Holiday Inn 2012 Annual Report Download - page 45

Risk management 43
Operational risks
The Group is reliant
on the reputation
of its brands and
the protection of
its intellectual
property rights
Any event that materially damages the reputation of one or more of the Group’s existing or new brands and/or
fails to sustain the appeal of the Group’s existing or new brands to its customers may have an adverse impact
on the value of that brand and subsequent revenues from that brand or business.
In particular, where the Group is unable to enforce adherence to its safety or operating and quality standards,
or the significant regulations applicable to hotel operations, pursuant to its franchise and management
contracts, there may be further adverse impact upon brand reputation or customer perception and therefore
the value of the Group’s brands.
In addition, the value of the Group’s brands is influenced by a number of other factors, some of which may be
outside the Group’s control, including commoditisation (whereby price and/or quality becomes relatively more
important than brand identifications due, in part, to the increased prevalence of travel comparison websites
and online travel agents), consumer preference and perception, or other factors affecting consumers’
willingness to purchase goods and services provided by the Group.
Given the importance of brand recognition to the Group’s business, the protection of its intellectual property poses
a risk due to the variability and change of controls, laws and effectiveness of enforcement globally. Any widespread
infringement, misappropriation or weakening of the control environment could materially harm the value of the
Group’s brands and its ability to develop the business.
The Group is reliant
upon its proprietary
reservations system
and is exposed to
the risk of failures
in the system and
increased competition
in reservations
infrastructure
The value of the Group’s brands is partly derived from the ability to drive reservations through its proprietary
HolidexPlus reservations system, a central repository of the Group’s hotel room inventories linked
electronically to multiple sales channels including IHG’s own websites, call centres and hotels, third party
intermediaries and travel agents.
Lack of resilience and operational availability and/or the failure of a third party technology provider could lead
to prolonged service disruption and may result in significant business interruption, impact the guest booking
experience and subsequently impact on revenues. Lack of investment in these systems may also result in
reduced capability, stability and ability to compete. Additionally, failure to maintain an appropriate technology
strategy and select the right technology partners could erode the Group’s long-term competitiveness.
The Group is exposed
to the risks related
to information security
and data privacy
The Group is increasingly dependent upon the availability, integrity and confidentiality of information including
but not limited to, guest and employee credit card, financial and personal data, business performance, financial
reporting and commercial development. The information is sometimes held in different formats such as digital,
paper, voice and video and could be stored in many places including facilities managed by third party service
providers.
The threats towards the Group’s information are dynamic including cyber attacks, fraudulent use, loss or
misuse by employees and breaches of our vendors’ security arrangements amongst others. The legal and
regulatory environment and requirements set out by the payment card industry surrounding information
security and data privacy across the many jurisdictions in which the Group operates are constantly evolving.
If the Group fails to appropriately protect information and ensure relevant controls are in place to enable the
release of information through the appropriate channels in a timely and accurate manner, System performance,
guest experience and the reputation of the Group may be adversely affected. This can lead to revenue losses,
fines, penalties and other additional costs, including legal fees.
The Group is exposed
to a variety of risks
associated with safety,
security and crisis
management.
There is a constant need to protect the safety and security of our guests, employees and assets against natural
and man-made threats. These include but are not limited to exceptional events such as extreme weather, civil
or political unrest, violence and terrorism, serious and organised crime, fraud, employee dishonesty, cyber
crime, fire and day-to-day accidents, incidents and petty crime which impact the guest or employee experience,
could cause loss of life, sickness or injury and result in compensation claims, fines from regulatory bodies,
litigation and impact reputation. Serious incidents or a combination of events could escalate into a crisis which
if managed poorly could further expose the Group and its brands to significant adverse reputational damage.
The Group is exposed
to inherent risks in
relation to changing
technology and
systems
The Group is reliant upon certain technologies, systems and platforms for the running of its business,
particularly those which are highly integrated with business operational processes. Some of these are
dependent upon the products and services of third party technology providers. The failure of any such third party
provider to provide products and/or perform services could materially adversely impact the Group’s business.
The Group may also have to make substantial additional investments in new technologies or systems to remain
competitive. Failing to keep pace with developments in technologies or systems may put the Group at a
competitive disadvantage. The technologies or systems that the Group chooses may not be commercially
successful or the technology or system strategy employed may not be sufficiently aligned with the needs of the
business or responsive to changes in business strategy. As a result, the Group could adversely affect guest
experiences, lose customers, fail to attract new customers, incur substantial costs or face other losses.
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