Holiday Inn 2013 Annual Report Download - page 36

IHG believes that an essential part of being a
responsible business is having in place robust
and effective risk management and internal
controls. This supports our business to be
resilient, successful and trusted.
Risk management system
IHG has an effective risk management system and internal
controls which provide assurance to its shareholders.
These are well established and help IHG to protect against
known and emerging risks and to cope with the unexpected.
The Group develops the risk management system, strategies
and controls as a result of continuous learning by management,
which in turn drives the focus of the Major Risk Review and
Global Internal Audit programme. Our internal controls and
risk management system aims to support the achievement of
business objectives and protect our business, in particular:
• our brands, business model and reputation across
keystakeholders;
• the delivery of our strategy, commercial targets and plans
forchange; and
• the safeguarding of physical assets, people, systems
andprocesses.
The risk environment that we operate in can be difficult to predict
and is rapidly changing. There are many risks that could impact the
Group’s brands and reputation and, therefore, IHG is giving particular
emphasis to developing its reputation risk management capability
and strengthening its culture of doing business responsibly.
The key features of IHG’s risk management system are:
• embedded risk management processes to consistently
identify and manage key risks to the business;
• a holistic approach to risk assessment applied through
Strategic, Tactical and Operational risk perspectives;
• risk strategies, controls and outcomes that support the
business and reduce unnecessary risk exposure; and
• a proactive risk and crisis management culture,
through leadershipand training.
Embedded risk management processes
IHG has a Major Risk Review process in place to identify,
manage, monitor and report the principal risks and uncertainties
affecting the Group (the Major Risks). TheBoard has ultimate
responsibility for the Group’s strategy and risk management as
explained on page 70 and the Audit Committee annually reviews
the effectiveness of the Group’s systems of internal control and
risk management. In addition, theExecutive Committee as a whole
is accountable for managing risks and as such all Major Risks have
named Executive Committeemembers who ensure that effective
risk mitigation and control strategies are in place.
Underpinning the Group’s Major Risk Review process, each of
the regions and functions have their own risk profiles which are
updated biannually in line with the activities of the strategic
planning cycle. During the interim periods, continuous dialogue
takes place between risk owners and the Global Risk Management
team to develop, execute and monitor detailed risk plans and
strategies for key risk exposures.
The Risk Working Group (RWG) provides a long-term, global and
strategic perspective to the risks faced by IHG. Its mandate is 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. Major Risks are
regularly discussed as part of Board, Executive Committee and
senior leadership meetings. In addition, the Major Risks are
collectively discussed at least twice annually atthe meetings of
the Executive Committee, Audit Committee and the Board.
Holistic approach to risk assessment
IHG conducts risk assessments to identify, prioritise and
distinguish risks it wishes to take from those it must mitigate.
IHG thinks broadly about potential threats – whether they are
strategic, tacticalor operational in nature.
Strategic risks: these are risks arising from IHG’s relationship with
the external environment and can impact on IHG’s ambition and
strategy over the long term. Strategicrisks are a key feature of the
Board and Executive Committee agendas, regional and functional
strategy setting and are considered during decision-making on
strategic issues such as the selection of future growth markets,
the selection of strategic business partners and decisions
pertaining to potential new initiatives.
Tactical risks: these are risks that could impact the delivery of
IHG’s one to three-year targets including implementation of
projects. These include factors influencing IHG’s ability to sign and
open new hotels, the performance of existing hotels and delivery of
projects. These are managed bysenior operators and overseen by
the Regional Operating Committees. In addition, project risks are
managed by project management teams and business sponsors
with oversight provided by the Programme Office.
Operational risks: these 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. A critical aspect of this is
managing the safety and security of our people and assets and
the continuity of the business. For some parts of the business,
operational risks also include managing third-party service
providers and the wider supply chain. Due to the nature of
operational risks, IHG typically mitigates these through internal
controls, operational and business processes, systems and tools.
Oversight roles exist through the management line, the Regional
Operating Committees and functional leadership teams.
34 IHG Annual Report and Form 20-F 2013
Risk management