RISK MANAGEMENT
Treasury (2004) state that risk management includes all the procedures involved in identifying, assessing and judging risks, assigning ownership, taking actions to mitigate or anticipate them, and monitoring and reviewing progress. Francesca (2011)explain that risk management has received wider consideration in the hotel industry in recent years, as economic crises, health scares and natural disasters have garnered as many headlines as terrorist attacks. These and other threats have necessitated a more holistic, long-term approach in the discipline, according to industry leaders during the Institute of Hospitality conference at the World Travel Market 2011.
There are three levels of risk management, said by (Paraskevas, 2011):
• Operational risk that we face day to day in the operation of hotels;
• Project risk when we start building a new hotel and choosing where we are going to expand; and
• Strategic risk that has to do with decisions about risk the company faces when it pursues its strategic objectives.
In Cresta group of hotels risk management is carried out by senior management under policies approved by the board of directors. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the group’s financial performance (Cresta group annual report, 2012).
How does Cresta group minimize potential adverse effects on the financial performance?
Cresta group annual report of (2012) states that the group`s approach to managing liquidity is to ensure as far as possible that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group`s reputation.
ReplyDeleteThe Group (Coca-Cola Hellenic’s risk management) is exposed to market risk ascending from changing interest rates, mainly in the euro zone. Occasionally they assess the desired mixture of fixed and floating rate liabilities and modify the interest payments based on the desired mixture of debt. They manage their interest rate costs using a mixture of fixed and floating rate debt, interest rate swap and option cap agreements. Although they have no set target for the mixture of fixed to floating rate liabilities, factually they have been more exposed to floating rates as this has tended to act as a natural hedge against their overall business risk (Cola Hellenic, 2014).
ReplyDeleteAccording to Cresta group annual report (2013) the directors have considered the nature of the Group’s business, with regard to the risks to which the business is exposed to, the likelihood of such risks occurring, their potential impact and the costs of protecting against them. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group.
ReplyDeleteThat's very true Langanani in Cresta group annual report of (2012) mentioned that they also continuously monitor defaults of customers and other counter parties recognized either individually or by group, and incorporates the data into credit risks controls. If customers are independently rated, these ratings are used. Or else, if there is no independent rating, credit control assesses the credit quality of the client, taking into account its financial position past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilization of credit limits is regularly monitored. In accordance with standard practice within the industry, the group may require repayment of standard charges prior to booking confirmation thereby eliminating portions of credit risk prior to rendering services. The balance of dues from guest is settled through bank transfer, in cash or using credit cards. The most significant dues from guest arise from transactions with agents. The group carefully vets new agents prior to extending credit terms, and deals mostly with agents with whom it has established reliable long term relationships.
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