ACC495: Discuss and identify the benefits and opportunities of hotel automation i.e. the Integrated ERP system: Corporate Governance and Risk Management Assignment, SUSS

Question 1

DG Hotel Group (DG Group) was founded by Mr Able Cheong and DG Group now has 88 hotels with over 8000 rooms under the brand name “YOLO”. It has an established presence in 5 countries i.e. Singapore, Malaysia, Australia, New Zealand and Japan.

The group focusses on mid-tier to upper upscale hospitality sectors for both urban explorers, business travellers and social urbanites. DG Group takes a customer-focused approach in positioning the YOLO brand which is carefully designed to deliver what consumers look for in today’s travel experience.

Able is the current CEO of DG group and he plans to hand over the reins of the business to his daughter, Anita Cheong, the current Chief Operating Officer (COO), in two years’ time from 1 January 2025. Anita graduated from the Singapore Management University (SMU) in 2010 with a double degree in Business Administration and Law. She started her career in Raffles Hotel Singapore and left as a Guest Services Manager after 3 years, to join DG Group in Sales and Reservations Department. She moved to various other functions to gain operational experience before she was appointed the COO in 2017. Able Cheong’s wife, Junie Cheong, joined DG group in the 1980’s and continues to oversee the finance function. She assumed the CFO position in 2005 and is supported by a Senior Finance Manager and a team of 10 staff in Singapore. She currently works on a part-time basis as CFO.

DG group’s Board of Directors comprises the CEO, Board Chairman, COO, CFO and Able’s older brother, Jack Cheong. Jack is also appointed as Senior Advisor and is paid a monthly salary. He attends management meetings and is involved in ad-hoc projects where required.

Other than being salaried employees, the CEO, COO and CFO are also paid director remuneration fees and performance bonuses. The group’s business, financial and operating authority (including remuneration matters) rests with the CEO and cheques and all payments modes can be authorised by either the CEO or CFO.

(a) DG Group’s Digital Transformation Roadmap
Anita established a 5-year Digital Transformation Roadmap for the DG group in 2021 and was instrumental in overseeing the implementation of the Cloud ERP system for the group that fully integrates the hotel operations from reservations, front office operations, billings, housekeeping, inventory management, food and beverage operations and finance. The group intends to launch a pilot project at the YOLO@Merlion Hotel located in the central financial district of Singapore by end of 2024, deploying robots to provide guests with a unique
experience, improve guest satisfaction by speeding up processes and reducing waiting times
and ease shortages in manpower with the tight labour market. YOLO@Merlion Hotel will be
the first hotel in Singapore to be staffed by robots at the front office. The hotel’s robots will be
deployed to provide information, front desk services, storage services, and check-in and checkout services, with technology including voice and facial recognition.

(b) DG Group’s Business Expansion and IPO Plans
The CEO plans to invest in a new business that specialises in the interior outfit of hotels focussing on the luxury and higher end market. The expansion plans involve an acquisition of an existing business with an established presence worldwide.

The group also plans to acquire various properties in Europe to establish a heritage brand. The DG group has initiated the IPO process and appointed a Catalist Sponsor to undertake the listing process with DG group on the Singapore Catalist Board. After listing, the Catalist Sponsor will continue to supervise and monitor DG group’s compliance with the continuing
listing obligations.

In working towards the planned listing, the group will undertake a formal an enterprise risk assessment of the group’s hotel management operations and this will be submitted to the appointed board of the listed entity for review and oversight.

(c) Operational issues with housekeeping operations in Australia
The hotel in Australia experienced a high turnover of housekeeping staff after a long serving housekeeping manager resigned in July 2022. There was a 50% turnover of staff over a period of 12 months after that. During that time, the standard of housekeeping services was significantly eroded to the extent that the department became dysfunctional and was unable to meet its required standards. Staff were not motivated and the overall morale was low and productivity declined. Guests’ complaints about the quality of service emerged and occupancy rates are affected.

Required:
(a)
(i) Discuss and identify the benefits and opportunities of hotel automation i.e. the Integrated ERP system and the deployment of robots.

(ii) Identify and assess the risks associated with the pilot project to deploy robots at YOLO@Merlion Hotel in Singapore and formulate the measures required to mitigate the risks to realise the full potential and benefits of the project.

(b)
(i) With the intended listing on Catalist, identify and discuss the key changes that the DG Group should make in the immediate term to meet the corporate governance arrangements and requirements of a listed company including compliance with the SGX Listing rules.
(20 marks)

(ii) Assess and determine the relevant internal control structures and other
arrangements at the entity or organisational level that DG needs to put in place to provide assurance to the appointed Board of Directors under the listing rules on the adequacy and effectiveness of internal controls. You are not required to cover the internal controls at the operational level for the different business functions
(20 marks)

(iii) You have been appointed as the Risk Advisory Consultant to perform the
Enterprise Risk Assessment. Identify and determine what are the key strategic, financial, operational, compliance and IT risks for the DG Group. You are required to report only the top 10 key enterprise risks (with at least 2 risks in each risk category) where the inherent or gross risk is expected to be high without establishing risk mitigation measures.
(20 marks)

(c) DG Group has hired you as a Business Consultant to review and provide
recommendations to get the housekeeping function back in shape. Applying the COSO Internal Control Framework components and principles, assess and formulate the internal controls systems and processes that should be established for the housekeeping functions in Australia to ensure that the key operational objectives are met and the required standards and expectations of hotel guests are fulfilled.

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