Assessment Activity 1
Significance of reviewing existing risk management process, procedures, and requirements at the commencement of this process:
Starwood Hotels & Resorts Worldwide, Inc is one of the largest hotel industries in the world. According to McNeil et al (2015), before implementing strategies, the management needs to relate the procedures and requirements with the current situation for a positive outcome. Therefore, it is important to review the process that Starwood Hotels & Resorts Worldwide, Inc follows in risk management. As opined by Chance and Brooks (2015), risk is associated to different areas within an Organization such as business, financial, and operational. If one of the sectors collapses, the entire organization collapses too. According to Lam (2014), the reasons that outline the significance of the assessment are the following:
- Existing risk management process is important to analyze to understand if the management has identified the risk properly or not
- It helps to understand whether the employees are able to fight the risk factors or not.
- It brings out whether the external stakeholders are supportive or not.
- If the process shows any positive outcome, the management team can continue with the process in future situations.
Alhawari et al (2012) outlined that the management should focus on available time and resources, views of the stakeholders, risk perceptions, and the legal and regulatory necessities that can be applied.
Importance of Identifying the Scope of Risk Management:
Pritchard and PMP (2014) opined that the areas that should be analyzed to define the scope for risk management are the following:
- Risk management objectives
Once the management decides to chalk out the strategies for risk management, the strategy maker should define the scope for it and the limitations of the scope. According to Hopkin (2014), it helps in following ways:
- It helps to find out the risk management activities that have been carried out so far.
- It helps in developing a structure to initiate and control the risk management activities.
- It develops the basic knowledge about the organizational objectives.
- It helps in defining the criteria based on which risk will be analyzed
- It is useful in defining the components present in the structure that identifies and assesses risk management process.
- It is helpful to understand the environment in which the objectives are set.
Review of Specific Type of Documentation for Establishing Risk Context:
As opined by Teller et al (2014), risks are assessed based on some criteria and the context establishment involves setting of those criteria. There are different types of documents that are reviewed for the establishment of the risk context. Teller et al (2014) stated that it considers the following:
- Internal context: objective of the organization, project or activity should be understood. The managers try to find out any professional culture, total staffs, and capabilities of the staffs through assessing the current performance of the organization.
- External context: The managers try to find out the perceptions of the external stakeholders about the organization. Shareholders, investors, and customers are taken into consideration.
- Risk management context: The limits and scope of any activity is considered in this context. For example, risk analysis of a new project should involve the identification of the parameters to ensure an effective risk analysis. Identification of any legislation and policies are also considered.
- Develop the risk criteria: It involves the unacceptable and acceptable risk levels. Each activity of the process should determine who can accept risk and to what extent.
- Define the structure to analyze risk: It includes the categorization of risks which will be managed during the risk management process.
Setting of the Risk Management Objective:
The organization has analyzed various risk contexts and they have identified from the external context that the shareholders and investors should be considered. Now, the objective is to build a communication between the external stakeholders and the management of the organization. According to Haimes (2015), they should be encouraged to believe that the company has all the knowledge about the potential risk factors, therefore, the external stakeholders should believe in the organization’s ability to manage risk. Haimes (2015) opined that the company should identify the risks by answering the following questions:
- What can happen?
- How can it happen?
- Why could it happen?
According to Haimes (2015), risk may increase if the shareholders and investors do not rely on the company’s ability to prevent crises. Therefore, the objective should be to gain their confidence. Then the managers can evaluate the risk and treat the risk properly.
Significance of Gaining Support of the Employees for Risk Management:
According to Bromiley et al (2015), the participatory approach is significant to assess the employees who are responsible for working individually and together to achieve the organizational objective. Sadgrove (2016) has found that in Starwood Hotels & Resorts Worldwide, Inc risks may arise from various elements such as the ventilation and air conditioning system, electrical systems and heating, exhaust fans, water supply failure, use of pyrotechnics, laundry facilities to point out some. The employees are responsible for maintaining the facilities that Starwood provides to its customers. Therefore, their needs should be taken into consideration if the management is willing to prevent crisis situations. If the employees are given the knowledge about potential risk factors and if they are involved into the risk management process, they will ensure the safety of the customers. Also, they will work cooperatively with the organization.
Risk Management Plan:
- Scope: Hazard free and customer friendly environment can be achieved.
- Internal and external stakeholders’ priority ranking: Some employees should be given the knowledge about how to use fire extinguishers properly. However, the external stakeholders have no issues right now.
- Political, economic, social, legal, technological, and policy context: Starwood is a renowned hotel and they have their headquarters in United States. At present, they have no political or economic issues. The management should focus on the technological advancement, which also involves time-to-time maintenance of the equipments.
- Goals and objectives for scope areas: The objective is to satisfy the customers and provide them with good facilities. Therefore, the technical aspects will be taken into consideration for an improved condition.
- Success factors: Starwood has a good reputation and all their external and internal stakeholders are willing to cooperate. Therefore, the objectives can be achieved.
- Communication process with all: The management team of Starwood will organize training for their employees to make them able to handle all equipments properly. They will make a corporate film that includes the visual description of how to use technology fruitfully.
Process to be highlighted
The steps are the following:
- Identify the risks: local government issues, high competition level, and low financial profit in the Victorian market
- Analyze the risk: Identified political, economical, operational risk factors can create a crisis that may harm the company’s business in Victoria.
- Evaluate the risk: All the risk factors are acceptable. Therefore, the senior management should try to develop their external relations, should try to develop product quality for better profit and understand the environment and condition of Victoria where the company is operating.
- Treat the risk: political condition should be given the highest priority; otherwise, they will not be able to continue with their business
- Review the risk: At first, try to rectify problems and if they are not solved easily, try to take necessary measures
Senior Management’s Responsibilities:
The senior management could have thought that the financial aspects are not the only issues here. Competition can generate from poor operational and managerial level too. As Vazquez (2014) opined even, the political aspect should not be overlook because of the involvement of government issues. However, it is the political unrest that caused the shutdown of the stores. Perhaps, the organization did not paid attention to what the employees perceived about the risk factors. The company failed in selecting the proper context of the risk and also limited their scope. Risks, however, can emerge from any external or internal factors.
Alhawari, S., Karadsheh, L., Talet, A.N. and Mansour, E., 2012. Knowledge-based risk management framework for information technology project.International Journal of Information Management, 32(1), pp.50-65.
Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk management: Review, critique, and research directions. Long range planning, 48(4), pp.265-276.
Chance, D.M. and Brooks, R., 2015. Introduction to derivatives and risk management. Cengage Learning.
Chapman, R.J., Operational Risk Management. Simple Tools and Techniques for Enterprise Risk Management, Second Edition, pp.267-308.
Haimes, Y.Y., 2015. Risk modeling, assessment, and management. John Wiley & Sons.
Hopkin, P., 2014. Fundamentals of risk management: understanding, evaluating and implementing effective risk management. Kogan Page Publishers.
Lam, J., 2014. Enterprise risk management: from incentives to controls. John Wiley & Sons.
McNeil, A.J., Frey, R. and Embrechts, P., 2015. Quantitative risk management: Concepts, techniques and tools. Princeton university press.
Pritchard, C.L. and PMP, P.R., 2014. Risk management: concepts and guidance. CRC Press.
Sadgrove, K., 2016. The complete guide to business risk management. Routledge.
Teller, J., Kock, A. and Gem?nden, H.G., 2014. Risk management in project portfolios is more than managing project risks: A contingency perspective on risk management. Project Management Journal, 45(4), pp.67-80.
Vazquez, R., 2014. Five steps to a risk-savvy culture. Risk Management,61(9), p.10.