IHG believes that an essential part of being a responsible businessis having in place robust and effective risk management and internal controls. This supports our business to be resilient, successful and trusted.
IHG’s approach to risk management
The Board is ultimately accountable for risk management across the organisation. This is supported by the Audit Committee, the Executive Committee and other delegated committees who collectively set the tone and appetite for risk management at IHG.
This is cascaded down to the day to day activities of IHG corporate offices and hotels through well established and continuously improving policies, processes, systems and controls which set out clear accountability, and are supported by tools, trainingand communication to ensure risks are effectively managed.
Risks are further identified, assessed, mitigated and monitored by functional specialists and where deemed necessary, periodically reviewed by internal and external auditors. These activities are typically grouped into ‘Three Lines of Defence’ as shown on the right. IHG’s Global Risk Management team provide subject matter expertise, leadership and support across all these activities.
Embedded risk management processes
IHG has in place a Major Risk Review process to:
- enable the business to identify, assess, manage and monitor the principal risks and uncertainties affecting the Group (the Major Risks); and
- support the Executive Committee, Audit Committee and the Board to monitor, review and reflect upon the progress of risk management activities across the portfolio of Major Risks on a bi-annual basis.
The Major Risks align closely with our strategy and business priorities, and also identifies those issues which are most likely to significantly affect other operational, commercial or reputation matters and as such are regularly discussed at senior leadership team and committee meetings.
Our Risk Working Group (RWG) ensures there is sufficient focus and effective management of the Major Risks, and seeks to improve cross-functional working and effective risk management of the highest priority and emerging risks affecting IHG. The RWG is chaired by the General Counsel and Company Secretary and comprises the heads of Global Risk Management, Global Strategy, Programme Office and Global Internal Audit.
Underpinning the Group’s Major Risk Review process, each of the regions and functions have their own risk profiles which are updated quarterly in line with the activities of the strategic planning cycle. During the interim periods, continuous dialogue takes place between risk owners and risk subject matter experts to develop, execute and monitor detailed risk assessments, risk mitigation strategies, controls and key risk indicators.
Holistic approach to risk assessment
IHG conducts risk assessments to identify, prioritise and inform decisions on risk mitigation. Risks are first assessed from an inherent or gross risk perspective (unmitigated risk). Then, internal controls and mitigation activities are identified and assessed resulting in a residual or net risk assessment (mitigated risk, net of controls). This is informed by the performance monitoring of internal key risk indicators, which provide objective evidence as to how effectively the risk is being managed. IHG and its Board thinks broadly and holistically about potential risks to the business, across the following categories:
|Risk||What are these?||Who manages them|
Risks arising from IHG’s relationship with the external environment that can impact on IHG’s ambition and strategy over the long term.
Include major market, environmental changes or events that could impact its reputation across key stakeholder groups.
Risks that could impact the delivery of IHG’s one to three-year commitments.Include, but not limited to, factors influencing IHG’s ability to sign and open new hotels, the performance of existing hotels and the delivery of projects that align with strategic planning processes.
Risks which include a wide spectrum of day-to-day risks that front-line hotel colleagues and corporate teams face when dealing with guests or ensuring corporate systems and processes are running smoothly.Include, but are not limited to, those managing the safety and security of our people and assets, the continuity of the business, third-party service providers and the wider supply chain.
Safety and security is vitally important to our guests, colleagues and other stakeholders. Our approach has been to support hotel owners, general managers and colleagues in managing risk effectively. We have a comprehensive range of policies, standards, web-based toolkits and training materials which are aligned to our Manage Risk and Safe Hotel Framework and which can be accessed by all hotels. The materials include risk management, safety and security policies and procedures, checklists, templates, posters, videos, e-learning and access to face-to-face training. To further embed capability in the business and community further and make risk management courses more appealing, IHG has worked with external training organisations such as the UK Chartered Institute of Environmental Health (CIEH) and the Institute of Risk Management. IHG risk management materials form part of the curriculum at Oxford Brookes University’s Hospitality Management Programme, showing the leadership we are taking in this area.
Providing a safe and secure environment for our guests, employees and those working at or visiting our hotels and corporate offices is paramount. Therefore, IHG has established a set of policies, procedures and measures to comply with relevant legislation. We ensure the protection and wellbeing of those working for IHG through suitable work-based strategies; minimise the risk of injury from work activity; ensure that sufficient information is provided and systems are in place to address health and safety concerns; and involve employees in the continuous improvement, reporting and review of health and safety matters.
Having a predominantly managed and franchised estate means that not all of the people who work at our hotels are our employees. When the Group’s entire estate is taken into account (including those working in our franchised and managed hotels) over 350,000 people worked globally across IHG’s brands as at 31 December 2014.
However, IHG employed the following:
- 7,797 people worldwide (including those in our corporate offices, central reservations offices and owned hotels (excluding those in a category below)), whose costs were borne by the Group
- 4,975 people who worked directly on behalf of the System Fund and whose costs are borne by the System Fund
- 602 General Managers who work in our managed hotels and whose costs are borne by those hotels
- 11,848 other hotel workers who work in our managed hotels who have contracts or letters of service with IHG and whose costs are borne by those hotels.
Despite our proactive approach, incidents do still occur. IHG hotels deal with natural catastrophes, political and civil unrest, pandemics, hotel fires and many other crises. We have established processes, tools and training which mean we are prepared for any scenario.