|by Leonard C. Cross - February 1999
Despite the buffeting taken in the global economy in the last year international expansion for many hospitality companies will remain a necessity-not a choice. Hotel companies that do make the decision to "go global," as well as those already operating offshore, will benefit from addressing a key area of business risk-physical security and other life safety risks arising from various forms of workplace violence and other crime. International expansion mergers, deregulation and privatization often drive revenue growth, operational efficiencies and benefits to customers. But they can also be breeders of employee discontent, labor unrest, potential criminal disruption and terrorist actions. The U.S. State Department has reported that 75 percent of the 440 international terrorist acts in 1995 were directed against businesses. Fire safety is also a major area of risk and source of litigation for organizations around the world.
Because of these risks, hospitality organizations doing business in foreign markets should avoid the mistake of replicating the management models, construction design, security systems and training programs that work for them in their home countries. Just as risk must be carefully assessed in the marketing and financial arenas, hospitality companies also need rigorous risk "audits" when it comes to life safety systems and crisis management.
Questions for managers of international operations should include a range of questions.
To support work with hospitality organizations around the world, Arthur Andersen has developed an extensive computer database to help identify risks, assess probability of threats and assist in mitigating the potential for disasters. The database-which now encompasses 80 countries - tracks bombings, assaults, kidnappings, thefts, and other criminal acts committed by disgruntled employees, criminals and terrorists.1 Drawn from government, business and news sources, the database contains information on 10 industries and 33 industry subgroups. "Hospitality and Leisure" data covers hotels, restaurants and tourism. Information from region to region, however, varies in depth because of the lack of a uniform reporting system. Law enforcement jurisdictions categorize events differently or do not maintain comprehensive counts. The database provides approximate totals, which are nevertheless revealing. The database is intended to make it possible to benchmark data in various parts of the world, particularly where information is generally incomplete or not systematically reported.
We begin by looking at regional totals in emerging markets for a collection
of events that included bombings, hijackings, strikes / protests and sabotage.2
The database does not capture every event, and consequently the statistics
should not be viewed as comprehensive. However, they do provide a picture
emphasizing the need for attention to risk by hospitality industry managers.
The following table shows an approximate number of incidents of bombings
and attempted bombings, hijackings, kidnappings, strikes and protests,
and a miscellaneous category of criminal acts for four regions of the world
where global hospitality organizations have been expanding quickly in recent
An analysis of incidents worldwide suggests that the primary security threats arise from.
Most prevalent in all regions. In Africa, for example, there were 182 bombings or attempted bombings between 1990 and 1998, while Asia reportings showed a count of 358. Latin America at 344 and the Middle East at 119. Bombings typically result in extensive property damage, high incidence of injury and lengthy disruption of operations, not only to the target company, but to adjoining businesses extending blocks or miles from the bombing target. In March of last year, for example, Colombian authorities were able to foil a plot by guerrillas to detonate a car bomb at a hotel in Colombia. The hotel was the site of a major international banking conference, with guest speakers including the presidents of Colombia, Panama and Peru. The apparent motive was to show solidarity with guerrilla groups in Peru. In April 1998, an international chain hotel, located in Uganda, was the target of a bombing resulting in five deaths. President Clinton had stayed in this hotel just four days before on his visit to Africa. Since January, Athens, the capital of Greece, has experienced over 150 bombings, directed at diplomatic facilities and foreign business establishments by a terrorist group trying to discourage foreigners from working or operating in Greece. India has experienced a number of bombings this year. During October 1997, terrorists attempted to place a truck bomb at a five-star hotel in Colombo, Sri Lanka, but were stopped by hotel security from gaining entrance into the parking lot. The terrorist thereafter parked the vehicle near two other five-star hotels, detonating the device causing major damage to the hotels and surrounding buildings and killing eleven people and wounding 105. The hotels were located near government buildings.
The second most frequent offenses reported after bombings. Not included on the earlier table because of the difficulty of capturing total data, assaults take the form of shootings, murder and physical assaults on a person. Various police jurisdictions report high numbers. According to Sao Paulo, Brazil police records, for example. 4,778 people were murdered in Sao Paulo in 1997, averaging 13 homicides per day. The Brazilian Ministry of Justice reported that 31 of every 100,000 Brazilians are murdered compared to 20 per 100,000 in Mexico and 10 per 100,000 in the United States. The records of the Colombian National Police reflected 31,808 murders or 87 per day in 1997, as well as 204 muggings or assaults committed in Colombia every 24 hours. Mexico City reports more than 250,000 crimes annually or approximately 700 per day.
This threat has emerged as a problem worldwide, reaching critical levels in Colombia and Mexico. Kidnappings are conducted by terrorists, criminals and others acting for political reasons. Most of the kidnappings are motivated by economic reasons, but in some cases are undertaken to effect political change in a country. Most are resolved peacefully, but some have tragic results.
The threat from organized crime elements has reached global proportions. The threat ranges from the well-developed economies of the United States to such places as Hungary, Russia, India, South Africa and other emerging markets. Organized crime groups, sometimes working in concert with distant organizations, are generally engaged in transporting stolen goods internationally, extortion, murder, bombings, drug trafficking, arson and bribery of government officials. In Hungary, organized crime has been responsible for killing a diplomat, newspaper publisher, the bombing of several political candidates' houses and offices, as well as more than 100 other bombings since 1991. The most brazen was in July of this year, when a car bomb detonated in the center of the tourist district, killing four and injuring 25 people. The apparent target was the owner of a restaurant and tourist resort.
The International Monetary Fund, World Bank and Inter-American Development Bank are all addressing the issue as it relates to projects with which they are involved. The U.S. Commerce Department estimates that companies worldwide operating outside their own national borders, paid approximately $80 billion in illegal payments or bribes to officials in other countries since 1995. For an industry involved in operating buildings, the fact that corruption is extensive in the construction area should be of particular concern to hospitality managers. Where building inspectors are paid to overlook poorly constructed buildings or lack of compliance with building codes, there is a potential for disaster. Such activity has resulted in a number of incidents, including building collapses resulting in injury and death.
Clearly there are risks for hospitality companies "going global," particularly in markets where there is a history of political and economic instability. Hotel organizations frequently rely on security systems that are transplanted from property to property. But hospitality managers should consider a number of pertinent questions.
In-Country Threat Assessment
Prior to physically launching operations, an analysis should be conducted of the country and of the market within which the hotel is located - whether it be a city or non - urban environment. In this process, current threats may be addressed in the immediate market area, as well as in the national context. As appropriate, such a review might also encompass adjacent communities and countries. The risk assessment should encompass the identification of particular criminal problems and crime statistics, as well as the evaluation of local and regional law enforcement agencies. The agency review should in particular focus on an assessment of proficiency. training, degree of professionalism and level of response to incidents. In conducting this review, enlisting the involvement of one's in-country embassy may also be helpful.
Physical Security Survey
Once the in-country and market area assessments are complete, the next step is a physical security survey. If done thoroughly at the outset, it may reduce the frequency of need for future assessments. Terrorism, for example, is currently a dominant concern in some environments, but the emphasis can shift quickly if the subject property becomes the target of guest room theft or assaults. The common link here, however, is perimeter security and access control. Both of these issues should be addressed in the physical security survey. Such a review would not only consider the physical issues such as perimeter security and access control, but also the likely origins of the threat whether it be terrorist, criminal or labor related. The survey should include the identification of vulnerabilities and critical operational components, such as communica-tions. power supply and valuable storage and data processing areas. Furthermore, it should encompass assessment of access control points, perimeter security, alarms/CCTV, lighting and finally a detailed review of security procedures.
Building Design and Security
New construction should include a crime-prevention design audit. Design for crime prevention in hotel development can he highly beneficial. To be considered are such factors as the relationship of buildings to parking areas and structures, lighting, perimeter views and protection, and security systems.
All hotel employees should have a thorough background check conducted. There have been a number of instances in which hotels have hired individuals with criminal records in illegal drug sales or theft. Incidents of drug dealing. time-clock tampering and guest theft are relatively common problems that can be greatly mitigated with thorough employment and criminal checks. This process is especially important when selecting security personnel.
These programs should be developed to enhance security among all hotel staff. in addition to the security force. Employee training should not only include a focus on hotel functions (guest relations. check-in procedures. daily operations, and administrative responsibilities). but security awareness as well. As is the case at most hotels. the security staff is limited and is sometimes strained due to commitments and shrinking staff. By providing the entire hotel staff with training in the identification of security issues, a description of operational methods, where to report information. and periodic updates on security advisories. management can in effect add additional "eyes" and ears to the organization.
Security Planning and Operations
It is important to broaden the focus of risk and systematize processes. Each hotel, for example. should have a detailed bomb threat plan that covers procedures to include: 1) the reporting person; 2) execution of the search plan; 3) what to do if a suspect package is found; and 4) evacuation plans. The process is critical because time is always of the essence. Many bomb threats are made for the purpose of disrupting a company's operations. Needless evacuation of a facility can play into the hands of the person making the threat. On the other hand, information must be properly handled because of the scope of the potential damage.
Special Events Planning
These events often involve government dignitaries. officials and organizations, senior management. associations that may be embroiled in controversial policies. or business transactions that can elevate the security threat. In some cases. police or other government agencies provide security. but this does not obviate hotel responsibility. The example of the bomb threat at the banking conference in Colombia, for example. was augmented by exposure of detailed conference plans on the Internet. The hotel needs to track where information has been distributed, including the Internet, to determine the level of risk that may result.
Companies establishing new operations in other countries must begin by understanding the risks inherent in these locations. Taking "local knowledge" too much for granted can be costly. If an incident does occur, the consequences can be extraordinarily high. Compounding the threats to people and buildings are the prospects of financial loss. And yet the protection of insurance coverage should not reduce the sensitivity of hospitality managers to these risks, which can have completely unforeseen consequences. Negative publicity or litigation arising from such incidents can have an adverse effect on a company's reputation. stock price, employee morale and future business relationships.
By focusing on proactive safeguards, rather than reactive measures, hospitality companies can reduce risk efficiently and cost - effectively. The important point is not to wait until a major incident shatters the status quo. The time to assess risks and build security and crisis management systems is before-not after-an emergency.
1 The database
captures criminal acts which have been reported in various publications.
It does not encompass all criminal acts perpetrated, because many events
(Leonard C. Cross is a Manager in the Boston office of Arthur Andersen. He consults with companies worldwide on physical security. life safety and crisis management issues.)