ARE YOU RUNNING A HOTEL BUSINESS, BUT THE SALES FIGURES ARE NOTE MAKING SENSE?

About Sally

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Sally is a CIPE-Certified Independent Compliance Assessor (CIPE-ICA), World Bank-IFC trained Corporate Governance and Board Evaluation Professional and a member of Institute of Directors (IOD) Nigeria. Sally worked as a Director, Risk and Control Assurance Business Unit of PricewaterhouseCoopers Nigeria and Manchester Office United Kingdom, driving the delivery of Corporate Governance , Risk Management, Internal Control, Compliance and Internal Audit Solutions. Sally holds BSc. Computer Science from University of Nigeria Nsukka (UNN), MSc Computer Science and Engineering from Enugu State University of Science and Technology (ESUT) and a number of professional certifications on Risk Management, governance and Assurance Solutions. Sally currently works with Platinum Edge Consulting Limited as an Executive Directors.  Sally is an advocate for victims of cultural biases, domestic violence and abuse. She is a volunteer in an international non-profit organization that is focused on providing protection and justice to the battered victims of cultural biases, domestic violence and abuse in Nigeria. She believes that everyone is created for a positive purpose, and achieving the purpose is a journey that requires collective effort and collaboration from others who are interested, willing and committed.

Sally writes the blog posts based on the knowledge, experience and competencies built from many risk management, governance and assurance projects delivered for clients in many jurisdictions, numerous professional trainings attended, networking and interactions with seasoned business leaders from different industries.

Introduction

Are you an owner or a manager of a startup hotel business? The following questions are for you.

• Do you know how much revenue your hotel business should be making annually given the market opportunities?
• How much revenue is your hotel business actually making?
• What is the annual size of the revenue leakages in the company?
• How much of the revenue leakages can be attributed to frauds and abuses?
• Do you know where to search and find the frauds and abuses in your organisation?
• How much knowledge of the applicable human right laws and regulations do you have?
• How are fraud investigations managed in your business without compromising the human right laws?
• Does your hotel business know when to involve law enforcement agents and what to do when charged to court?
• What have you been doing to minimise the scale of revenue leakages caused by frauds and abuses in your business?

According to the Association of Certified Fraud Examiners (ACFE), every organisation around the globe losses about 5% of the annual revenue to fraud risks and abuses yearly. Some other credible sources claimed that the losses could be up to 8%.

Regardless of the size and nature of the business, 5% yearly loss is significant. The trend may get worse in some countries, given the global economic hardship caused by Covid-19 Pandemic and other significant events peculiar to the countries.

Many of the business owners and leaders rely on the assurance providers to provide them with the comfort, confidence and trust that the frauds and abuses are well controlled.

Sadly, the global survey showed that the assurance providers, particularly, the internal audit function, have not performed up to the expectations in helping their organisation prevent and discover frauds and abuses when compared to the performance of the other employees and external parties.

The above performance weakness has been attributed to many factors which include knowledge gaps.

This blog post brings insights on how fraud risks and abuses can become big invisible pipes and holes draining revenues from the hotel businesses, particularly, the startups and some key actions to consider for the combat.

Disclaimer: This blog post is not meant to teach employees and others about how to commit fraud and abuse. The primary objective is to help the uninformed entrepreneurs and well-meaning employees, managers and others in the hotel businesses, particularly the startups to be well informed and remain vigilant, well prepared and proactive in taking quick and right decisions and actions in dealing with fraud risks and abuses in order to avoid the surprises, embarrassments, pains and “had I known” that may spring up when fraud happens. The assurance providers in the hotel industry can do better by leveraging the information to boost their capabilities and credibility in helping their organisation in preventing and discovering frauds as part of their routine assignments.

What Is Fraud Risk And The Impacts on Company Revenue and Profitability?

Risk refers to opportunities (positives) or threats (negatives). In the context of this blog post, risk will be discussed from the negative perspectives.

• Risk is the possibility that something bad will happen and the impact will negatively affect the achievement of predefined goals and objectives. The Committee of Sponsoring Organizations of the Treadway Commission (COSO, founded in USA in 1985), classified risk into four key types, namely: strategic risk, compliance risk, financial risk and operational risk.
• Strategic risk is the risk of taking wrong or bad decisions and actions that will impede successful planning and execution of the corporate strategy of the organisations.
• Compliance risk is the risk of inuring penalties for not complying with the applicable laws and regulations.
• Financial risk is the risk of incurring financial losses by engaging in financial market operations such as investments, trading with foreign currencies, borrowing and credit granting, and not having sufficient cash or capital to meet daily obligations or continue business operations.
• Operational risk is the risk of incurring losses or damages as a result of inadequacies in business processes, policies, procedures, internal controls, peoples’ conducts or negligence, technology (ICT) systems or pandemic outbreak. The Institute of Operational Risk Management (IOR, established in UK in 2004), perceives operational risk to be the biggest and most disruptive of all the risk types. This observation has been proved by the recent Covid-19 Pandemic and the lock down effects which brought massive disruptions and losses to the global community.