The Top Five Business Risks for the Hospitality Industry

Are you gambling with the profitability of your company?

All businesses take risks; otherwise you could not do business. But risks need appropriate controls or businesses will have problems. The top risks for the hospitality industry are:

  • Theft of product or services
     
  • Inadequate money control
     
  • Poor food or service quality
     
  • An unsafe workplace
     
  • Inability to identify a market niche

    Another way to think about reviewing your risks is to make a list of what business challenges keep you awake at night. These will probably be your biggest risks. To control these risks there are some industry standard processes you can use or you can use more innovative solutions, depending on the how much risk you want to accept and your business model.

    How do you know your business risks?

    At least annually, as part of the planning process, hospitality managers should make a list of the risks the business is exposed to, worse case, if they have no controls in place at all. Some risks change regularly based on the market, the economy, technology, regulations, etc. For instance, the hospitality industry faced significant strategic risks after 9/11; many businesses developed new marketing plans to address those risks. Other risks may remain pretty much the same from year to year, or they may change as your business grows and changes. It is important to take a look at new or changing risks and monitor old risks to make sure you have the appropriate controls in place that suit your business. This review won’t make the risks go away, but it will help you decide how much risk you want to take and provide a reminder to update controls if needed.

    How much risk is acceptable?

    Some business managers are willing to take more risk than others, and some business models are riskier than others. The important thing is that you can make the choice about how much risk you want your business to take and plan your business and processes accordingly. You don’t want risks sneaking up on you.

    Do you have good theft detection processes to deal with loss of product? Or are bottles of wine and food walking out your door? Do you have an employee meal policy? How are bar tabs controlled? Do you have controls for coupon offers?

    Are there ways your business can control for these risks?

    For each risk, think about ways you can prevent it. For cash management, are good ticket control processes in place? Are you are getting deposits to the bank quickly? For market risk, are you looking at how your business compares to other hospitality businesses in terms of price, product, and service?

    Do your controls need to be updated?

    When you take a look at your risks and controls, are there any risks that have no controls? Put together a plan to get those risks under control. If this plan will take significant time or resources to put into place, you may want to create short and long term solutions. Has your business changed or grown significantly in the last year or so? Do the controls you have in place still work well for you or are updates needed?

    Don’t let risks sneak up on you. Make risk assessment and review of your controls part of your business planning process. Once you know the risks your business can face, you can build controls that will work for your business and help your business grow and thrive.

    Outside the Lines, Inc. can help you identify these risks, put industry standards and new innovative controls in place. Call 707.933.0687 for more information.

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