Holiday Inn 2010 Annual Report Download - page 34

Business review continued
32 IHG Annual Report and Financial Statements 2010
Capital availability – the recent difficult economic conditions have
made capital availability a challenge for our current and potential
hotel owners which could impact the size of the existing estate
or the delivery and growth of the hotel development pipeline.
In response to the market conditions, specialist teams were
formed within the mature markets focused on monitoring and
analysing market conditions, supporting owners with distressed
assets and reviewing financial alternatives with lenders. In addition,
development teams focused on opportunities with less capital
requirement, to improve likelihood of completion.
Data security and credit card fraud – studies from credit card
companies report that global incidents related to data security or
credit card fraud in the hotel and hospitality industry is increasing.
IHG takes this risk very seriously and has been using risk-based
methods to build capability and resilience into our systems for a
number of years, as well as moving to Payment Card Industry –
Data Security Standards (PCI-DSS). In the last year, the Group has
achieved PCI compliance for core systems, increased data security
resources and efforts globally, formed a Data Security Task Force
to bolster our response to incidents and continued with the
Information Security Council, as a governing body, which is attended
by senior executives across the business, directly focused on
containing this risk.
Maintenance and upgrading of systems and platforms – IHG is
reliant on a number of key IT systems and platforms which require
continuous investment, maintenance and system upgrades to
meet changing user requirements, system capabilities and
specifications. In 2010, the Group continued to invest substantially
in IT systems, with a number of key projects. The Group also
strengthened project risk management and project governance
capability to ensure alignment of strategic projects, successful
project delivery and to minimise business, interruption.
Distribution channels and intermediaries – there has been a shift
towards online sales and distribution channels over recent years.
This includes increasing dependence on comparison websites
and search engines. Sales through these channels typically have
high commission rates and are taking a larger share across the
travel and hospitality sector. IHG has responded well in this area
by devoting more than half of its discretionary marketing budget
to non-traditional tools such as online search, loyalty programmes
and direct/incentive-based marketing. The Group has also
continually invested in developing IHG’s own internet presence
and we have the scale to negotiate favourable terms with
business partners.
Terrorism and security – security risks, particularly the threat
of terrorism, continue to be a significant concern for the hospitality
industry as a whole. IHG has implemented a sophisticated risk
mitigation and response programme that is intelligence-led
and risk-based. For the highest risk sites, detailed threat and
vulnerability assessments have been conducted. This year, IHG
also launched a new Crisis Management Toolkit to ensure that
hotels and corporate offices are prepared to respond to crisis
events or scenarios.
Assurance:
Global Internal Audit uses a risk-based approach to provide
assurance and identify vulnerabilities and opportunities for
improving existing controls that business leaders might not
have identified for themselves.
Global Internal Audit is separately responsible for providing
assurance across the Group and provides reports on the internal
control framework to the Audit Committee. This ensures
appropriate allocation of duties between the risk management
and internal audit functions and hence supports good governance.
Legal/Compliance:
Our legal and regulatory compliance teams protect and support
the business by identifying and interpreting regulations applicable
to IHG, using a risk-based approach to create awareness and
achieve compliance.
Risk governance:
Risk governance is included in the roles and responsibilities of the
Board, Executive Committee and Audit Committee and is described
in the Corporate Governance section of this Annual Report on
pages 42 to 46.
The Risk Working Group and the Company Secretary provide
operational leadership to risk governance and appropriate access
to the Board, its Committees and both the Chief Executive and
the Chairman.
Major Risk Review and risk mitigation activity
The Board is ultimately responsible for the Group’s strategy, risk
management and system of internal control, and for reviewing
their effectiveness. In discharging this responsibility, the Board
considered the 2010 Major Risk Review.
The 2010 Major Risk Review focused on all key, changing or
emerging risks and in particular the mitigating actions and controls
necessary or already in place. The following section gives insight
into some of these risks and control activities:
Governance
RISK
MANAGEMENT
ASSURANCE
STRATEGY
LEGAL/
COMPLIANCE