RISK MANAGEMENT IN THE

TOURISM INDUSTRY
 Ssssssss
OBJECTIVES:
01 02 03 04
Understand the Know the Know the Understand the
concepts and importance of different benefits of an
principles of RISK identifying the hazards in the effective risk
MANAGEMENT IN risks in the tourism communication.
TOURISM industry. industry
•Tourism companies are increasingly facing
incidents that involve risks for both
tourists and the tourism business.
•It is important to learn to address risk
management issues and reduce the impact
of crises and disasters
STAKEHOLDER:

Anybody (individual
or company) who
can affect or be
affected by the
strategy or project
of an organization.
CLASSIFICATION OF
TOURISM STAKEHOLDERS:

1. INTERNAL : Has a direct relationship

with the company.
e.g. employees, owners, investors
 CLASSIFICATION OF
TOURISM STAKEHOLDERS:

2. EXTERNAL : Those who do not have a

direct relationship but could be affected
by the action of the management.
e.g. local community, local government,
tourists and guests.
RISK IDENTIFICATION

Identifying the eminent risks based on the

inventory of potential hazards attached to
TOURISM and tourist related activities.
Risk Identification could concern:

1. Natural Hazards
2. Civil or political Hazards
3. Technological Hazards
4. Biological Hazards
Each hazard has the potential to impact a community and cause loss or
harm to that community or the environment.
SAMPLE HAZARDS IN THE TOURISM INDUSTRY
cyclone, storm surge, flood, tsunami, earthquake, mudslide, avalanche,
volcanic eruption

NATURAL HAZARDS
 CIVIL OR POLITICAL HAZARD:

• terrorism, sabotage, civil unrest, hostage situations.

 TECHNOLOGICAL HAZARDS:

• failure of technical systems relating to industrial sites, transportation,

infrastructure.
 BIOLOGICAL HAZARDS:

• Spread of disease amongst people or animals, pests,

contamination.
• Sources of biological hazards may include bacteria, viruses,
insects, plants, birds, animals, and humans. These sources
can cause a variety of health effects ranging from skin
irritation and allergies to infections
(e.g., tuberculosis, AIDS), cancer and so on
Factors in the Identification of the Nature of
Impending Risks:
1. Reason for the risk occurring
2. Frequency of the risk occurring
3. Duration of the risk
4. Speed of onset
5. Scope and Impact
6. Potential to Destroy
7. Criteria for determining the necessity of the risk treatment
8. Acceptable and tolerable criteria
9. Considerations for positive and negative risk combinations
10. How these risk combinations will be considered
2 Essential concepts of Risks
1. Inherent Risk – refers to the
exposure arising from a
specific risk before an action is
to be made by the risk
manager
2. Residual Risk – the exposure
arising from a specific risk after
the risk manager has made any,
and in case such action has
proven useful.
Basic Classifications of a risk management plan:

A. Preventive Plan B. Contingency Plan

 Risk Avoidance

Risk Reduction
Strategies
of Risk Transfer
Risk
Management:
Risk Retention
 RISK AVOIDANCE

• The complete elimination of risk by merely avoiding the activities that

are potential risks after rational consideration.
 Refers to reducing the risk level
RISK REDUCTION through minimizing either the
likelihood or the consequence of a
specific task through the
implementation of precautionary
measures, risk controls or treatments.
 Considerations of Risk Reduction:

1. 2. 3. 4.
Observance Use of safety Earthquake Qualification
of safety devices proof requirements
standards building/ (training)
proper waste
management
system
Personal Protective equipments:
TYPES OF PERSONAL PROTECTIVE EQUIPMENT:
1.RESPPROTEC 4. HAND 7. WORKING
TION PROTECTION FROM HEIGHTS
IRATORY

2. EYE 5. FOOT 8. SKIN

PROTECTION PROTECTION PROTECTION

3. HEARING 6. HEAD 9. OTHER PERSONAL

PROTECTION PROTECTION PROTECTIVE
EQUIPMENT
 RISK TRANSFER

Risks can also be partially or completely transferred to a third party.

The burden is shifted from one party to another, from one individual to
another, from an individual to an insurance company, or from insurers to
reinsurers.

Can be accomplished through:

 OUTSOURCING:

A process which commonly transfers a variety of

risks to a partner. This usually involves a contract
between the management and the provider. May
include penalties in case the project will not push
through.
DERIVATIVES:

Is a financial instrument whose value is derived from the value

of another asset, which is known as the underlying.
When the price of the underlying changes , the value of the
derivative also changes.
A derivative is not a product but a contract that derives its
value from changes in the price of the underlying.
Underlying asset e.g. stocks, bonds, commodities, currencies,
interest rates, market indexes.
CONTRACTS:

According to Boggs (2017), contractual risk transfer is a non-insurance

risk transfer mechanism that accomplishes the goals of risk financing
and risk control.
INSURANCE:

Investopedia (n.d.) has defined insurance as a contract being

represented by a policy in which an individual or entity receives
financial protection or reimbursement against losses from an insurance
company.
PRINCIPLE OF ADHESION:

The principle states that one party is left with no choice except to
adhere to the terms and conditions of the insurance prepared by the
other party.

Insurance is classified as a CONTRACT OF ADHESION. They are personal

contracts and thus, cannot be freely transferred to other parties.

The parties to the insurance contract are required to disclose

conditions affecting the risk of which he is aware, or the material fact,
which the applicant knows, and those which he ought to know.
RISK RETENTION

Planned acceptance of losses by deductibles, deliberate noninsurance,

and loss-sensitive plans where some, but not all, risk is consciously
retained rather than transferred.

Handling risk by bearing the results of risk, rather than employing other
methods of handling it, such as transfer or avoidance.
 Principles of Risk Communication:
Communication and consultation
are enabling activities which are
fundamental to risk management, Adequate and appropriate
communication and
and they must be undertaken at
consultation will also
each step in the process. A two- ensure that stakeholders
way process of internal and have a sense of ownership
external communication and of, and commitment to, the
consultation must be established tourism risk management
and maintained between decision- process.
makers and stakeholders and a
communication plan developed.
 Risk Communication:

Risk Communication is a socio-technical method among stakeholders to

seek process which leads to a better solution of an issue.
This is communication for the future possibility of danger and hazard.
It is essential to know the following before communicating a risk:
1. Who are the audience?

Knowing who the audience are, one can decide on the kind of language
that is needed to correctly convey the risk that is present in the
particular tourism activity or business.
 2. The credibility of the source of information:

Take steps to assure the public that all information across all the media
platforms are accurate and credible.
Reliable information can most likely influence the public perception of the risk .
3. Shared Responsibility

• Updating the public and making them aware of specific risks should
be shared by the risk manager and the national and local government
regulatory agencies.
• The media also play an essential role in the communication process.
4. Transparency:

This involves the openness and availability of the risk management

process for scrutiny and checking by interested parties and makes for a
more likely acceptance of the outcome of risk analysis.