Procurement Risk and Contract Management

This report discusses the importance of risk management in the context of a hotel project. It identifies various risks such as economy risk, consumer interest risk, longevity risk, legal risk, and management risk. The report also explores different methods for risk identification and provides a risk matrix to indicate the risk appetite of the project owners. Additionally, it offers a risk action plan to effectively manage and mitigate risks.

Procurement Risk and
Contract Management

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
(a) Identify the risk facing by the project and what methods could use for identification along
with justification.........................................................................................................................1
(b) Analyse each risk giving an indication of the probability/likelihood and
impact/consequence of each risk on the project objectives........................................................4
(c) Each risk onto a risk matrix which indicates the risk appetite of the project owners...........5
(d) Produce a risk action plan....................................................................................................6
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Risk management is the procedure of recognising, analysing and controlling threats of an
entity's capital and earnings. Such threats or risks are identifying from different sources in which
consist of legal liabilities, strategic management errors, natural disasters and financial
uncertainty. It is existing in the business when an investor determines and attempts to decide the
potential losses of investment (Cao, and et.al, 2020). For any organisation it is essential to
manage risk in proper way and take right decision for further investment. This report based on
the Yawn sing hotel project that was located in UK. The main aim of the project to reopen hotel
project that has been closed due to critics. In this report consist of different types of risk in hotel
management and prove to select them. Along with define that how to impact on the profitability
and calculate cost and profit. At the end of the project prepare risk matrix that presents risk
appetite of owners and develop risk action plan for taking right action.
MAIN BODY
(a) Identify the risk facing by the project and what methods could use for identification along
with justification
Risk is associating with all kinds of company and it need to be adequately maintained in
order to minimise the risk factor. In the project of Yang Sing hotel, there are certain risk which is
present with the project and need to determined properly in order to monitor them effectively.
Following risk is related to this project are as follows-
 Economy risk- As, there are certain factors present in the economy such as political,
social, legal and technological that used to impact the working of all kinds of business.
This happens through many changes in the economy of particular countries that need to
be handled effectively. The need to analyse for the Project Yang sing, opportunities in
the available factors like technological factor organisation can come up with new
innovation. This might be threat as some factors such as political and legal that require
proper assessment of threat associated with them (Chopra, 2019).
 Consumer interest risk- In the present world there are constantly changing in the taste
and behaviour of consumer and for the hospitality sector, this risk is very important to
evaluate for the company. For the project of Yang sing project, the threat will be rapidly
changing in the consumer demand and organisation is not able to meet that will badly
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impact the business negatively. For the project, this might be opportunities as they can
evaluate the upcoming demand of consumer and accordingly deliver them products and
services.
 Longevity risk- In the hospitality sector, the risk is lack of experience and well
educated employees as they directly communicate with customer. This is major problem
that used to face by many hotels and restaurant. This is threat for the project as they will
face the problem in delivering customer service. For the project they can convert this
risk into opportunities by giving best training and different development programmes
that will going to enhance the performance of staff of hotel and customer will be
satisfied with the service of employees (de Araújo, Alencar, and de Miranda Mota,
2017).
 Legal risk- This is major risk factor that every company need to be monitor properly in
order to sustain with better smoothing in the function of organisation. For the project,
this risk is need to identify clearly so that they could overcome from this risk. There is
threat that is associated with this risk is rapidly changing in the rules and regulation in
the economy. For the project, they can find the opportunities that might there such as
implementing and properly using all the defines rules and regulation to overcome the
future uncertainties.
 Management risk- They are important part of any hospitality sector and changing in
their will crate as big risk with the project. This is threat as this will occur as a big
problem for the organisation as they are as fuel. For the project, this could be
opportunities as they can introduce comfortable environmental and can come with new
policies and rules that help in attracting the visitors.
For the risk management require to use different types methods of risk identification that
are mentioned below:
 SWOT analysis: It is a technique of risk identification that identify positive risk and
negative risk to identify the strength, weakness, opportunities and threat of company. It is
used to determine the strategic risk in business. This analysis is assessing technology,
existing software and service centres by Yawn Sing Hotel Project. This identify the
technological risk in the project which affect the growth of company (Eckerd, and Girth,
2017). In this strength and opportunities is examined and to increase their success
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whereas weakness and threats determined to convert them to assets. It is used to make
strategic decision related to their internal and external environment.
 Assumption analysis: It defined as a tool which identify multiple assumptions and
determine number of project which helps in analysing risk. This identify the inexactness,
uncertainty, incompleteness in the project which impacts to the objective of project. It is
the analysis to decrease risk in assumptions when specific project is in process.
 Brainstorming: It is the new thinking of people to allow them to participate to give
suggestions for particular problem with no panic of punishment which encourages people
to come with new ideas and thoughts. It identifies the ideas for a specific project to
manage risk for time management. At starting of the project of Yawn Sing Hotel Project
have a brainstorming session with team to identify risk analysis in the project. It is
essential to assess many risk and solve the complete analysis in the project. This is a
group analysis for interaction of all the participants.
 Documentation reviews: It is said to determine the data which ascertain the plans,
project documents to identify areas of risk or clear the objectives of project. This assess
the risk of inaccuracy, inconsistency and improper plan of project. These identify the risk
of Yawn Sing Hotel Project. All the documents should be reviewed such as project
statement, schedules and files of the company (Fu, and Zhu, 2019).
 Delphi technique:
Justification: As per the above analysis it is justified that before the starting of Yawn
Sing project investor faces many problems. Such problems, market risk, customer interest risk
and many others impact on the business operations ion direct manner. If any hotel carries out
new technology in the market and investor is not able to establish new technology so it impacts
on the business activities and become risk. Due to changes market trends impact on customer
trustee & preferences so it create risk of consumer interest. For this require to apply new
innovation in hotel to attract customers. Legal risk is most important risk that face by the
investor when set up hotel as per the rules and regulations but government change their policies
of hospitality sector so it impacts on this project negatively. Moreover, poor management is
reflecting on the products & services of business. As a result, consumer do not take interest and
impact on the sales volume. Thus, it is considering as management risk.
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(b) Analyse each risk giving an indication of the probability/likelihood and impact/consequence
of each risk on the project objectives
The main objective of the project to establish a new Hotel in United Kingdom. For this
require to analysis of each risk in proper manner. There are identify different risk that impact on
the project objectives in direct manner such as:
Management risk: The Poor management of hotel impact on the objective in direct
manner because probability of the risk is high due to visit large amount of customers. Such risk
impact on revenues of the company that related with ineffective manner and investors holding
inventory in an organisation (Hackett, and Statham, eds. 2016).
Technological risk: When hotel wants to expand their business activities so decided to use
new methodology in hotel to attract customers but changing regulation in business impact on the
business in adverse manner. The probability of this risk is low because in the starting of the
project investor set up new technology to attract customers but it impacts on the objectivity in
negative manner.
Legal risk: Such risk related with the financial and reputational loss that can face by the
investors due to lack of awareness, misunderstanding and differences. The likelihood of the risk
is medium so it impacts on the business objective in low manner. Because investors before the
starting of the project collect all the information and manage all financial funds in particular time
period.
Longevity risk: The probability of this risk is low because of investor do not hire those
people who have not proper experience in this field. But this risk impact on the project objective
in high manner because employees are stakeholders that are handling company activities
effectively. Thus, it is required to recruit skilled staff members who are handling different
activities in proper manner.
Economy risk: The probability of the risk is low because of investor wants to open hotel
project in United Kingdom and investor know all the policies effectively. In case any economic
risk arises in the project so it impacts on objective in marge manner because according to
objective investor set all the strategies for business (Handfield, Jeong and Choi, 2019).
Consumer interest risk: Many times consumer changes their perception in regard of hotel
so probability of risk medium. It impacts on the objectives directly because of sales of the hotel
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mainly based on the consumer visiting. For this require to apply different innovation policies to
attract customers and enhance their revenues (Tumuhairwe, and Ahimbisibwe, 2016).
Risk score: There are giving score of each risk that are identify by the consultancy firm
in the new hotel project such as:
Risks
Management Risk 5
Technological risk 6
Longevity risk 8
Economy risk 9
Legal risk 4
(c) Each risk onto a risk matrix which indicates the risk appetite of the project owners
A risk matrix is a matrix that utilised by the business for risk assessment to explain the
level of risk in which focus on category of probability against category of consequences
intensiveness. It is a simple mechanism to enhance visibility of risks as well as effectively
manage decision making procedure (Hong, Lee, and Zhang, 2018).
Risks Negligible Minor Moderate Significant Severe
Management Risk Very likely Low Medium Medium Medium High High High
Technological risk Likely Low Low Medium Medium Medium High High
Longevity risk Possible Low Low Medium Medium Medium High Medium High
Economy risk Unlikely Low Low Medium Low Medium Medium Medium High
Legal risk Very Unlikely Low Low Low Medium Medium Medium
Likelihood scale Criteria Description
Rare 0 - 5% Enormously unlikely or nearly
unbearable
Unlikely 6 - 25% Unlikely to arise
Possible 26 - 50% Fairly likely to happen
Likely 51 - 75% More likely to occur
Almost certain >75% Almost convinced will occur
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Consequence scale
Type of
impact Insignificant Minor Moderate Major Critical
Impact to
cost <$150k $150k - $500k $500k - $1.5m $1.5m - $5m >$5m
Impact to
time <10 days 10 - 20 days 20 - 40 days 40 - 60 days >60 days
Impact to
scope
Minor
modifications
in ancillary
requirements
Change in
subsidiary
necessities
Change in
multiple
necessities
Change in any
of the opponent
rations
Key change in
any of the
serious wants
Impact to
government
reputation
Little to no
impact; control
of impact can
be managed
internally
Some impact
to government
reputation;
control of
impact can be
managed
internally
Moderate impact
to government
reputation;
control of impact
can be managed
internally, but risk
is high that other
parties may need
to get involved
Major impact to
government
reputation;
control will
require the
involvement of
a number of
agencies
Significant
impact to
government
reputation;
media news
coverage;
Minister or
Premier
involved
As per the risk matrix it is analysed that management risk impact in the project is low
medium in negligible manner, minor medium, at moderate level consider as medium high and at
significant and serve is high but likelihood of project is very likely. Different risks impact on the
business activities in different manner.
(d) Produce a risk action plan
Risk Action plan: This plan is the course of action in which business agrees upon to
supports to address potential risks and try to reduce the likelihood of such risks happening as
well as lessen that effect on such risks when they happen. This plan is using to assure about the
right actions are taken by business in specified time period. There are making risk action plan of
Yawn sing project to manage risk that arise in future and impact on the project objectives
(Kohler, and Dimancesco, 2020).
Item 1
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Risk Economy risk
Summary (Recommended
response & impact)
This risk impact on Yawn sing project in medium manner and
recommended that follow all economic policies in systematic
manner. The investor wants to complete their project in specified
period of time.
Proposed actions  Require to collect all information in regard of project and
prepare different strategies.
 Make a team for different activities.
Resource requirements  Time for collect data
 Deal with authorities
Responsibilities The main responsibility of investor to aware about the
government rules and regulations in regard of hospitality
industry.
Timing The process is completing in particular time about 6 months.
Reporting/Monitoring Completed checklist to be achieved from installer effectively
after set up project.
Item 1
Risk Legal risk
Summary (Recommended
response & impact)
When project do not follow all the political activities in proper
manner so it will impact in negative manner. Thus, it is suggested
that follow all the laws and regulations of hospitality sector
(Lysons, and Farrington, 2016).
Proposed actions  Develop a procedure to prepare all papers in regard of
project.
 Manage financial resources in proper manner.
 Take initiative to complete task on time.
Resource requirements For this risk require to arrange funds on time and take right
decision for business modelling.
Responsibilities  To conduct each task in particular period of time
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 Prepare all the documents on time.
Timing About 2 months
Reporting/Monitoring Reporting to senior manager of the project and complete check
list effectively.
Item 1
Risk Technological risk
Summary (Recommended
response & impact)
At the starting company set up new technology but after some
time face technology after the implication by new hotel. So for
this create a fund that helps for investment.
Proposed actions  Create a new fund activity
 Research about the new technology and related cost
 Provide training to staff members in regard of new
technology
Resource requirements Select technician who have knowledge about the different
technology and provide training to people accordingly.
Responsibilities  Prepare a team of IT and research skills based people
 Set up project on modern technology
Timing 6 months
Reporting/Monitoring For this risk report to IT manager that has ability to conduct
different activities in effective manner and monitor on consumer
behaviour. Along with focus on marketing activities to follow
properly (Muhammad, and et.al, 2019).
Item 1
Risk Management risk
Summary (Recommended
response & impact)
This risk impact on the business operations at the starting of the
business. At the starting of hotel hire different types of people so
it is required to people coordinated with each other effectively.
Proposed actions  Provide proper training to all staff members
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 Arrange informal meeting to people know each other
Resource Requirements  Hire expertise of this field who have more experience in
regard of their work
 Apply different types of management strategies.
Responsibilities  Apply different concept of management theories
 Use different types of strategies
Timing 4 Months
Reporting/Monitoring For the reduction of this risk require to consultant with senior
manager and take appropriate steps on right time (Rendon, and
Snider, 2019).
Item 1
Risk Longevity risk
Summary (Recommended
response & impact)
When staff members are not trained in the hotel so they impact in
negative manner and become the reason of Longevity risk. For
this require to proper training as per the changes that helps to
conduct different operational activities.
Proposed actions  Provide training and skills to people
 Conduct seminars for personal development
Resource requirements For this risk require resources of various leadership skills based
people who have ability to influence people to fulfil
organisational goals & objectives.
Responsibilities Complete task in certified period of time
Timing 4 months
Reporting/Monitoring For this appoint HR manager who create goof relation with all
the staff members (Thai, ed. 2017).
Risk management theory consist of develop models within the body of the following
theories in which apply different theories such as:
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 Financial theory: This theory defined that foundation for different problems that
mismatch with interest between shareholders and debt holders due to earning distribution.
 Agency theory: This theory extends the determination of firm in which consist of
separation of ownership, control and managerial motivation. For proper management of
risk in business apply risk management theory and influence managerial in regard of risk
taking and hedging.
CONCLUSION
As per the above report it has been concluded that hotel risk management is analysing,
prioritizing and controlling risk in hotel industry. It is integral part of good management as well
as governance. This term applied in logical as well as in systematic manner that will enable to
reduce losses and increase opportunities. For hotel project identify different types of risk like
economy risk, legal risk and many others. After the overall analysis it is recommended that set
up the new hotel project effectively.
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REFERENCES
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Fu, Y. and Zhu, J. 2019. Big production enterprise supply chain endogenous risk management
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Hackett, M. and Statham, G. eds. 2016. The aqua group guide to procurement, tendering and
contract administration. John Wiley & Sons.
Handfield, R., Jeong, S. and Choi, T. 2019. Emerging procurement technology: data analytics
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Hong, Z., Lee, C. K. and Zhang, L. 2018. Procurement risk management under uncertainty: a
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Kohler, J. C. and Dimancesco, D. 2020. The risk of corruption in public pharmaceutical
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Lysons, K. and Farrington, B. 2016. Procurement and supply chain management. Pearson.
Muhammad, K., and et.al, 2019. Contract management and performance characteristics: An
empirical and managerial implication for Indonesia. Management Science Letters. 9(8).
pp.1289-1298.
Rendon, R. G. and Snider, K. F. 2019. Management of defense acquisition projects. American
Institute of Aeronautics and Astronautics, Inc..
Thai, K. V. ed. 2017. International handbook of public procurement. Routledge.
Tumuhairwe, R. and Ahimbisibwe, A. 2016. Procurement records compliance, effective risk
management and records management performance. Records Management Journal.
Yoon, J., Talluri, S. and Rosales, C. 2020. Procurement decisions and information sharing under
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