Unpacking the risks: Cafe & restaurant risk management

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Here at SilverChef we exist to see Hospitality Businesses thrive! Whether that's through offering flexible hospitality financing or unpacking the nuances of effective risk management. We're here to help.

We also understand that no one dives into the world of hospitality expecting an entirely smooth journey. It's an industry driven by passion that calls to the most creative and agile of entrepreneurs. 

To thrive long term in this unique world there is a need for robust risk management.

Let's look at some critical areas of risk relevant to the hospitality sector, and potential solutions to protect you from negative consequences.

Risks Related to Unexpected Interruptions

Natural disasters, local emergency, pandemic lockdowns.
Machinery breakdown or failure of crucial equipment.
Delays due to improperly trained staff. Such as incorrectly used and subsequently damaged equipment or loss of stock from poor preparation or contamination.
Failure to abide by liquor and food licensing regulations, leading to fines and/or temporary closure.

Do you have a Plan for managing such accidents, interruptions or emergencies? This could look like having natural disaster mitigation in place, back up equipment or clearly detailed staff training processes.

Equipment maintenance and updates are essential to guard against unexpected failure; repairs and replacement of old equipment can be surprisingly costly.

Risks Related to Employees

Loss of a key person (chef or manager).
Staff unable to come to work because of transport problems or emergencies.
Staff unable to handle customer demands and service needs.
Unable to recruit staff because of labour shortages.
Harassment leading to legal action, negative publicity or loss of good staff.

Impacts of long working hours on staff.
Incorrect payment of wages, leading to fines and back-payments for affected employees. Additional risk to reputation.

People management is critical to get right in hospitality, with no one single method available to manage its multiple nuances.

Establishing strong cultural benchmarks, robust recruitment, rostering, payroll and communications systems are all part of the complex, but crucial process.

There are a wide range of low-cost digital solutions available to handle these tasks, track costs, and make staff management much more predictable. Regular consultation with staff additionally will help to improve 'softer' systems, like customer service, sales activity, reputation management and staff turnover.

Risks Related to Food, Alcohol, Cooking and Service

Incorrect food storage or preparation.
Inadequate cleaning and sanitation.
Food allergies.
Wasteful work practices that cause loss of food, alcohol and other stock.
Inadequate fire control systems, leading to fire damage and/or loss of equipment.
Irresponsible service of alcohol.
Booking mismanagement. No-shows and overstaffing.

Many food and beverage risks overlap with the need to ensure consistently adequate and updated equipment. For example, fridges and freezers can be digitally monitored 24/7 with the implementation of relatively inexpensive systems.

The need for effective risk mitigation will additionally be detailed by insurance providers and certifying bodies.

The Importance of Insurance

Insurance has always been a solution for sharing risk with a third party, in return for paying a premium. But many insurance policies exclude risks related to business interruption from unexpected events, like COVID-19, machinery breakdown, floods and fire. Especially if you're in an area where this is likely to happen. If a policy is available, you'll want to balance the premium against the likely cost of loss and interruption.

To operate under successfully reduced risk, it is essential to balance not only attaining adequate insurance, but also establishing risk management plans.

First, identify your unique business’ risks, then work about clarifying where and how you can reduce these.

By embracing a proactive stance towards risk mitigation, hospitality owners are better equipped to navigate any potential impacts.

In the dynamic world of hospitality, change and challenge are to be expected. This often-tumultuous environment is also brimming with opportunities for creative impact and passion-fuelled success.

If you have a hospitality business (or dream of one) SilverChef are here to help you acquire the equipment and fit out that you need to thrive! You can read more about our flexible financing options here.

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