Addressing Risks in Tourism

In this self-paced course, tourism professionals in management positions will explore the challenges and benefits of resilience in tourism. You will learn about relevant aspects regarding risk assessment, how to use a risk matrix and how to reduce the impact of hazards. 

Who is this course for? 

The course is intended for tourism professionals in management positions, and anyone interested in the topic.

What will you learn? 

• You will learn how to identify and prioritize different types of hazard
• You will learn how to evaluate and manage risks using the concept of a risk matrix
• You will learn how to reduce the impact of hazards by adapting to changes

 Keywords: Sustainability, tourism, resilience, hazards, risk matrix, change

 

Introduction to Addressing Risks in Tourism

Lesson 1: Introduction to Addressing Risks in Tourism

Description

Welcome to the third learning unit in the course, Resilience in Tourism. This learning unit is about how to correctly assess and address risks.

A disaster occurs when hazard meets a high level of vulnerability and exposure. A hazard alone does not lead to a disaster because we can manage and mitigate or reduce risk. Natural hazards especially occur and if these cannot be influenced directly, preparing for them by reducing exposure and vulnerability reduces risk and therefore the likelihood of a disaster. These aspects are explained and highlighted in more detail in the second learning unit of this course series.

Conducting a risk assessment can help identify and classify risk. A risk assessment is a process that helps identify and prioritise risks and is important for businesses as well as holiday destinations generally. 

The process of a risk assessment is divided into several steps, which we’ll look at together in this learning unit, starting with the identification and prioritisation of hazards through the evaluation of risks to the addressing of these risks.

In order to build resilience and reduce the impact of risks, it’s important to adapt to change. This will also be the topic of this learning unit.

I’m looking forward to delving deeper into this topic with you. 

So, off we go.

 

Risk Assessment

Lesson 1: Identify and prioritise hazards

Identify hazards

The first step is to identify all relevant hazards. Consider both internal and external hazards:

Natural Hazards

• Meteorological hazards (flooding, strong storms, extreme temperatures, droughts) 
• Geological hazards (earthquakes, tsunamis, landslides, volcano) 
• Biological hazards (viruses, bacteria, animals including insects etc.) 

Men made Hazards

• Accidents (workplace accidents, hazardous material accidents) 
• Intentional acts (strike, riot, kidnapping, terrorism, cyber attack, robbery) 
• Information technology (loss of connectivity, failure of technological systems, data loss)
• Utility outage (Infrastructure failure or damage, no access to required resources such as water, fuel, electricity or gas)

Workplace-Specific Hazards

• Chemical (environmentally harmful substances) 
• Physical (environmental factors that can harm an employee)
• Ergonomic (poor workstation setup in an office, poor posture and manual handling)
• Psychosocial (sexual harassment, victimisation, workplace aggression and abuse, and stress)

You will find more in-depth information on this in learning unit two of this course series.

Which hazards are potentially affecting you or your business? 

When identifying the hazards that are relevant to you and your business, it is important to look at each component and activity that is being carried out. 

Also consider indirect impact of hazards such as road closures or other events that may limit guests accessing your property (an event may not have to happen close to your business, it could happen at visitors’ origin or an important transport hub). A loss of an important supplier may also disrupt your business. 

Prioritise hazards

Based on your list of hazards and impacts, rate the likelihood of the hazard occurring and the consequence, how severe the impact would be. This determines the level of risk or risk rating.

Why rate risks? 

“Rating risk helps identify which hazards are most likely to occur, the hazards that cause the largest consequence shall they occur. This understanding identifies which risks to prioritise and provides the basis to make informed decisions on risk mitigation interventions”. Julia

To rate each risk, refer to a risk matrix which helps you determine the level of risk based on the likelihood (probability) and its severity (impact). You will learn more about this in the next lesson.

Lesson 3: Risk matrix

The risk matrix shown below results in four levels of risks: minor, moderate, major and extreme. If you prefer more detailed levels of risk, you can add additional levels, like a ‘trivial’ risk level.

Likelihood (probability)

To identify the likelihood of hazards, you may be able to speak from experience when it comes to hazardous events that are likely. You can also ask your staff to rate the risk relevant to their departments and combine the scores. For external hazards you may be able to obtain information from government websites, industry associations or other relevant sources. Extreme weather events for examples are usually less likely to occur than smaller workplace accidents. However, meteorological hazards are often seasonal and may occur regularly. 

Very likely

Expected frequency greater than twice a year (e.g. power outage due to poor local supply)

Likely

May happen once a year (e.g. a seasonal outbreak of blue-green algae in a adjacent lake)

Moderate

Once every few years (e.g. a flood event)

Unlikely

Incident every three to five years (e.g. a bushfire during a period of drought)

Rare

Once every few decades (e.g. global economic crash – visitor numbers are at record lows due to a global economic downturn)

Change drivers such as climate change may impact the frequency of these events, including cyclones/hurricanes, droughts and wildfires. For example, in most parts of Africa, but specifically West and Central Africa, climate change is predicted to cause a large increase in the number of hot days as the temperature is projected to rise faster than in other parts of the world. This will increase the frequency of heat waves and contribute to droughts.

Severity (impact)

For each hazard, identify who or what may be harmed shall the hazard occur.  Would the hazard lead to a disruption of business processes or functions and which ones? Would people be harmed and how? Are there consequences to the environment and what may the environmental harm be? Other areas that may be affected by hazards include infrastructure, facilities, utilities and the economy or economic sustainability of the business.

Extreme

Threatens the survival of the business. Loss of revenue is extreme.

Major

Threatens the effective functionality of the business and may require intervention. Loss of revenue is very high.

Moderate

Business is not threatened, however could be subject to significant review or changed ways of operating. Loss of revenue is medium.

Minor

The consequences are dealt with internally or by routine operations. Loss of revenue is low.

“To identify how severe the consequences of the hazardous event could be, vulnerability and exposure (refer to Module 2) need to be considered. For example, a secluded hotel is more likely to have a severe loss of revenue in case of floods as customers are not able to access the hotel anymore”. Julia

On a larger scale, businesses located close to coastlines, especially those with limited natural buffers (coral reefs, mangroves) or structural protection (sea walls), will be more exposed to hazards such as flooding from storms. 

Other contextual factors will also influence the severity of impacts shall the hazard occur. These include the size and objectives of the business, as well as existing risk mitigation measures implemented to address any vulnerability and exposure, which should be considered when rating the severity of hazards. 

Review the hazards identified above and add any other hazards you have missed. 

Lesson 3: Evaluate risks

The risk rating informs the prioritization of which hazards are addressed first. Risk which are classified as major, or extreme, should be prioritized. Alternatively, scores can be given to each level of impact and likelihood, starting with the lowest score (1), for the lowest level of impact/likelihood. To calculate the risk level, scores for impact and likelihood should be multiplied. The hazard with the highest score should be prioritized. 

For example, if the hazard of a tsunami is very low (1), but the impact high (3), the risk score is 3 (1×3 = 3).

The risk score is not a robust decision-making tool, but a support tool to identify potential high-risk events that are normally not taken into account. Decisions on which risks are treated as a priority must align with stakeholders’ expectations, values and risk perceptions. 

Trade-offs

Values may vary between stakeholder groups, thus, broad consultation is important. When risks are reduced, trade-offs may occur. For example, resources spent on risk reduction measures cannot be spent on other areas of the business. To address the exposure of infrastructure and people to risk, the business may decide to invest in new assets which are set back from the shoreline. To protect natural buffers such as trees, mangroves, dune vegetation or coral reefs, trade-offs between users need to be considered and addressed.

Lesson 4: Managing risks

Once risks are identified, rated and evaluated, they must be managed. Once an option is identified and action(s) are formulated, clearly assign responsibilities together with a timeline. There are several standard risk treatment options and it is important that each is evaluated to select the most appropriate option.

Avoiding Risk: Risk can be avoided by implementing changes in processes, practices or products. 

For example, to avoid risk of flooding, a business could be relocated, or a tour route changed. To avoid the contamination of the natural environment with chemicals, a business could switch to using environmentally friendly/degradable substances instead.

Reducing Risk: Risk can be reduced by reducing the impact of a hazard rated with a major or extreme impact to a level that is acceptable, and/or reducing the likelihood of a hazard that is classified as very likely.

There are many options of how the impact or likelihood of a hazard can be reduced, a few examples are described in more detail below. Especially when it comes to natural hazards, we are not able to reduce the likelihood of occurence.  But we can implement risk reducing measures to limit the impact these hazards have on our business and daily life.

Policies, plans and SOPs

Putting in place policies such as a Work Health and Safety policy, plans such as emergency plans or communication plans, and standard operating procedures (backing up data, storing environmentally harmful substances appropriately) is one approach that does not require substantial financial resources. However, it is important to ensure that these policies and plans are functional, tested and updated on a regular basis. 

Training and education

Another option to reduce the consequences of a hazard is to invest in training and education. Making sure staff know what is expected and have the skills to perform the tasks and procedures they are required to conduct as part of their role, especially activities that are linked to a potential risk, is critical. 

“Identifying roles and responsibilities, and mapping existing skills against the requirements is one way of identifying gaps and training needs. Communication with staff and providing avenues for them to provide feedback is also important”. Julia

Reducing resource use

Reducing resource use and increasing efficiency is a great way to reduce the risk of reliance on and overuse of limited resources (such as freshwater or oil). Reducing the use of energy sourced from fossil fuels reduces the release of greenhouse gas emissions responsible for climate change, thus contributing to the reduction of climate change risk.

The reduction of greenhouse gas emissions is known as climate change mitigation.

Transcript

Tourism is responsible for about 8% of global greenhouse gas emissions.

Most of this comes from CO2 heavy modes of travel like flying. However, most destinations and tourism businesses, particularly remote locations, rely on tourists travelling often long distances. Hotels, too, are big energy consumers, most of which goes on air cons, heating, lighting for both indoor and outdoor areas, cooking, meals, laundry, and so on. Tourists participate in sightseeing activities, day trips and tours, all of which produce further emissions. On top of this, the sector has been growing almost exponentially, which in turn increases its total emissions.

Raising concerns over whether it can keep in line with international climate targets. Reducing emissions is everyone’s responsibility from businesses, large and small, local management authorities and governments. 

Businesses can reduce emissions by reducing energy use, for example, by improving efficiency or changing habits, and by making sure that they source their energy from renewables such as solar, wind or hydropower.

By buying goods and services locally, businesses can reduce transport levels and therefore emissions. They can also encourage suppliers to do the same, helping to build green supply chains.

Becoming more efficient may require investment to update equipment or technologies. But the returns are often high. For example, the investment in a new dishwasher will usually pay for itself thanks to greater efficiency and water and energy savings.

The climate crisis means that greenhouse gas emissions will need to be reduced significantly over the next decades. Countries around the world have formally agreed to be climate neutral by 2050.

Definition of climate change mitigation: Climate change mitigation is achieved by limiting or preventing greenhouse gas emissions and by enhancing activities that remove these gases from the atmosphere

Reducing emissions is everyone’s responsibility 

Besides tourism businesses, destination authorities and governments can also do a lot to help reduce emissions.

Destination authorities 

Destination authorities can encourage decarbonisation by providing incentives to businesses that have a low carbon footprint, for example by promoting these businesses on their website, and by providing information and education on how emission reduction can be achieved. Destinations can target domestic tourists and thus reduce emissions from transportation.

Governments

Governments at a national level also play a role, as their policies and regulation help guide the actions businesses and destination take. Governments can set ambitious national emission reduction targets, investing in renewable energy infrastructure and implement a carbon tax, making organisations who produce emissions and thus contribute to increasing the risks associated with climate change pay for it, thus providing a strong incentive to reduce emissions. 

Reducing the Impact

Lesson 1: Reducing the impact of hazards by adapting to changes

“Another common response to reduce the impact of slow-onset hazards such as sea level rise and increased temperatures is to adapt to the changes they cause”. Julia

Climate change adaptation 

Climate change adaptation is an important field aimed at reducing vulnerability and increasing the resilience of communities, individuals and businesses. Adaptation involves anticipating changes, such as changes in weather, seasons, sea level rise and even the increased intensity of extreme events. In many parts of the world, people are already living with these changes and even if we reduce emissions in line with international climate agreements tomorrow, the impacts of climate change will increase due to inertia and delays in the earth system. This makes adaptation important. 

Climate change adaptation is the process of adjusting to current or expected climate change and its effects.

Examples of adaptation to climate change range from incremental changes to capacity building. For destinations and government decision makers, adaptation may involve the development of building and planning regulations. 

Incremental changes 

Amending the timing of tours to avoid the hottest time of day, installing air conditioning, providing additional shading, providing indoor activities for wet weather days, subscribing to weather information services, changing the design of buildings or constructing sea walls.

Capacity building

Capacity building, including training and education, can also form part of adaptation actions.

Development of building and planning regulations

Set back zones from coastlines, development restrictions for flood prone areas or caps on how much groundwater each business can extract, upgrade or relocate roads, invest in beach nourishment, damns or sea walls.

Coastal vegetation

When there is sufficient space to allow for natural buffer, beaches and coasts can be protected from erosion by planting and protecting coastal vegetation. 

Despite the fact that mangroves provide many benefits in addition to coastal protection, they are often seen as negative for tourism as they restrict access to water and cover the area that could be used as sandy beach. For this reason, there are many examples where resorts have removed mangroves in order to increase the attractiveness of the shoreline. However, simply removing mangroves does not create a sandy beach and often leaves coastlines muddy and exposed to the impacts from waves and tides. 

Lesson 2: Transferring, sharing and accepting risks

Transferring risk

A business can outsource certain activity to a subcontractor and thus transfer the risk associated with that activity to the subcontractor. A common way to transfer risk is through insurance, whereby the buyer transfers risk to the insurance company. Once risks are identified and rated, it is recommended to discuss key risk with an insurance broker to find out if the business is covered against these risks. There are different levels of insurance which provide security, as losses are recouped, thus helping the business recover from crisis quicker. 

“Having risk reduction and adaptation measures in place may reduce the insurance premium for certain hazards. When purchasing third-party insurance, it is important to always read the fine print to find out exactly which events and situations are covered by the insurance”. Julia

Sharing risk

Another option to reduce the impact of hazards is to share risk between businesses. Sharing is different to transferring as the risk is divided between businesses. Creating business partnerships is a common examples of how risk is shared. In the context of disaster risk, a hotel may have an agreement with a sister hotel which allows guests to transfer in times of a crisis when operational activities are restricted. 

Accepting risk

Retaining risk means absorbing potential risks. Companies accept risks when they believe that the cost of doing so is less than the cost of fully or partially insuring against it. Increasingly, tourism infrastructure in exposed locations becomes uninsurable.  This results in a situation where the business is liable for the risks itself, requiring substantial financial resources in case of a crisis. 

What does uninsurable mean?

Uninsurable means that either, insurance companies are not willing to provide insurance against certain hazards, or the premiums are so high that the cost of retraining the risk is lower.

How to select the right treatment?

When interventions or risk treatments are implemented, ask yourself the following questions to ensure the best option is selected:

Question 1: Will the intervention create any new risks?

Question 2: Will this intervention reduce risk or transfer risk to other elements of the business or the destination, including the community or natural environment?

Question 3: Are there any trade-offs this intervention creates and how can they be reduced?

Question 4: Is the implementation feasible, including the cost of the intervention?

Question 5: Is there an opportunity to obtain government support or subsidies for any of the options?

Question 6: Does the intervention align with the objectives of the business?

Lesson 3: Monitoring and evaluation and residual risk

Residual risk

After prioritizing, evaluating and managing the potential risks, you will probably find some risks that cannot be fully minimized. This is the so called residual risk. 

Organisations should acknowledge existing risks and try to minimize their risk as much as possible through adaptation, preparedness and transfer measures. 

Monitoring and evaluation 

The risk management process is not a one-off exercise but should be integrated into business processes, whereby risks are monitored, the risk assessment is reviewed and updated on a regular basis and actions taken to reduce risk are evaluated.

Risk are constantly changing: This is important because risk are constantly changing, and the context of the organisation and destination may change too. For example, changing consumer sentiments towards flying may have implications for remote destinations that rely on long distance markets such as many islands.

“Risk that have previously been rated as low and not been addressed may increase due to changing circumstances. Risk that are high but very unlikely, such as extreme events, cannot be ignored and it is important that emergency plans are in place for these events (such as fire, tsunami, cyclone, earthquake). Change in business practices may also lead to new or changed risks”. Julia

Finally, monitoring and evaluation are critical to achieve continual improvement of the risk management process.

You have successfully completed the third learning unit of the course “Resilience in Tourism”.