Evaluating Three Major Dimensions Of Risk Management

Answer :

Risk management

Introduction

Rapid changes and developments in all spheres of people’s lives  force different types of business activities  operate harder .Modern enterprises have  not only  move with the times but also be able to  predict future uncertainties and manage the potential risks  in order to avoid future challenges and minimize profound consequences (Hoyt,Dumm & McCulloughLouh, 2010).The main reason of the necessity to access the risks  in advance in a  today’s competitive environment is a mutual correlation relation between business operation and  the quality of the service, relationship with customers (Patil,Grantham & Steele, 2012).

One of the fastest growing businesses in the world economy that tend to   access the risks ahead and build the business strategies accordingly is hospitality industry (Bharwani, Mathews,2012).The main reason of this trend is high level  of sensitivity to all external and internal factors and willingness to gain a high competitive advantage along with business resilience. In order to maintain the high position in the market and deal with all challenges (Jauhari & Sanjeev, 2012), this type of business tends to shift its focus from reacting the emergency situations, to analysing and assessing risks while  building their business strategies (Bharwani, Mathews,2012). Risk management encompasses the set of practices that used to manage risk (Besner & Hobbs,2012) and helps to identify the potential risks in advance ,analyse them practically and take necessary steps to reduce the consequences .(lecture notes Ref)

The main purpose of this essay is to critically evaluate 3 major dimensions of risk management: legal, ethical and sustainability dimension .Each dimension will be presented consistently showing the importance of itself and based on living case examples. Since the hospitality industry encompasses a broad range of different fields such as lodging, event planning, tourism each example will be accessing dimensions within the different contexts. In the end, the essay will summarise the key points of discussions and demonstrate the future implications of risk management theme for travel and tourism.

Legal dimension

In today’s life more and more businesses are shifting their focus from   creating the benefits towards the society (Beck, 2012) to avoiding the harm (Mythen, 2004). In tourism environment people partially or completely neglect the law for their own benefits. The main reason of neglecting this

Thus, while starting then business owners have to consider all legal requirements. Compliance with policies and procedures will help business not just to prevent serious penalties but also help organization to prevent all the possible risks.. A range of legal requirements may affect your business. 

3 major dimensions of risk management: Legal dimension 

There are certain laws pertaining to every industry and those that guide different countries travel business. There are standardized procedures to perform in a certain manner to preserve the sentiments of the host country and the travellers visiting. The travel laws are those which have a direct impact on the travel business and require attorneys that specialise in this particular zone.  It comprises of contract law, between the countries and the people travelling, the employment law, laws to promote and protect the hospitality procedure, regulatory and antitrust laws (Cui, Liu, Chang, Duan, & Li, 2016).  The industry must also posses the knowledge of the international agreements and the treaties because there are extensive things a traveller can do during their visit. For example, a traveller travelling to New York City can explore sound and night life activities, sights. However, in some lesser developed cities probably, the natural attraction, forest and heritage would be the prime attraction which would need certain laws to support and preserve them (Tseng, & Wang, 2016).  The local employees and the people are therefore responsible to maintain the attractions and the activities in accordance to the local culture and values, requiring a legal back support, regardless of the nature of the activities such as, a concert, any sport event, movies, theatre festivals, protecting the museum and preserving the historical monuments and other setting natural or manmade (Karl, 2018).  These activities comes under a variety of legal contracts and punishments for those negatively impacting the heritage sites and also laws for those travellers being hurt in the host place to protect their interest as well. For example, a traveller who booked a ticket online from Francisco to stay for a night and travel all day to New Jersey and if the hotel or the guide fails to provide the services, information as promised, it becomes the duty of the New Jersey court to take an action against the hotel to protect the interest of the traveller and to protect the values of the country (Williams, & Baláž, 2015).  Another example followed probably would be pertaining to the use of words and their literal meaning in different nations, for instance, first class in US has a different meaning than First Class in America. Most travellers might take it differently in US than the American travellers. There could be serous penalties for the business and for the travellers; therefore t is important for the nations, the travel agents and the travellers to understand the legal requirements to be followed beforehand (Armenski, Dwyer, & Pavluković, 2018).

Ethical dimension 

Good ethics necessitate good risk management and similarly, good risk management is possible because of good ethical practices in travel and tourism business. The ethical dimension in the tours and travel industry is accompanied with the choice of selection the options based on its right and wrong outcomes. At the onsets of which, there are two aspects to ethics and risk management being discussed in the literature, first, the people who are representing the firm in one or more ways must inculcate ethical practices. Second, the organization in order to stay strong on ethical grounds, the people representing the organization must be able to manage the risk. For instance, if an employee or any person associated thereof, misrepresents the products and the services, the organization may suffer with the spoiled reputation and lost market shares. Another example would be, if the employees experience unethical behaviour and treatment by the superiors and the bosses, the employee may lose motivation to perform; his performance may decline, impacting the overall productivity and his vitality. T has been observed that a number of people leave jobs due to the dissatisfaction with the ethical practices at work. Risk management therefore is imperative for every organization to act ethically, the risk may in involve the smaller task such as disposing the trash at the right place to not harm environment and roads and avoid environment pollution, prevent distrust amongst people (Mohammad, Chelliah, & Haron, 2016). The employees working in an organization to improve the risk management must be honest with the organization, fellow employees and the insurers while giving the information to them to create an ethically strong image, to build a good reputation amongst the underwriters. This will also help the organization gain the good premium rates. It is observed an ethical business attracts more shareholders and customers in all forms are associated with the business. If a company fails to expose their losses is again considered as an unethical practice. The people involved in sharing the outcome, must also be involved in sharing the risk and in decision making. The failure in loss exposure demonstrates the organization’s careless conduct leading to law suits, a loss of reputation and falling share prices. A company’s long term insurance protection can be hurt because of the short term mistakes made by the risk management executives by hiding and misinterpreting the information pertaining to the risk management. 

The most ethical company being recognized is Starbucks, despite the fact that the company uses competition crushing practice; the company still manages to remain on top because of the ethical practices they follow to serve the society, the company puts in efforts to stay environmentally active, the company has started using less water and recycles paper for the cups (Mossaz, & Coghlan, 2017). The customers bringing their own cups are given some discounts to promote ethical practices to support the environment and rebuild their image. Starbucks is also involved into giving the complete health insurance benefit to the baristas (Anthony, 2016). It is also imperative for the industry to support in corporate social responsibility activities which are directed towards serving the lost values and culture of the nations and the host places. Also it is important to uplift the grass root level culture and living standards of the people (Font, & Lynes, 2018).

Sustainability dimension 

With the changes in time, Tourism Company has been gaining momentum throughout the time. It is analysed that sustainability dimension of this company has been showing the key information and details of business long term affecting certain and uncertain factors. In order to sustain the tourism business, there is need to align the interest of the society and tourist with the ramified changes in economic growth. This will not only strengthen the economic value but also result to tourism development in effective manner.  When the organization’s profits are aligned to the organization’s environmental policies, it is said to be following a sustainable risk management strategy. The objective of the sustainable risk management is to efficiently align them in order to sustain and grow and at the same time protect and preserve the environment. Any organization is responsible to follow the global and the country specific national regulations to adopt sustainable risk management practices. The process starts with identifying the effects that the business practices are having on the environment and finding to execute the ways to minimize the same (Weaver, & Jin, 2016).  Every department working is responsible to manage the risk from a sustainable dimension. For example, the IT department is responsible to provide automated auditing capabilities to report the practices being followed and their impact (Williams, & Baláž, 2015).  Similarly it helps in identifying the loop holes in other departments such as supply chain, production and operation in travel and tourism. For examples, the issues pertaining to these departments include the availability and use of renewable energy sources, the amount and rate of depletion of the non renewable resources. In travel and tourism the risk management concerning the sustainability dimension is directed towards managing the adverse effects of the tourism disastersn (Hall, 2015).

Sustainable tourism should involve the following parameters and guidelines to be followed. 

• The tourism company must be able to optimally utilize the non renewable resources in order to generate the environmentally optimized practices. The ecological processes already in place must be maintained, the tourism industry must make sure that it preserves the natural heritage of the places and their biodiversity also stays protected.  
• It is important especially for this industry to protect the socio cultural authenticity of the places and the communities the travel industry is hosting or visiting. The people must respect the cultural values and promote the norms. 
• Apart from the factors concerning the external environment of the place, the industry must also work towards providing the equal income earning opportunities to the host countries and communities. The stakeholders must gain the equal and fairly distributed socioeconomic benefits (UNWTO, 2015).
• The focus must also be towards uplifting the community from the grassroots level to eradicate the poverty issue. 

However, from the review it has been understood that a continuous and combined effort is required in order to achieve sustainable tourism business, and to achieve the same it is important that the tourists guides, the solo travellers and the tourist must leave a positive impact by preserving, protecting and help regaining the natural environment, lost socio cultural values and heritage at the same time ensuring the tourist satisfaction and utmost experience (Becken, & Miller, 2016). 

Conclusion

From the literature review it has been understood and observed that in order to remain in business and protect the values of the stakeholders and the environment, it is imperative for the travel and tourism business to function in the most ethical manner, while following the laws, rules and regulations of the host country and their own country to perform a sustainable business. The business must be able to adapt to the changing requirement of the tourism industry and the destination places. The resources must be used in the most efficient manner while being transparent ethically and legally to all its stakeholders to gain and retain their interest. The industry is completely customer driven, therefore to protect the interest of the places and the interest of the travellers become the prime concern of the industry.