23 May 2017

Corporate risk management at Meliá Hotels International

Any business activity is exposed to risk, and the sustainability of a company over time is marked, among other things, by how it manages those risks and anticipates possible positive or negative events. This can only be achieved through an efficient risk management model focused on meeting the company's objectives.

From the business point of view, a "risk" is considered to be an event that, if it occurred, would affect:

  • The market value of the company
  • Its ability to achieve its objectives
  • Its ability to implement business strategies
  • The way it operates
  • The reputation of the company and the business

In this context, corporate risk management models require a comprehensive and dynamic information management process, covering all risks (financial, operational, reputational, legal, etc.) that might have an impact on objectives and results, as well as appropriate design of the different functions and roles of those that take part in the process.

Corporate risk management thus follows the guidelines developed by COSO (Committee of Sponsoring Organizations of the Treadway Commission). It is an ongoing process that flows downwards from the company Board of Directors and its senior management to all of its team of employees. It is designed to identify potential events that could affect the company (risks), manage those risks, and provide reasonable assurance about the achievement of objectives.

Risk management at Meliá Hotels International

Meliá Hotels International (MHI) is a company with a strong international presence, and its activities expose it to a large variety of risks inherent to its different businesses and the numerous countries in which it operates. This makes it absolutely necessary that the company has a robust and efficient risk management model.

Risk management at Meliá is considered a differential factor whose ultimate goal is to improve the company’s ability to generate sustainable value and offer security and confidence to its different stakeholders. To this end, it has a number of different governing bodies and organizational units that have been assigned responsibilities in risk management.

Policy on the control, analysis and assessment of risks and its development through the corresponding internal regulations, allow MHI several tools with which to carry out effective risk management. These are organized into what could be called first, second and third lines of defence:

  • The first line of defence would be the Business Units and Corporate Areas themselves, directly responsible for risk management.
  • In the second line would be the area of Risk Control and Analysis, which ensures compliance with policy and defines the basis for risk management
  • The third line is formed by the Internal Audit team in charge of auditing the entire process.

This is all supervised by the company's governing bodies, the Board of Directors, the Audit and Compliance Committee, and the Executive Committee.

In the current environment for travel companies such as Meliá, the most important risks may be summarised as follows:

The Meliá Hotels International Risk Map is updated annually, and aims to identify, evaluate, analyse, control and communicate the most important operational and reputational risks. It is an important tool for general management and continuous improvement, reflected in company activity by its influence on both expansion and investment plans, crime prevention models, and numerous internal processes.

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