Feasibility Analysis of Applying Financial Risk Management Methods to Tourism Risk Management

Abstract

The global tourism industry, a significant contributor to economic growth and employment, operates within an environment of profound and increasing uncertainty. Geopolitical tensions, climate change, and the lingering effects of pandemics have exposed the limitations of traditional, qualitative risk management approaches prevalent in the sector. This paper argues for a paradigm shift, exploring the feasibility of transferring quantitative and predictive methodologies from the mature discipline of Financial Risk Management (FRM) to Tourism Risk Management (TRM). We contend that despite surface-level differences, both fields share foundational characteristics: exposure to uncertainty, information asymmetry, systemic interconnectedness, and vulnerability to catastrophic tail events. Through a comparative analysis, this study systematically examines the applicability of key FRM tools—such as Value at Risk (VaR), GARCH models, stress testing, real options analysis, and portfolio theory—to tourism contexts. We propose concrete adaptations for forecasting demand volatility, assessing destination resilience, and predicting supply chain disruptions. While acknowledging significant challenges like data heterogeneity and the subjective nature of tourist risk perception, the paper concludes that such a cross-disciplinary application is not only feasible but also imperative for building more resilient tourism systems. We propose an integrated conceptual framework to guide implementation, paving the way for a more robust, data-driven approach to navigating the complexities of modern travel.