Risk Management in Hospitality Industry

This report discusses the risk management in the hospitality industry, specifically focusing on the case study of Wagyu Ya Japanese Indoor Smokeless Charcoal Grill Restaurant. It includes a venue risk analysis, findings, and recommendations for mitigating the identified risks.

Running Head: RISK MANAGEMENT IN HOSPITALITY INDUSTRY
Risk Analysis for Wagyu Ya Japanese Indoor Smokeless Charcoal Grill
Restaurant
Name of the Student
Name of the University

1RISK MANAGEMENT IN HOSPITALITY INDUSTRY
Table of Contents
1.0 Introduction................................................................................................................................2
2.0 Venue Risk Analysis..................................................................................................................2
2.1 The Risk Rating System........................................................................................................2
2.2 Venue VRA...........................................................................................................................3
2.3 Findings.................................................................................................................................5
2.4 Recommendations..................................................................................................................6
3.0 Conclusion.................................................................................................................................6
References........................................................................................................................................8

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1.0 Introduction
This scenario is based on the case study of Wagyu Ya Japanese Indoor Smokeless
Charcoal Grill Restaurant, located in Toorak Road, Melbourne, Australia. The restaurant is
gaining more and more popularity within short period of time due to the preparation of exotic
and traditional Japanese dishes that not only attract the local Asian population (Japanese and
Chinese) but also the Australians who want to try new dishes. In spite of having certain
limitations related to the overall space of the restaurant and other problems, the restaurant
provides good quality services and has high customer satisfaction that makes it quite successful.
The purpose of this report is to identify some internal asset based risks that may occur in
the near future and result in damage in the business of the restaurant. In order to develop
management plan for the risks, the VRA (Venue Risk Analysis) technique has been used in this
report.
2.0 Venue Risk Analysis
2.1 The Risk Rating System
For the purpose of identifying the priorities with which each risk is to be treated, a risk
rating system is to be developed. The risk rating system is based on two main factors –
Likelihood and Probability of Impact (Rhou, Li and Singal 2019). From a suitable scale (in this
case, 1 to 5), the risks are rated under these two factors. After that, the ratings of the two factors
are multiplied to find the actual risk rating (or ranking). The risks are then treated based on these
ratings in descending order (high to low).

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For this particular case, the risk rating system is shown in the following table.
Likelihood
5 ALMOST CERTAIN: will probably occur, could occur several times per year
4 LIKELY: high probability, likely to arise once per year
3 POSSIBLE: reasonable likelihood that it may arise over a five-year period
2 UNLIKELY: plausible, could occur over a five to ten year period
1 RARE: very unlikely but not impossible, unlikely over a ten year period
Potential impact
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 NEGLIGIBLE: very small impact, rectified by normal processes
2.2 Venue VRA
The venue VRA analysis is conducted and the results are published in the following table
(Wen and Kwon 2017).
Risk Consequence Risk
category
Likelih
ood
Impact/
consequ
ence
Risk
rank
Risk treatment Owner
Broken tile Trip hazard
resulting in
Slips
trips &
2 3 6 Repair floor Manager

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major physical
injuries for the
staffs and
customers
falls
Open garbage
bin
Unhealthy
atmosphere,
may lead to
nausea and
sickness
Hygiene 3 3 9 Create separate
covered area for
garbage bins
Manager
Insects in
food
Severe
dissatisfaction
of customers,
sickness of the
customers
Food
quality
2 5 10 Ensure the raw
food materials
and the utensils
are clean before
cooking
Quality
control
Short circuit Fire breakout
and electricity
failure
Electricit
y
3 5 15 Supervise
electrical
connections on
frequent basis
Manager
Poor quality
food
Dissatisfaction
of the
customers
Food
quality
2 3 6 Check raw
material and
cooked food
quality before
serving
Head chef
Poor service
from the
Dissatisfaction
of the
Service 4 3 12 Train the staffs
and waiters
Manager

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waiters customers
Fire hazard Major injuries,
may be fatal
Fire 4 5 20 Ensure there are
sufficient fire
extinguishers
and fire alarms
Manager
Smoke pipe
leakage
Smoky
environment
and
suffocation
Environ
ment
2 4 8 Check smoke
pipe before
igniting the
barbeque oven
Waiter
Broken plates
during dining
Financial loss
of the
company,
delayed
service due to
lack of plates
Plates
and
Utensils
4 2 8 Use melamine
plates that are
unbreakable
Manager
Mouse and
insect traps at
random open
places in
restaurant
Customer
dissatisfaction
and loss of
trust
Environ
ment
5 2 10 Conduct pest
control service
during closed
hours instead of
using traps
Quality
control
2.3 Findings
From the VRA, it has been found that there are several highly possible risks that can
occur sooner or later. These risks include broken tiles, short circuit issue, fire hazard, quality
issues in food and service, broken plates and utensils, suffocation due to barbeque oven smoke

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and others (Dupuis et al. 2016). All the risks discussed are very serious in nature and occurrence
of any one of these may result in severe customer dissatisfaction of the customers. This in turn
will negatively affect the overall business of the company. Hence, it is important to take
appropriate measures that will prevent the risks from occurring. The findings are shown in detail
in the VRA table.
2.4 Recommendations
Based on the analysis of the risks highlighted, several recommendations are made to the
restaurant management.
Conduct risks analysis on frequent basis: The management is required to conduct risk
analysis test on frequently basis (monthly or quarterly) in order to identify any residual or new
risks occurring within the restaurant. Accordingly, suitable actions must be taken to ensure these
risks do not occur or have any significant impact on the operations of the restaurant.
Assign stakeholders to manage risks: It is not possible for the manager alone to take care
of all the risks associated with the restaurant. Hence, the manager must appoint suitable
stakeholders to the identified risks for mitigation. For example, for the mitigation of food quality
risk, a quality control staff can be assigned.
3.0 Conclusion
Finally, it can be concluded that any business operation has some risks and issues that
may occur at any stage. Occurrence of the risks can result in massive negative impacts on the
business. Hence, it is important to identify the risks early using suitable techniques so that
sufficient time is available for mitigating such risks. Furthermore, while mitigating the risks, it is

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important to develop long term solutions rather than short term ones. This will ensure the
mitigated risk will not occur any time in the near future.

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References
Dupuis, R., Meisel, Z., Grande, D., Strupp, E., Kounaves, S., Graves, A., Frasso, R. and
Cannuscio, C.C., 2016. Food allergy management among restaurant workers in a large US
city. Food Control, 63, pp.147-157.
Jung, S., Lee, S. and Dalbor, M., 2016. The negative synergistic effect of internationalization and
corporate social responsibility on US restaurant firms’ value performance. International Journal
of Contemporary Hospitality Management, 28(8), pp.1759-1777.
Park, S., Song, S. and Lee, S., 2017. Corporate social responsibility and systematic risk of
restaurant firms: The moderating role of geographical diversification. Tourism Management, 59,
pp.610-620.
Rhou, Y., Li, Y. and Singal, M., 2019. Does managerial ownership influence franchising in
restaurant companies?. International Journal of Hospitality Management, 78, pp.122-130.
Seo, K. and Sharma, A., 2018. CEO overconfidence and the effects of equity-based
compensation on strategic risk-taking in the US restaurant industry. Journal of Hospitality &
Tourism Research, 42(2), pp.224-259.
Tang, C.H.H., 2015. Determinants of commodity price risk exposure in the restaurant industry:
An analysis by commodity price cycles. International Journal of Hospitality Management, 45,
pp.121-129.

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Wen, H. and Kwon, J., 2017. Restaurant servers’ risk perceptions and risk communication-
related behaviors when serving customers with food allergies in the US. International Journal of
Hospitality Management, 64, pp.11-20.
Youn, H., Hua, N. and Lee, S., 2015. Does size matter? Corporate social responsibility and firm
performance in the restaurant industry. International Journal of Hospitality Management, 51,
pp.127-134.