A problem shared?
A white paper from Copenhagen Convention Bureau says associations and meeting suppliers should take a collaborative approach to risk management...
Staging international conferences involves a complex business eco-system involving the ‘buyer’ – i.e., the association or corporate who owns the event, and various ‘suppliers’, including convention bureaux or destination management companies, hotels, venues, and a range of other suppliers, such as audio-visual companies, transport providers, event tech companies, and speakers etc. Sitting in the middle are professional congress organisers (PCOs) who offer their services to associations but are ‘buyers’ of many supplier services themselves, and often own their own events.
A new white paper – Copenhagen Risk Assessment: embracing a bold new era of risk management in the business events industry – posits that each of the parties listed above are exposed to ‘several severe and present risk scenarios’, which have ‘brought about a new awareness of the negative impact unexpected incidents can have on our business sectors’.
COVID-19 was a jolt to the system - and the impetus for the white paper, which surveyed 152 people, mainly from Europe and mainly senior managers. Most of the buyers who responded (80%) were associations, while 36 per cent of suppliers were from venues and 26 per cent were PCOs.
Bettina Reventlow-Mourier, deputy convention director at Copenhagen Convention Bureau, says the pandemic had challenged the usual rules of the game when it came to the honouring of contracts.
“We have seen how the honourable principle pacta sunt servanda (agreements must be kept) is easily challenged when a crisis arises, calling for compromises, that if unsuccessful, can cause tensions and potential damage to relations and reputation,” she says.
“The radical uncertainty with shifting market trends and changes in geopolitical, technological, and environmental conditions calls for a movement towards risk-sharing management, so we can stand as strong as possible in our business collaboration and execution.”
...where risk frameworks were in place, there was evidence that they had not been updated since the pandemic...
Lack of understanding
But, she conceded, ‘as an industry, we have little shared knowledge of which risks are the most important for the various stakeholders we work with and how they are best handled’.
The aim of the paper was to find out what those risks were, where they overlapped, and how the risks might be shared. And it became clear early on in the research why this was important.
Of those surveyed, risk played a major role in organisational decisions for both buyers and suppliers. While 98 per cent of buyers responded that risk, in general, influences their organisation’s decision to select a host destination, 100 per cent of suppliers said that risk has at least some influence on their organisation’s decision to quote for a conference or event.
But understanding of the scale of risk and, crucially, who owns it was not consistent across the board. The quality of risk frameworks varied across buyers and suppliers. While PCOs and corporates had strong risk management frameworks, the same could not be said of most associations, and much of the supply side. Only 52 per cent of association had a framework for assessing risk, with convention centres and hotels 55 per cent and 54 per cent respectively.
In some cases, where risk frameworks were in place, there was evidence that they had not been updated since the pandemic and were therefore, potentially, out of date.
For example, an association’s primary risks are around finance, such as meeting revenue targets, while the suppliers’ risks are around operational and cancellation policies. A key challenge is that post-COVID delegate and business behaviours shifted, but suppliers went back to their standard contractual agreements and the industry’s legal framework remained the same.
For associations the main strategic risks were global and regional instability...
Three pillars of risk
The paper identifies three pillars of risk - strategic, financial, and operational – and puts them in the context of business events, from an internal and external organisational perspective.
For associations the main strategic risks were global and regional instability impacting sponsor and exhibitor participation (74%), the flexibility of contractual obligations (70%), and the attractiveness of destinations to meet registration targets (60%). The main financial risks were around insurance and cancellation policies (73%), fluctuating prices (73%) and the cost of certain destinations (66%). Operationally, the main threats were travel restrictions, including access, cost, capacity etc., (83%), Venue’s technology infrastructure (78%) and space availability (61%).
Common and competing risk
Many of the risks identified in the survey were shared by buyers and suppliers alike. The impact of travel restrictions, the effects of issues like fluctuating costs on budget management, and the far-reaching consequences of global instability were all identified as common risks.
But other risks were diametrically opposed. From a supplier's perspective, buyers were providing restrictive contracts, whereas from a buyer’s perspective supplier contracts were inflexible. Similar competing risks were identified around deadlines and logistics.
Only by sitting down to talk can common risks - and how to share them - be identified...
Sharing risk
So, what might risk sharing look like when it comes to organising conferences and business events? Well, in most cases, it probably starts with honest and frank conversation between associations and their suppliers – the cities, venues and hotels that will host their meeting. Only by sitting down to talk can common risks - and how to share them - be identified.
As part of consultation for the survey, various examples were mentioned:
Some areas that were raised related to risk sharing were around room blocks, space, and catering numbers, whereby a sliding scale model was implemented instead of a firm set number by a certain deadline. For both sides there is risk and reward. For example, when an event reaches lower numbers, then both sides accept the reduction, and when the number exceeds, both sides take an upside with an opportunity to revenue share.
Another way to minimise risk was to radically rethink the relationship between ‘buyer’ and ‘supplier’ – away from a traditional transactional model to something more like a partnership. Such a step could benefit both sides who may not have the budget or in-house expertise to ‘negotiate the significant changes in contracts being sought today’.
It was raised that a true partnership approach would be seen as one of the most valuable risk mitigators. The traditional contract is no longer fit for purpose with terms and conditions established over many years using traditional buyer behaviour, event formats, and business models. Today’s buyers and suppliers want their risk exposure minimised, providing an opportunity to repurpose a partnership agreement with clear objectives established at the outset. This is a shift in approach that may be beneficial.
The white paper notes that risk sharing effectively reduces risk, breaking it down into ‘manageable proportions’ by ‘distributing the burden of potential losses across multiple parties.’ But for risk sharing to take hold, three things needed to happen: associations and suppliers needed to accept a mindset shift to a ‘new normal’ where environmental and social concerns were being foregrounded in businesses and organisations; they needed to develop and integrate new risk management tools which were ‘fit for purpose; and, finally, they needed to engage in ‘intensified dialogue’ to ensure better ‘risk mitigation all round’.
The report concludes:
By fostering a deeper understanding of the risks and their potential opportunities as well as threats, both buyers and suppliers can develop and strengthen their risk management frameworks. Collaborative risk sharing between parties will only become more important as a key strategy to enhance financial resilience and optimise outcomes. By embracing risk sharing and working together, we can effectively mitigate potential disruptions, ensure business continuity, and ultimately deliver successful and impactful events.
DOWNLOAD THE FULL REPORT: HERE
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