MNG012222-2017-2 Facility and Risk management for Hospitality Operation

Executive Summary

The report  define the importance of risk specially in the hospitality industry. The restaurant business or a café  has direct interaction with the customers’ and hence it needs to assess the risk and manage them properly in order to continue its business operations. 

The report identifies the risk associated with the Parisi café at the Parisi Food Hall at Roe bay in NSW.  The risks identified are ranked on the basis of their likelihood and impact on the business. The report also recommends ways to reduce and manage the risks so  that the business is least affected by these risks. 

The report thus presents the venue risk analysis (VRA) for the business in the report. 

Introduction

Parisis’ Food Hall is a popular destination for the food lovers as there one gets very fresh fruits and vegetable, including deli, café, kiosk and fresh groceries.  Large no of people visit the place and it is a big place. Since the cafe is at rear of the Food Hall, they foot fall is more than that would have been for a standalone cafe.  Risk is inherent to every business and this is more important in the hospitality industry because of direct interaction with the people (http://parisisfoodhall.com.au/cafe.php). 

The report reviews the venue of the Parisi café and performs Venue Risk analysis. It also presents conclusion of the risk associated with the venue and recommends some ways to reduce the exposure.

The notion of Risk 

Risk the uncertainty associated with certain activities due to some unforeseen event in future.  Though risks cannot be eliminated from the system completely, the identification of risk can help the management to manage the risks and act promptly on occurrence of the risky event. Thus the impact of the risk can be minimized. 

Types of Risk

Risk associated to any business can be systematic risk or unsystematic risk. Systematic risks are the market risk and the major factors leading to these risks are the economic factors, like the business cycle, inflation rates, industry phase, etc. The systematic risks affect all the business in a similar ways to some degree. Systematic risk cannot be avoided if one is in the business and hence are also termed as non-diversifiable risks. On the contrary the unsystematic risk is the risk associated with the single assets or firms and is unique and specific to a business firm. The unsystematic risk can be managed and controlled by effective risk management by the business and diversification to a large extent (Chen, M.S., 2013).

Venue risks are the risk associated with the location of a business and hence are the unsystematic risks associated with the business. The venue can be managed by performing detailed risk analysis and making risk management plan. 

Importance of Risk Management

Risk management is important as it helps the management of the firm and it employees to be prepared to face the uncertain situation and address them properly.  Risk management is all the more important in the hospitality industry because of the interaction with the people. Therefore an effective risk management policy/program is very important for the hospitality industry. The risk management strategy helps the firm to identify the risk the business is prone to, analyze them and assess their impact on the business, and make appropriate plan to avoid the risk , mitigate them or minimize their negative impact. 

In reference to the tourism and hospitality industry, risk management is important for two main reasons (Risk Management and Legal Liability):-

1.  To keep the employees and guests safe from any injury and 

2. To protect the business operations from loss of asset and profit. 

The hospitality industry is subject to risk from various sources like risk to the physical assets of the business, harm to the staff of the business, harm to the customers and legal ramifications to them, accidents or natural disasters   or the cyber treats due to excessive use of debit/credit cards in making payments. Further the restaurants business in hospitality industry is further exposed to risks like burn due to work with fire or loss of payments on account of any customer leaving without making the payment. Some other risks associated with the hospitality industry are related to customer care. Falling sick of the customer while in the restaurant due to some bacterial infection on consumption of food by them, or getting hurt in some accident are also huge risk faced by the restaurants and cafés.

An effective risk management strategy is essential for members of the hospitality industry. Risk management helps employees to identify, analyze, assess, and hopefully, avoid or mitigate risks coming from a variety of sources, such as financial upset, legal ramifications, accidents, natural disasters, data or cyber security breaches, and many more. 

Risks associated with Cafe

The variety of risks that are associated with the restaurant. They can be broadly classified in the following categories (Reiman, M., 2017): 

i. Risk associated with physical assets: the property and physical assets of the restaurant are subject to risk like fire, accident, theft or normal wear and tear. The restaurant deals with lot of consumable goods like groceries and edible stuff which has short shelf life. Hence there is lots wastage or subject to loss. 

ii. Risk associated with staff: The staff and employees of the restaurant staff are at risk from accident in the restaurant and injury while on work. 

iii. Risk associated with customers: Since the restaurant industry is direct interaction with the customer, the business is subject to risk of accident, harm or infection due to food intake  to its customers. 

iv. Financial Risks: The restaurant business is subject to financial risk like theft of money, robbery, customers not paying the bills, etc.

v. Cyber/ Information risk: Since the customers at restaurant pay through debit and credit cards, the business is subject to cyber or information theft risk. 

The risk being the uncertain events cannot be identified completely. Thus the business should attempt to identify as many risks as possible. 

Venue Risk Analysis 

The location of the business like a restaurant is very important. Thus the venue is an important factor for running the effective restaurant business. The risk to location or venue of the business depends upon the surroundings of the business to a large extent. The venue risk analysis is performed in this section.

The risk analysis requires identification of risks, ranking of the risk and laying down the risk management process. 

Risk Ranking System (RRS)

There are innumerable risks that a business is subject to. Some risks can be very frequent while some can be rare. Some risk can have severe impact on the impact and some may affect the business very slightly. Similarly the risk management also cost the company; some risk may require heavy investment to manage them while some risk can be managed by following simple steps of caution.  The extent to which the firm should manage the risk and spend on risk management depends upon the ranking of the risks.  The risks which are ranked high can affect the business significantly and the firm should spend time and money in managing those risks. Therefore the firm needs to formal risk assessment policy to assess the impact of the risk on the business. The steps in risk ranking system are as follows (Ranking Risks: Rare to certain, Negligible to Catastrophic):

i. Identify the risk related to the business

ii. Define the likelihood of the risks from among rare, less likely, likely, very likely, almost certain and their consequences on the business from among negligible, minor, moderate, major and catastrophic.

iii. Make the matrix to identify the risks which are intolerable for the business after ranking the risks. The risks which are high ranked are considered for management purpose. 

VRA of Parisis’ Café

Parisis Café is located at Parisi’s food hall is located at 19-21 Dover Rd, Rose Bay NSW. The café is in the rear of the food hall.

Source: https://www.zomato.com/sydney/parisis-food-hall-cafe-rose-bay/photos

The venue risk analysis reveals the following risks:

i. Risk to Physical Assets

• The café is located at the rear of the food hall. The assets of the café have a high risk from accidental fire. The café uses fire for cooking and has wooden furniture which is highly inflammable. Hence the risk of fire is high there.
• The café is part of the food hall which is visited by number of people; the food hall is famous for its fresh vegetable, fruits and hence has a huge footfall.  The physical assets of the place are subject to rough use by the people visiting the café and hence will have high wear and tear.
• Risk of theft and loss of assets is high in the café due to location in one of the busiest food mall.  Pickpockets and thefts are common at places of crowd.

ii. Risk to employees and guests

• The place has a large number of visitors coming to the place, thus the place is prone to infections and allergies which the guests might be affected to. Thus the employees and guests at the place are subject to high health risks.
• The place is in the market location and is located in heart of Rose bay. Any disturbance in the city due to riots or political disturbance is very likely to affect the place. 
• Risk due to fire or accident like stampede. The place is highly crowded and has cooking section which involves usage of fire. The employees and guest are subject to risk of accident due to fire. The rear position of the cafe makes it more prone to the risk and a difficult place to escape. 

iii. Risk to financial assets and data

• The risk of loss of cash or theft is highly possible there due to the location of the café and huge number of people visiting the place. 
• The data risk due to loss of debit/credit of the customer on account of theft by the visitors or the employees of the café is also there.
• Cyber theft is a high risk with the use of technology. The computer system of the café is subject to cyber theft which might result in loss of firms as well as personal data of the customers. 

The VAR for showing the impact of the risk and means to manage the risks is as follows:

Conclusion

It is concluded from the VRA that the risk to physical assets and life of the employees and clients if high due to accidental fire. The place has use of fire, lots of people visiting the place and has wooden furniture that is inflammable. Thus it is very high ranking risk for the business.

The risk to loss of financial assets like cash and personal information is also high for the business. The use of digital payment system technology has exposed the business to this risk highly. Further the location of the café in food mall ensures people coming to the place for various purchases and hence more use of cards. The place is visited by lots of people and hence the possibilities of theft and loss are also high

Recommendations

It is recommended that the Parisis Café at Parisi food hall take proper precautions to cover the risks.  Firstly, the staff should be trained to meet the situation of crisis. The emergency contact umber should be in display for easy reach. Secondly, the staff should be trained in operating the fire fighting equipments. The exit door and refuge areas should be kept clear and clutter free.

Thirdly, the business should have appropriate insurance cover to  cover up the business as well personal loss in case of any accident.

The firm should maintain cleanliness and should take care of sanitation to avoid any food born bacterial infection or allergies to the employees and guests. There should be security personnel at the entrance door to avoid any inebriated person entering the café or any person running out of the café after performing immoral act.

The risks are everywhere and one cannot avoid the risk completely. However proper risk management plan can help the business to reduce the impact of the risk significantly.