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Graduate School
ADAMSON UNIVERSITY
Risk Management
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Introduction
risk. One tool to solve this is the concept of risk management. Risk
the risk (The Economic Times, 2015). Since there is a constant presence
of risk, the only way to solve this is the anticipation of risks and utmost
usual environment for not more than one consecutive year for leisure,
aims to provide people which we often call as tourists, the activities that
are not part of their usual routine and are usually done on places they do
not reside for a limit of one year. The main objective of the tourism
requirements of the tourists are called the travel trade businesses. Travel
trade businesses refer to people and companies that resell travel products
that they have bought and/or reserved from other parties. It is also the
collective term for tour operators, wholesalers and more particularly, the
travel agencies. (TTG Media Magazine, June 2010 Ed.; p.23). The travel
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ADAMSON UNIVERSITY
trade entities therefore serve as the middlemen or third-party entities
travel agencies are similar with other agency businesses which contract
commission.
“What are the market, and operational risks involved?” and “How to
solve the market and operational risk for a travel agency business?”.
problems determined.
G R A D U A T E S C H O O L
ADAMSON UNIVERSITY
Market Risk
for products, and pay for production inputs (Crane, 2014). In the
Philippines, market risk may mean as the possible uncertainty that may
event in the business occur (Salcedo & Cruz, 2011, pp. 102-104). This
means that the occurrence of market risk is visible on both local and
international setting.
the travel agency. Based on the study of Santos (2014), Travel agencies
ownership.
G R A D U A T E S C H O O L
ADAMSON UNIVERSITY
How to Identify Market Risk?
Based on the study of Lawton and Weaver (2011), the best method
The trend in the demand reflects the condition of the market. Their
This means that once the strategy fails, the demand for the products and
the services of the business will be highly affected. These results have
Shankar (2013) mentioned on his analysis that though the demand for
expenditure.
The research of Lim (2012) on the other hand gives credit to pre-
complex and complicated business flow that everything should come into
preparation and product development. The type of tour package that will
G R A D U A T E S C H O O L
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According to the report of Travel Industry Association of America (2010,
p.14), the anticipation of the travel agency on what a walk-in client may
tourists.
might also avail the services of the travel agency. The result of
evaluation determines the possible flaws that might affect the positive
belief was seconded by the study of Dela Pena (2010) which cited that
the market risks involved in travel agencies are classified into two: risk
The most common risk on travel agency and tour operations is risk
G R A D U A T E S C H O O L
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(2011) emphasized it, testimonials from previous clients greatly affect
offering as a type of market risk. This is because once the travel agency
offers a tour package that is not even interesting on the eyes of the
general tourists, no clients will transact to the travel agency. This is also
pp. 247-248) as once you don’t have to offer what the tourist wants and
minimize market risks. These are the diversification of tour package and
travel agency sells a varied list of tour itineraries for the clients. Brown
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(2015) stated that diversification minimizes any possible market risk.
Santos (2013) and Manzano (2015) supported this solution, as giving the
tourists several options will make them build the interest for travel
risk. The type of risks that can be solved through this are those that
The main solution for solving market risk according to Cho (2012)
since pleasing the clients or the tourists upon the delivery of the service
that they avail won’t necessitate these anymore. As how Kotler (2010)
explained it, trying to provide the service that is worth the money that
these tourists paid for gives them a positive and lasting impression of the
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Operational Risk
events (JP Morgan and Chase Journal, November 2014 Issue, p.17). The
often present with other types of risk. It can even overlap other types of
risk (Salcedo & Cruz, 2011, pp. 105). This signifies the importance of
can damage the entire system of the business. As how operations is being
Claravall (2014, pp. 250-254) in his text “ Travel Agency and Tour
skills for scheduling and itinerary execution. This is why travel agencies
in the country will not implement a tour package without the provision of
the tour guide, the marketing officer and the tours department manager.
G R A D U A T E S C H O O L
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How to Identify Operational Risk?
the actual execution of the system. In travel agency and tour operations,
actual tour to spot possible risks in the execution of the tour package.
threats. Tree Diagram assesses risk through rooting possible causes and
trying to mitigate these possible risk causes. The FME Analysis is a type
of cause and effect analysis but qualifies the causes of failure into
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What Are the Operational Risks Involved?
two groups: risks in planning failure and management and risks in the
about by the failure of the operations staff to consider the essential tour
mistake means a deficiency in the details of the booking that might affect
quotation which will give the travel agency a loss in terms of profit.
The risks in the actual conducting of the tour are the unanticipated
events and occurrences that may pop-up out of nowhere during the actual
events, since unexpected, are often the test of the ability of the travel
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agency to deliver what they promised to their clients despite the
unanticipated circumstances.
only employee safety but also client or tourist welfare and will result in
agency would require from third party providers which can be one of the
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surely be disseminated by several government and private entities or
organizations.
development, itinerary planning and tour conduction will hone the skills
of the travel agents to prepare what can be prepared and to remedy the
assessment tools will also help the operations function to fair well
Travel agencies, being one of the major travel trade businesses, are
prone to risks. Managing these risks is always a challenge for all the
the tour package components which were availed by the tourists. Both of
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these risks are related in a sense that operations may dictate the post-
the use of not only one of the identified techniques but rather all of the
business.
generates rapport and trust that might generate positive word of mouth
will not eliminate all the possible risks but rather mitigate and control
critical aspects and functions. Though they may require distinct risk
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management strategies, the operations and market risk protection should
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References:
Philippines
Dolnicar, F. & Laesser, T. 2012. Travel Agency Marketing Insights
Switzerland.
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Jacoby, J. and L. B. Kaplan. 2012. The Components Of Perceived Risk
Ed.
Lawton, A. & Weaver, B. 2013. Demand Forecasting and Analysis: A
Philippines
Moharrer, M., H. Tahayori, S. H. Z. Amir Albadavi and H. Perzon .
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Santos, B. 2014. Research on Marketing Strategies and Risk
College, Manila:Philippines
Shankar, V., A. Smith and A. Rangaswamy . 2013. Customer
175.
The Economic Times. 2015. Bennett, Coleman & Co., Ltd.
Travel Industry Association of America. 2010. Economic Review of
Issue, pp.14-15
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