers, and therefore, an economic downtown
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means that people will not spend and as such, the cafes and restaurants will fail to achieve their
target regarding sales and revenue.
1.2.2 Risks to human assets
Muffin Break has employed various staff who work in different departments. These employees
are a threat to the firm since the unfortunate event can occur to them at any time. Risks to human
assets, therefore include; the personnel (such as human resource management and employers),
patrons, shareholders, and staff (Bhattacharya and Wright, p. 937). Risks to human assets are as
well pronounced in Muffin Break as well as in any other business operations. It requires as such
to be handled correctly as they influence the outcome of the business operations directly. For
instance, if the staff is sick or there are wrangles between the employees and employers, then
customers will not be catered for, and their needs will not be meant. If this happens in the long-
run, then the firm is probably going to lose customers, operations affected, and eventually, it will
collapse. Human capital risk assessment, as well as management, is vital in determining
responsibilities of every employee and thereby avoiding the risk of unnecessary wrangles.
Human assets risks are connected to human resource organization (Youndt and Snell, p.347),
designing of talent strategies, fraud prevention, rewards and appraisal alignment, and ethical
behavior promotion.
1.2.3 Risks to non-physical assets
Non-physical assets are also known as intangible assets. These two words are used
interchangeably. They include; company reputation, leases, computer programs, agreements,
workforce motivation, customer relations, and intellectual capital (White, p.3). Non-physical
assets go further to include corporate intellectual property such as trademarks, copyrights,
patents, and business methodologies. As compared to physical assets, the non-physical assets
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also depreciate, and they undergo wear and tear (Hand and Lev, p. 9) Due to such, they need to
be put into consideration and possible risk determined. It is crucial also to understand that, the
greater costs of these assets leads to a significant lose especially in the redeeming process
thereby causing poor financial ratios.
1.2.4 Risks to physical assets
Physical assets are materials or items that have a tangible existence. These are things that can be
touched and seen in a business. In Muffin Break, intangible assets include; chairs, tables, plates,
cups, cutlery, buildings, cash, dishwashers, food and drinks, and all other equipment and
machines. In case of default, liquidation process of some of the physical assets can be performed
in paying off the debt (Shi, p. 121). These assets however, undergo the process of depreciation,
deterioration, depletion, and shrinkage over time or during the storage process. People tend to
think that physical assets as compared to others, have more value diversification and thereby
experience greater risk when it comes to economic uncertainty. Nevertheless, risk can occur in
whichever asset and necessary precautions should be taken.
1.3 Significance of risk management implementation process in hospitality business
Risks usually are unforeseen outcome of a business process. Businesses are normally subject to
both internal and external risks. Internal risks are normally the business weaknesses and can be
controlled once identified. On the other hand, external risks are the threats from the outside and
can be out of one’s control. Risk management is crucial to ensuring growth and survival of the
organization. Through identification and management of the probable risk (Bromiley et al., p.
269) cash flow in an organization can be improved and maintained. Continual cash flow in a
firm, creates a stable business environment which in turn sustains credit relationship while
building additional credit in the firm. Managing unexpected risks concerning the human asset,
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increases accountability among employees which in turn improves the tactical and operational
efficiency at every level in the café and other hospitality-related businesses. Human resource has
a big role to play in success of hospitality industries. They deal with the customers one-on-one
and hence motivating then is essential to the success of the business. Employees can thus be
motivated through performing performance appraisal, giving rewards, promotion, and taking
care of their welfare (Hameed et al., 5). Strategic risk management plan is very crucial in
circumventing outcome of unexpected risk. It helps the top management of the hotel to carry out
their operations smoothly and risk swiftly hence increasing longevity of the hotel in the market.
Proper risk management strategies, helps a company to achieve its goals and objectives. The
firm’s assets are also protected as well as the business reputation which guarantees the continuity
of the business operations (Wheelen and Hunger, p.7). During the normal activities of a firm,
there is always a likelihood of either an opportunity or a threat presenting itself. These could
either be beneficial or disastrous to the business. However, with effective and efficient risk
management strategies, it is possible to overcome the uncertainties. The ultimate goal typically is
to avoid business failure and increase the likelihood of success by achieving a maximum
sustainable value for all business activities.
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Part Two:
2.1 Venue Risk Analysis (VRA)
Venue risk assessment is vital in preventing adverse effects of unseen outcomes. Also, it helps
the operations of the company to run smoothly hence have a competitive edge over your
competitors. Proactive and preventive measures can only be taken through exhaustive
analyzation of the venue. Such measures can be achieved by performing a thorough check of the
venue by conducting a full business audit (Rausand, p. 203). Undertaking financial, project, and
operational risk assessment helps the company respond to any unforeseen event. This section
analyzes the Muffin Break by carrying out risk ranking system and venue risk analysis.
2.2 Risk Ranking System
In risk ranking system, hazardous elements are usually placed in a sequentially to help in the
decision-making process. Risks vary with their severity, and it becomes important to rank them
thereby fasten the process of mitigation. The criteria for application of the risk ranking system is
based primarily on the quantitative and qualitative information. The process involves
identification of all possible risks and those having a higher chance of occurring ranked (Haimes
et al., p. 389). The same case applies to those that have a lower chance of occurring as well as
those in which utmost consequence of occurring is low/high. Risk identification and ranking help
the top management to make affirmative decisions and determine how to deal with them in worst
case scenario. It is also crucial to perform risk prioritization whereby the identified hazards are
weighted and also compared using various methods. This could be through political will,
feasibility, practicability, control measure effectiveness, estimates certainty, and levels of public
concern.
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2.2.1 Risk Ranking at Muffin Break
Muffin Break has grown recently and apart from Australia; it’s now located in India, New
Zealand, and in the United Kingdom. It serves a variety of delicious drinks, snacks, and foods.
The design of the Muffin Break has incorporated the modern design where the arrangement of
chairs and tables is satisfactory. The point of sale, lighting, kitchen, seating area, counter,
lighting, and artwork and décor is on point. The café also contains the coffee machines, ovens,
mixers, worktables, refrigerators, baking sheets, and racks as well as other equipment’s. All these
equipment’s need to be frequently monitored and their life expectancy determined to avoid risk
occurrence. Risk consequence/assessment matrix places probable risk in a table regarding their
likelihood of occurrence and their impact (Morgan and Fischhoff, p. 208). It gives the
management a quick view and an opportunity to prioritize on the risk hence develop an efficient
and effective strategy.
Figure 1: Risk matrix table
LIKELIHOOD CONSEQUENCE/IMPACT
Insignificant/
Negligible
(1)
Minor (2) Moderate
(3)
Major (4) Extreme/Cata-
strophic (5)
Rare (1) Low (1) Low (2) Low (3) Low (4) Low (5)
Unlikely(2) Low (2) Low (4) Low (6) Medium (8) Medium (10)
Possible(3) Low (3) Low (6) Medium (9) Medium (8) Medium (15)
Likely(4) Low (4) Medium (8) Medium High (16) High (20)
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(12)
Almost
certain(5)
Low (5) Medium
(10)
Medium
(15)
High (20) Extreme (25)
Table 2: Likelihood of risks occurring
Level Likelihood Frequency
1 Rare Very unlikely. In exceptional circumstances.
2 Unlikely The chance of occurring is less than 25%.
3 Possible The chance of occurring is between 25-50%.
4 Likely The chance of occurring is between 50-75%.
5 Almost
certain
The chance of occurring is over 75%.
Table 3: Consequence/impact table
Level Consequence Impact
1 Insignificant Little impact with no material disruption. Can be remedied through
simple processes.
2 Minor The impact can be rectified easily using a considerable effort.
3 Moderate Some of the business objectives affected but can be rectified.
4 Major Company’s objectives and performance affected.
5 Catastrophic Performance failure and objectives not achieved.
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By creating a risk matrix table, one can tell which risk holds the highest probability of
occurrence as well as one that has the greatest impact. With this knowledge, one can then
perform a risk management matric and implement strategic policies to circumvent the risks from
occurring.
2.3 Venue risk analysis form
Analysis of the venue and determination of the actual risk that can occur in a firm is essential for
smooth business operations. The importance of VRA form, therefore, becomes critical as it helps
the management to understand the consequence of the probable risk and impact levels. It also,
helps the management to predict potential or future threat in the organization. In doing so, one
can assign priorities and thereby develop and implement the risk prevention strategies (Olson
and Wu, p.267) Additionally, the maintenance costs of the hotel can be minimized as the overall
quality of the venue is upgraded. Muffin Break has a modern design of its venue with spacious
seating area. The bespoke banquette seating, as well as the made-to-order chairs, gives the
Muffin Break restaurant an irresistible appeal. The venue is well furnished with comfortable
furniture and machines. The environment is also conducive with friendly employees. (The risk
assessment form of Muffin Break is attached as an excel form).
2.3.1 Discussion
The risk assessment of Muffin Break indicates that major risks fall under the category of
financial and non-physical assets. In financial assets, cash flow misappropriation and
income/capital variability risk rates high in the category as compared to others. In hotel
operations, financial assets are critical to ensuring either failure or success of the business. Poor
finance handling affects all the operations of the hotel leading to business failure. It is, therefore,
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important for Muffin Break to ensure proper handling of finances through proper audit and
employing qualified financial staff.
Risks to non-physical assets also, such as operational risk, reputation damage, and lack of staff
motivation also rates high with an impact factor value of 20 each. Such risks affect the reputation
of the hotel making it less popular. Disruption of the entire business operations also, can lead to
the collapse of the business and be overtaken by rival competitors. The motivation of employees
is necessary for enhancing their performance. Highly motivated employees are committed to
their work as compared to unmotivated ones. Through performance appraisal, rewards and
incentives, employees can be motivated to perform better. The risk to human assets such as
customer dissatisfaction also needs to be considered. The café need to cater for the needs of their
customers to increase numbers and maximize profit. The lowest risk to occur is the physical asset
risks. The Muffin Break has invested much in physical assets, and their tables and chairs and
other equipment are of good quality.
Recommendations
Muffin Break has grown tremendously over the years. However, it could employ technology use
in its operations to enhance its activities. For instance, it would open an online store when they
can do delivery for orders. The business world has revolutionized, and technology is key in
ensuring the success of an organization. They should also try increase space to accommodate a
large number of customers and avoid congestion.
Conclusion
It is crucial to perform a risk assessment for your business to be prepared to tackle any outcome.
Risk identification and ranking help the organization to identify the risks that have a high
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probability of occurrence and impact and hence implement effective strategies. Muffin Break has
maintained high standards of the venue, but it would be necessary to embrace technology in its
operations.
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