Roads to Resilience

Business challenges 4

Like many businesses, industries and economies, IHG’s business has evolved up the value chain from a commodity business to one that is differentiated through brands and experiences. At the different stages of maturity the business challenges vary from physical safety and wellbeing of assets to commercial resilience and success to building emotional connections, trust and love with stakeholders. For IHG, the business challenges span all three areas and they all can impact on reputation. The scale of IHG operations and the corresponding requirements for risk management is immense: “ On any one night we can have half a million guests. That is the equivalent to managing the risks for a small city. With so many hotels and guests, inevitably incidents will occur. That means that risk and crisis management is part of our business ” (SVP Head of Global Risk Management). IHG has designed a comprehensive system to recognise and mitigate all types of risks with strong awareness at the executive level, where the weekly incident and risk report is discussed and key learning extracted from each. Another key challenge is delivering consistency in each of the nine brands. “ The brands are defined centrally but we need the owners to continually invest in the hotels and it’s the people on the front-line that make the brands come to life. The challenge is delivering consistent experiences in our hotels, with a highly varied estate and limited control of hotel staff ” (SVP Head of Global Risk Management). “ As IHG does not have operational control of franchisees, it achieves quality and consistency through promoting a core purpose of Great Hotels Guests Love and a culture to reflect our Winning Ways. This is in addition to leveraging its legal contracts, managing compliance towards its Brand Standards including Brand Safety Standards, and providing central support, training, and online tools available to all hotels. ” (Director of Corporate Risk Management) Culture is often mentioned as a prerequisite for a successful business: “ from our perspective, the success of a business is based around its culture. I know it’s very easy to say and it can be a bit clichéd ” (General Counsel and Company Secretary). IHG is careful to go beyond the cliché and the way culture is achieved is carefully defined. The appropriate business culture, “ means that people are prepared to put themselves on the line, are high performing in whatever they do, significantly enjoy what they’re doing, they’re good at it and then they’re living it. People are happy to collaborate and therefore there’s an element of openness, which enables the organisation to be effective ” (General Counsel and Company Secretary). Working across many boundaries, IHG needs to establish standard approaches to risk management but it has recognised that, “ the standard itself gets you to compliance. To really manage the risk, you’ve got to have the culture ” (SVP Head of Global Risk Management). Therefore, a four-stage maturity model is used within IHG to assess whether risk management in hotels, functional areas and the different regions has progressed from ‘reactive’ (Stage 1) through ‘compliant’ (Stage 2), to embedding the knowledge to create commitment (Stage 3), to finally “ making risk management a core value and second nature ” (Stage 4) 5 . People and culture

4 See 2012 Annual Report: http://www.ihg.com/hotels/gb/en/global/support/about_ihg 5 From IHG internal presentation material.

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Appendix A Case study: InterContinental Hotels Group (IHG)