Travel Risk Management: Are You Ready for a Crisis? | Travel

Introduction If you know that business travel is not without its risk and the potential for crisis, then you need to read this article. In this article we are going to talk about the management and containment of crisis as it relates to travellers and travel managers. The objective of this article is to share with you the collective knowledge on managing crisis and significantly improve your ability to identify and manage a crisis but also improve your business travel efficiency.During this article I am going to discuss travel risk myths, crisis management, plans and options so you can immediately compare or improve your own travel risk management system for your travellers or travel management department.Crisis by definition is something you didn’t have a plan for or something in which you are unprepared. Additionally, it can be a series of events that in concert create a crisis. Events or issues that occur, to which you have a plan and strategy, is merely an incident.Crisis Management/Leadership The first thing is to clarify what is the difference between crisis management and leadership. More importantly, which one is the more important?Crisis management relates to the response to event/s that threaten your business, travellers or travel activity. The event leads and you follow with plans, decisions and actions.Crisis leadership, on the other hand, is more about getting ahead of the events and issues to prevent, management and even contain the impact to your business or business travel activities. While management is a portion of the leadership demand, your actions and involvement lead the outcomes rather than a more passive wait and act approach with pure crisis management.Crisis leadership is the less practiced of the two, but the most significant in terms of results and reduction in risk and impact. If you take nothing else away from this session, it should be that your focus should always be on Crisis Leadership, not crisis management.Myths There are many myths and half-truths about crisis, disruption and threats within the travel management sector. Much of this misinformation has originated from travellers themselves, media, travel managers, friends and family or so called “experts”.For example, many travellers and planners are focused on terrorism. The reality is, you have a very, very small chance of being exposed or affected directly by a terrorist act. It doesn’t mean you should discount it as a threat altogether but it shouldn’t dominate your plans or processes if not a proportional threat to you and your travellers. Conversely, almost everyone overlooks motor vehicle accidents. Yet, they happen far more frequently, can have devastating affect on travellers and are the least common plan contained within company travel management departments.Travellers and travel managers must be prepared, educated and have supporting plans for any event that has the potential to delay, disrupt or harm the traveller or the business.The most common events include:
Motor vehicle accidents
Airline delays or cancellations
Airport closures or disruptions
Transport delays
Bad weather
Sickness and illness
Petty crimes
Hotel fires
Political disputes
Demonstrations and gatherings
Motor vehicle accidents within your own country can be stressful and dangerous but on an overseas business trip they can be 100 times more challenging and dangerous. Consider language, local authorities, first responder, standard of healthcare, families and support in your plans and initial response.Airline delays and cancelations. They happen all the time but they are not just an administrative response. You may need to consider safety, transport, quarantines, security threats, government response and wide spread suspension of services to overcome the issue and maintain safety of your travellers.Airport closures or disruptions. Failed systems, electrical problems, threats, weather, construction and so on can prevent you even getting to your flight. Consider the impact this has on your plans and how your traveller will need to possibly extend stay, move to alternate airport or find accommodation.All other transport delays and disruptions can create crisis when everyone no longer has access to trains, buses, key roads or even water transport. Have a plan and add it to your immediate decision making process.2010 and the commencement of 2011 has seen travel of all kind affected by natural disasters and weather. Weather and natural forces have and always will impact travellers. It does and will continue to occur. It is highly concerning how unprepared travellers and companies are for volcanic eruptions, typhoons, floods, earthquakes and general bad weather.People get sick or feel unwell all the time. This is compounded significantly when travelling. Standard of care, language, access, cost, complications, choice and numerous other location based concerns will determine just how at risk your traveller will be. A single, “one-size-fits-all” plan or solution will fail and you need to be aware of these issues immediately with the onset of an affected traveller.Crimes are a reality of any city in the world. However, travellers seldom know the risks and may be preyed upon by thieves and criminals. The loss of phones, money, and other items may seem less likely to constitute a crisis but when overseas, injured or not able to speak the local language, all these simple events can create a major concern for your business travellers. This can be amplified if you have a senior executive or a group of executives affected.Hotel fires and emergencies are more common than most people think. The immediate threat to an individual is fairly obvious but the impact that the lack of accommodation choices can create from the temporary or permanent closure of a hotel is a much bigger concern. This was graphically displayed during the Mumbai terror attacks (as extra ordinary as the event was) when most of the best/preferred hotels were now unavailable in a key part of the city. This removed thousands of rooms for business travellers and forced many to cancel or significantly alter travel plans just because there were a lack of suitable accommodation options, whether affected by the events or not.Any event that alters the political stability of a location or region or results in thousands of people out on the streets constitutes a risk to your business travel plans and travellers. They can happen spontaneously or take time to develop. The immediate dangers and the ongoing disruption can have a major impact on your business or traveller.Again, plans, preparation and thought to these issues will greatly reduce the impact and improve your business too.Now that we have removed the most common misconceptions, let’s focus on the management and containment of a crisis.Crisis management The key to successful crisis management is planning, training, plans, decision-making and adaptability.Planning Given the issues previously covered, you now have a better insight into how and why planning is important to remove the more emotive issues from the realities of real business threats and events.Planning needs to include multiple departments and perspectives to be truly effective. One of the greatest weaknesses I see regularly is that departments continue to manage the risk of travel through multiple departments with multiple plans. The input and plan needs to be unified. Depending on the company, it may include travel managers, security, HR, finance, marketing, C-suite and operations.All plans need to be continuously updated, location specific, aide in the decision-making process and modular enough have elements extracted quickly and effectively. Modern, effective plans embrace technology. Rapid, efficient access to information, along with running updates is the hallmarks of a modern sustainable plan, regardless of the size of the issue or the company.Training No plan is effective without training and rehearsal. Training, whether through simulations, drills or live, full-scale exercises are vital to the success of any crisis situation. Such sessions don’t need to be boring or overly complicated but must include travel managers and planners along with the more common crisis and emergency managers.Increasingly, training is becoming a mandatory requirement for key positions and roles. It can be linked to internal HR processes but must support the business objectives and measurable on how it reduces the risk to people, business, brand and travel demands.While the plan creates the framework for crisis decision-making, teams can learn a lot from training on how and when to adapt their plans. How the team interacts, strength, weakness, leaders, followers, limitations, tools and many more planned and surprise outcomes are possible with effective training.Adaptations No plan will completely script all the events, issues and options available for every plausible travel delay, disruption or crisis. You need to be able to adapt and evolve from the original plan and intention. This can only be achieved with planning, plans and training.Solutions So what do I need in my plan?Here is the best travel risk management content for your plan:
Objective(the single most important part of any travel policy)
References
Scope
Legal
Insurance
Finance
Reimbursements
Limits
Priority/precedence
Management Authority/ies
Situations
Procedure will likely cover:
Planning
Resources
Tools
Authority
Executive Decision making
Limits
Budgets
Training
Compliance
Pre-trip admin
Providers
Booking
Accommodation
Airlines
Ground Transport
Safety and Security
Health and wellness
Emergency
SOP/Actions on
Insurance
Travel Monitoring /tracking
Reporting
HR
Entitlements
Threat/risk levels
Shelter in Place
Relocations/evacuations
Management Authority
Review
Don’t forget your risk assessment will need to include the key elements:
Traveller
Location
Activity
Support/Resources
Response
ConclusionThere you have it. Now you know what is required, how do you rate your current plans and preparedness?You now have the most relevant issues and areas to focus upon that will reduce or contain the majority of incidents you may face your travellers will be safer, your business more profitable and your costs will be contained by reducing your exposure to expensive crisis events.We have debunked popular travel threat myths, identified the difference between crisis management and leadership, outlined plans and options so you can immediately compare or improve your own travel risk management system for your travellers or travel management department. Review your plans and make the immediate improvements.You will know when you have an effective crisis management system for your travel risk management strategy when you have little to no crisis.You may have numerous events or incidents but you have a plan, you’re prepared and your decision making is fast and consistent. If not, you have failed and you will run from crisis to crisis on a regular basis.
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The Top 5 Key Benefits of Purchasing and Owning Investment Real Estate | Real Estate

So… You may ask yourself, why should you buy or invest in real estate in the First Place? Because it’s the IDEAL investment! Let’s take a moment to address the reasons why people should have investment real estate in the first place. The easiest answer is a well-known acronym that addresses the key benefits for all investment real estate. Put simply, Investment Real Estate is an IDEAL investment. The IDEAL stands for:• I – Income
• D – Depreciation
• E – Expenses
• A – Appreciation
• L – LeverageReal estate is the IDEAL investment compared to all others. I’ll explain each benefit in depth.The “I” in IDEAL stands for Income. (a.k.a. positive cash flow) Does it even generate income? Your investment property should be generating income from rents received each month. Of course, there will be months where you may experience a vacancy, but for the most part your investment will be producing an income. Be careful because many times beginning investors exaggerate their assumptions and don’t take into account all potential costs. The investor should know going into the purchase that the property will COST money each month (otherwise known as negative cash flow). This scenario, although not ideal, may be OK, only in specific instances that we will discuss later. It boils down to the risk tolerance and ability for the owner to fund and pay for a negative producing asset. In the boom years of real estate, prices were sky high and the rents didn’t increase proportionately with many residential real estate investment properties. Many naïve investors purchased properties with the assumption that the appreciation in prices would more than compensate for the fact that the high balance mortgage would be a significant negative impact on the funds each month. Be aware of this and do your best to forecast a positive cash flow scenario, so that you can actually realize the INCOME part of the IDEAL equation.Often times, it may require a higher down payment (therefore lesser amount being mortgaged) so that your cash flow is acceptable each month. Ideally, you eventually pay off the mortgage so there is no question that cash flow will be coming in each month, and substantially so. This ought to be a vital component to one’s retirement plan. Do this a few times and you won’t have to worry about money later on down the road, which is the main goal as well as the reward for taking the risk in purchasing investment property in the first place.The “D” in IDEAL Stands for Depreciation. With investment real estate, you are able to utilize its depreciation for your own tax benefit. What is depreciation anyway? It’s a non-cost accounting method to take into account the overall financial burden incurred through real estate investment. Look at this another way, when you buy a brand new car, the minute you drive off the lot, that car has depreciated in value. When it comes to your investment real estate property, the IRS allows you to deduct this amount yearly against your taxes. Please note: I am not a tax professional, so this is not meant to be a lesson in taxation policy or to be construed as tax advice.With that said, the depreciation of a real estate investment property is determined by the overall value of the structure of the property and the length of time (recovery period based on the property type-either residential or commercial). If you have ever gotten a property tax bill, they usually break your property’s assessed value into two categories: one for the value of the land, and the other for the value of the structure. Both of these values added up equals your total “basis” for property taxation. When it comes to depreciation, you can deduct against your taxes on the original base value of the structure only; the IRS doesn’t allow you to depreciate land value (because land is typically only APPRECIATING). Just like your new car driving off the lot, it’s the structure on the property that is getting less and less valuable every year as its effective age gets older and older. And you can use this to your tax advantage.The best example of the benefit regarding this concept is through depreciation, you can actually turn a property that creates a positive cash flow into one that shows a loss (on paper) when dealing with taxes and the IRS. And by doing so, that (paper) loss is deductible against your income for tax purposes. Therefore, it’s a great benefit for people that are specifically looking for a “tax-shelter” of sorts for their real estate investments.For example, and without getting too technical, assume that you are able to depreciate $15,000 a year from a $500,000 residential investment property that you own. Let’s say that you are cash-flowing $1,000 a month (meaning that after all expenses, you are net-positive $1000 each month), so you have $12,000 total annual income for the year from this property’s rental income. Although you took in $12,000, you can show through your accountancy with the depreciation of the investment real estate that you actually lost $3,000 on paper, which is used against any income taxes that you may owe. From the standpoint of IRS, this property realized a loss of $3,000 after the “expense” of the $15,000 depreciation amount was taken into account. Not only are there no taxes due on that rental income, you can utilize the paper loss of $3,000 against your other regular taxable income from your day-job. Investment property at higher price points will have proportionally higher tax-shelter qualities. Investors use this to their benefit in being able to deduct as much against their taxable amount owed each year through the benefit of depreciation with their underlying real estate investment.Although this is a vastly important benefit to owning investment real estate, the subject is not well understood. Because depreciation is a somewhat complicated tax subject, the above explanation was meant to be cursory in nature. When it comes to issues involving taxes and depreciation, make sure you have a tax professional that can advise you appropriately so you know where you stand.The “E” in IDEAL is for Expenses – Generally, all expenses incurred relating to the property are deductible when it comes to your investment property. The cost for utilities, the cost for insurance, the mortgage, and the interest and property taxes you pay. If you use a property manager or if you’re repairing or improving the property itself, all of this is deductible. Real estate investment comes with a lot of expenses, duties, and responsibilities to ensure the investment property itself performs to its highest capability. Because of this, contemporary tax law generally allows that all of these related expenses are deductible to the benefit of the investment real estate landowner. If you were to ever take a loss, or purposefully took a loss on a business investment or investment property, that loss (expense) can carry over for multiple years against your income taxes. For some people, this is an aggressive and technical strategy. Yet it’s another potential benefit of investment real estate.The “A” in IDEAL is for Appreciation – Appreciation means the growth of value of the underlying investment. It’s one of the main reasons that we invest in the first place, and it’s a powerful way to grow your net worth. Many homes in the city of San Francisco are several million dollars in today’s market, but back in the 1960s, the same property was worth about the cost of the car you are currently driving (probably even less!). Throughout the years, the area became more popular and the demand that ensued caused the real estate prices in the city to grow exponentially compared to where they were a few decades ago. People that were lucky enough to recognize this, or who were just in the right place at the right time and continued to live in their home have realized an investment return in the 1000′s of percent. Now that’s what appreciation is all about. What other investment can make you this kind of return without drastically increased risk? The best part about investment real estate is that someone is paying you to live in your property, paying off your mortgage, and creating an income (positive cash flow) to you each month along the way throughout your course of ownership.The “L” in IDEAL stands for Leverage – A lot of people refer to this as “OPM” (other people’s money). This is when you are using a small amount of your money to control a much more expensive asset. You are essentially leveraging your down payment and gaining control of an asset that you would normally not be able to purchase without the loan itself. Leverage is much more acceptable in the real estate world and inherently less risky than leverage in the stock world (where this is done through means of options or buying “on Margin”). Leverage is common in real estate. Otherwise, people would only buy property when they had 100% of the cash to do so. Over a third of all purchase transactions are all-cash transactions as our recovery continues. Still, about 2/3 of all purchases are done with some level of financing, so the majority of buyers in the market enjoy the power that leverage can offer when it comes to investment real estate.For example, if a real estate investor was to buy a house that costs $100,000 with 10% down payment, they are leveraging the remaining 90% through the use of the associated mortgage. Let’s say the local market improves by 20% over the next year, and therefore the actual property is now worth $120,000. When it comes to leverage, from the standpoint of this property, its value increased by 20%. But compared to the investor’s actual down payment (the “skin in the game”) of $10,000- this increase in property value of 20% really means the investor doubled their return on the investment actually made-also known as the “cash on cash” return. In this case, that is 200%-because the $10,000 is now responsible and entitled to a $20,000 increase in overall value and the overall potential profit.Although leverage is considered a benefit, like everything else, there can always be too much of a good thing. In 2007, when the real estate market took a turn for the worst, many investors were over-leveraged and fared the worst. They could not weather the storm of a correcting economy. Exercising caution with every investment made will help to ensure that you can purchase, retain, pay-off debt, and grow your wealth from the investment decisions made as opposed to being at the mercy and whim of the overall market fluctuations. Surely there will be future booms and busts as the past would dictate as we continue to move forward. More planning and preparing while building net worth will help prevent getting bruised and battered by the side effects of whatever market we find ourselves in.Many people think that investment real estate is only about cash flow and appreciation, but it’s so much more than that. As mentioned above, you can realize several benefits through each real estate investment property you purchase. The challenge is to maximize the benefits through every investment.Furthermore, the IDEAL acronym is not just a reminder of the benefits of investment real estate; it’s also here to serve as a guide for every investment property you will consider purchasing in the future. Any property you purchase should conform to all of the letters that represent the IDEAL acronym. The underlying property should have a good reason for not fitting all the guidelines. And in almost every case, if there is an investment you are considering that doesn’t hit all the guidelines, by most accounts you should probably PASS on it!Take for example a story of my own, regarding a property that I purchased early on in my real estate career. To this day, it’s the biggest investment mistake that I’ve made, and it’s precisely because I didn’t follow the IDEAL guidelines that you are reading and learning about now. I was naïve and my experience was not yet fully developed. The property I purchased was a vacant lot in a gated community development. The property already had an HOA (a monthly maintenance fee) because of the nice amenity facilities that were built for it, and in anticipation of would-be-built homes. There were high expectations for the future appreciation potential-but then the market turned for the worse as we headed into the great recession that lasted from 2007-2012. Can you see what parts of the IDEAL guidelines I missed on completely?Let’s start with “I”. The vacant lot made no income! Sometimes this can be acceptable, if the deal is something that cannot be missed. But for the most part this deal was nothing special. In all honesty, I’ve considered selling the trees that are currently on the vacant lot to the local wood mill for some actual income, or putting up a camping spot ad on the local Craigslist; but unfortunately the lumber isn’t worth enough and there are better spots to camp! My expectations and desire for price appreciation blocked the rational and logical questions that needed to be asked. So, when it came to the income aspect of the IDEAL guidelines for a real estate investment, I paid no attention to it. And I paid the price for my hubris. Furthermore, this investment failed to realize the benefit of depreciation as you cannot depreciate land! So, we are zero for two so far, with the IDEAL guideline to real estate investing. All I can do is hope the land appreciates to a point where it can be sold one day. Let’s call it an expensive learning lesson. You too will have these “learning lessons”; just try to have as few of them as possible and you will be better off.When it comes to making the most of your real estate investments, ALWAYS keep the IDEAL guideline in mind to make certain you are making a good decision and a solid investment.
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