Chapter 11. Risk Management and Legal Liability
Don Webster
Learning Objectives
- Define the concepts of risk and risk management
- Apply the four steps of a risk management process to a tourism operation
- Identify potential liabilities and develop mitigation strategies to minimize the impact of these
- Identify the four elements of a negligent action
- Describe the components of a valid contract under Canadian contract law
- Appraise the statutory requirements for a tourism or hospitality operator as required in BC
- Demonstrate a working knowledge of occupational health and safety in tourism
Overview
This chapter examines the concepts of risk management and legal liability in tourism and hospitality. We’ll review theoretical risk concepts and practical risk management applications while exploring applicable areas of statute, tort, and contract law. Insurance and occupational health and safety are also discussed. Examples are provided that apply to principles of risk management for tourism and hospitality operations. Please note that the advice and definitions provided in this chapter are general, and should not be relied on in the case of legal action. They will, however, provide a foundation for working in the tourism industry, and for further study.
What is Risk Management?
Risk is defined as the potential for loss or harm (Canadian Tourism Commission [CTC], 2003a). This could be a financial loss, damage to property, or injury to workers or guests. Understandably, most tourism operators are interested in avoiding these impacts to their operation, which is why risk management is needed.
Risk management refers to the practices, policies, and procedures designed to minimize or eliminate unacceptable risks (Cloutier, 2000; CTC, 2003a; Heshka & Jackson, 2011). Depending on the type of operation and the industry undertaking the risk management process, these may vary greatly. Consequently, it is helpful to think of risk management as being a process of determining the exposure to risk, and then initiating action to either minimize or eliminate the risk (Enterprise Risk Management, 2004).
Why Practise Risk Management?
There are two main reasons for tourism operators to practise risk management: to avoid injury to guests and employees, and to protect their business operations from financial or physical ruin.
Keeping guests and employees safe is a moral and ethical responsibility of operators and includes avoiding both emotional and physical harm. Protecting business operations includes protecting against damage to property, damage to reputation, and any financial impacts occurring from litigation (Centre for Curriculum, Transfer, and Technology [CCTT], 2003a). By practising this twofold approach, operators demonstrate that they are are prioritizing the health and safety of individuals, while still taking steps to protect the operational sustainability of their company.
On a larger scale, practising effective risk management can be seen as an importa