RISK

MANAGEMENT IN THE TOURISM 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
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

1. NATURAL HAZARDS
cyclone, storm surge, flood, tsunami, earthquake, mudslide, avalanche, volcanic eruption
2. CIVIL OR POLITICAL HAZARD:
• terrorism, sabotage, civil unrest, hostage situations.
3. TECHNOLOGICAL HAZARDS:
• failure of technical systems relating to industrial sites, transportation, infrastructure.
4. 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

Strategies of Risk Management:
1. RISK AVOIDANCE
The complete elimination of risk by merely avoiding the activities that are potential risks after
rational consideration.
2. RISK REDUCTION
Refers to reducing the risk level 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. Observance of safety standards
2. Use of safety devices
3. Earthquake proof building/ proper waste management system
4. Qualification requirements (training)

TYPES OF PERSONAL PROTECTIVE EQUIPMENT:
1. RESPIRATORY PROTECTION
2. EYE PROTECTION
3. HEARING PROTECTION
4. HAND PROTECTION
5. FOOT PROTECTION
6. HEAD PROTECTION
7. WORKING FROM HEIGHTS
8. SKIN PROTECTION
9. OTHER PERSONAL PROTECTIVE EQUIPMENT


3. 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:
a. 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.
b. 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.
c. 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.
d. 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.

4. 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.
Principles of Risk Communication:
Communication and consultation are enabling activities which are fundamental to risk management,
and they must be undertaken at each step in the process. A two-way process of internal and external
communication and consultation must be established and maintained between decision-makers and
stakeholders and a communication plan developed.
Adequate and appropriate communication and consultation will also ensure that stakeholders have a
sense of ownership of, and commitment to, the tourism risk management process.

• 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.
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