Holiday Inn 2012 Annual Report Download - page 42

40 IHG Annual Report and Financial Statements 2012
Managing risks in a changing environment
We continue to experience a dynamic external risk environment seeing changes or disruptions in political, economic, social, technological,
legal and environmental risks. These external factors are expected to remain unsettled for 2013 and the foreseeable future. The Group’s wide
geographic spread and fee based model means that in general, events affecting specific hotels or in all but the most significant countries are
not expected to have a material impact on the Group’s results.
The following sets out our control and risk mitigation activities for those risks which are perceived as most dynamic and thus continuously
monitored by senior management. These complement the wider comprehensive risk factors listed on pages 42 to 44.
Risk description Control and mitigation activities
Macroeconomic outlook
The current outlook for 2013 may worsen due to
escalating impacts of the US ‘fiscal cliff’, change
in leadership in China, uncertainty in the Eurozone
and ongoing unrest in the Middle East. In addition
to trading conditions, the economic outlook also
affects the availability of capital to current and
potential owners which may have an impact on
existing operations and the health of the pipeline.
• IHG’s scale, diverse portfolio of brands, segments, countries of operation and mix
in business model, positions it well against short-term macroeconomic impacts;
• IHG continues to monitor macroeconomic conditions and make necessary
adjustments, including cost optimisation programmes where appropriate; and
• IHG has developed revenue management tools and guidelines to assist hotels to
monitor local developments in supply and demand and to inform decisions on
pricing, promotions, channels and room inventory.
Increasing dependence on online travel
agents (OTAs)
Travellers now have access to far more information
through comparison websites, search engines and
online travel agents. Sales through these channels
typically have high commission rates and are taking
an increasing share of bookings across the travel
and hospitality sector, which may have an impact
upon our brands and profitability.
• IHG devotes a significant proportion of its marketing budget to non-traditional
tools such as online search engines, its loyalty programmes and web and mobile
applications, to encourage guests to book through its direct channels;
• the Group continues to invest in developing its own internet presence and aims to
make scale benefits when working with online business partners; and
• IHG has implemented a book direct strategy, which has several initiatives including
IHG’s Best Price Guarantee for bookings made through IHG branded websites and
roomkey.com, a hotel metasearch engine founded by IHG in partnership with
several other hotel companies.
IT performance, resilience and technology
change
IHG is dependent on the stability of its IT
infrastructure and must stay abreast of industry
shifts towards mobile applications and cloud
computing. Failure to maintain IT performance,
resilience and technology change could impact
guest experience and revenue channels.
• Network stability is a priority for IHG’s Global Technology team, which includes
deploying back-up systems, developing robust business continuity practices and
working collaboratively with external service providers;
• IHG’s strategic partnerships with leading technology companies enables us to
innovate, develop and deliver cost-effective solutions that differentiate its brands
and enhance the guest experience; and
• our Programme Office has developed a consistent approach to project management
to ensure successful delivery of projects, including major technology ones.
Information security and payment card
protection
The threats against information remain an
increasing concern with high-profile losses in many
big businesses. The risk ranges from payment card
information to other personal or sensitive
information which can be held in IT systems, in
paper format on desks and filing cabinets, in voice
and video recordings and in other media.
• IHG takes information security very seriously and has applied risk-based methods
to build capability and resilience into our systems and processes for a number
of years;
• IHG continues to aim to be fully compliant with Payment Card Industry – Data
Security Standards (PCI-DSS) using tools and services from a leading specialist
third party provider with respect to payment card processing; and
• the Group manages data security incidents through internal committees and
councils, which work together to contain this risk and reduce the Group’s exposure.
Sensitive data is tightly controlled through limited and monitored access.
Reputation and brand protection
IHG’s reputation and brands are important assets
for the business. Protecting them is reliant upon
the performance, behaviours and reputation of
those working in all hotels and corporate offices
and our owners. Failure to safeguard the reputation
of IHG and its brands could have severe impacts on
the Group’s future performance.
• Responsible Business underpins each of our corporate priorities and we
continually keep under review our internal policies and communicate these to
employees throughout our business, thereby working to ensure our employees
work ethically to maintain our trusted reputation;
• led by the General Counsel and Company Secretary, a team of lawyers, compliance
specialists, chartered secretaries, internal auditors and risk managers work
together to champion and protect the trusted reputation of IHG and its brands;
• we continue to ensure that global registered trademark protections for all of our
new and existing brands, loyalty programmes and other relevant intellectual
property are in place; and
• we have established an effective internal controls and risk management system.
Business Review: Risk management continued