Why it Matters in Hospitality Projects
When you are planning a hospitality project, there are a lot of moving parts to keep track of. And while it might be tempting to dive right in and start building, taking a step back to assess the potential risks can make a huge difference in the success of your project.
Here we will explain why risk assessment and management is so important, and use an example to demonstrate how it works.
What is Risk?
Basically, risk is anything that can go wrong that may impact your timeline, budget or quality of the end result.
For the purpose of this article, let us assume that you are setting up your very own vineyard, complete with a customer experience centre. There are plenty of risks to keep in mind for such a project. What are these risks and what can you do about them? That is where risk assessment and management come in. The process can be broken down into 3 steps.
Step 1: Identifying the risks
The first step is to identify the potential risks for your project. Think of all the things that can go wrong at each step of the way. For example, you might be worried about bad weather, machinery breakdown, changing market trends and labour challenges, among many other things. Each of these have their own likelihood of happening and the potential to derail your plans or operations.
It is neither feasible nor even possible to think of every single risk. The important consideration is to identify those that are most likely to happen, as well as those that will have the biggest adverse impact to your project.
Step 2: Determining the likelihood and severity of each identified risk
Evaluate each of the risks that you have identified in the previous step. How likely is it to occur? And if it occurs, how much will it affect your project or business? For example, inclement weather is a common occurrence and it is likely to happen multiple times. But that is not likely to have a lasting and serious impact on your project. On the other hand, a breakdown of your critical equipment such as your refrigeration system is rare, but when it happens, the impact is much more severe. You may have to stop trading until it is rectified, or your wines run the risk of spoilage if the problem cannot be solved in short order.
Step 3: Develop risk mitigation strategies
The next step is to develop strategies or contingency plans for each of the identified risks. The aim of this is to minimise or mitigate the adverse effect of each risk should it actually occur.
Using our vineyard example again, here are some possible risk management strategies that you can come up with.
To minimise the effect of inclement weather to your business, perhaps you can construct your customer experience centre under shelter. You may also develop indoor tour packages of your cellars and wine-making facilities to replace outdoor tours of your grounds in case of bad weather.
To reduce the risk of supply chain disruptions, you can choose to source your raw materials from multiple suppliers instead of just one or two. By diversifying your suppliers, you reduce the impact of any problems with one of them.
Perhaps you are worried about staff shortages or attrition. You may then decide to automate some of your processes. For example, self-service kiosks to dispense wine and beverages for tasting not only reduce your reliance on your service staff, it also comes with the benefit of creating a novel and more unique experience for your customers.
Presenting the results
The matrix below shows the result of the Risk Assessment and Management process, and is a good way to summarise your findings and mitigation strategies. Of course, our example here is very simplified for the purpose of demonstration, but the underlying concepts behind the process are the same. It is also important to understand that the Risk Assessment Matrix is a living document that should be regularly reviewed and updated. This will enable you to stay on top of things in the fast-paced and evolving hospitality industry.
| Risk | Likelihood | Impact | Risk Rating | Mitigation Measures |
| Adverse Weather Conditions | High | Medium | High | – Keeping up to date with weather forecasts over week long periods – Build your customer experience centre under shelter – Develop indoor tours as alternative to outdoor ones |
| Market Trend Changes | Medium | High | High | – Conduct regular market research to stay up to date with current trends |
| Supply Chain Disruption | Low | Medium | Medium | – Maintain relationships with multiple suppliers to diversify your risk of supply disruption |
| Labour Shortage | Medium | High | High | – Develop training programs to upskill workers – Implement automation when viable for vital processes |
By taking a systematic approach to risk assessment and management, you will be able to identify potential problems before they happen and develop strategies and contingency plans to minimise their adverse impacts. It also demonstrates to your stakeholders that you are well prepared, and gives them confidence in your project.
Taking the time to assess and manage the risks associated with your hospitality project is important, and will almost always pay off further down the road.
Every hospitality business or project has its own specific set of risks. For a professionally tailored risk assessment and innovative mitigation strategies, contact us at the Merriweather Collective and we will be happy to assist!