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The Property Manager's Quick Guide to Risk Management

What Is Risk Management

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From Chesley Brown International

Risk Management

 

What types of risks can affect property managers?

If you are a property manager, project manager, or facilities manager, you have a lot of responsibility on your shoulders, and you know there’s a lot at stake. There’s occupancy concerns, building maintenance, ensuring investors and tenants alike are satisfied, and so much more.

With every project or property one must assume there are certain inherent risks. Risks are everywhere:

  • There can be delays during certain project stages.
  • Severe weather may cause significant damages that will cost more time, money and liability.
  • Proprietary data might not be as secure as it needs to be.
  • Contractors and employees may suffer site injuries or death.
  • Clients may create exposures you hadn’t thought of.
  • You may not have all the information needed to properly prepare certain project phases.
  • Your lack of security measures, safety and/or confidentiality protocols may leave you liable in local, state and/or federal lawsuits.

The list can go on and on. As a property manager and leader, you’re responsible for all of these probabilities. And, there is always room for unforeseeable risks as well. But for most, there are 6 main risk types to be aware of during any project. These include:

Market or Economic Risk

Market or Economic Risk

Anything that will bring your expected overhead costs above or beyond manageable means, this can include counterfeit or fraudulent activity or even budget overruns.

Operational or Physical Risk

Operational or Physical Risk

These include risks that originate from inefficiencies or dangers within various project stages. These risks can be small things from delays or overwork to something as major as an accident on site and/or safety violations.

Perimeter Risk

Perimeter Risk

Most might think this includes risks related to protecting the project, project site, and the tools and workers. However, in today’s information age, perimeter risks also include anything that poses a threat to cyber security protocols and in-place countermeasures.

Strategic Risk

Strategic Risk

Every choice you make comes with some sort of risk or consequence. That’s why it’s important to evaluate all your options when formulating and implementing a project plan.

Environmental Risk

Environmental or Regional Risks

In every region there are a variety of unique risks ranging from hurricanes and tornadoes to flooding and area crime statistics. It is important to have a plan in place to handle anything mother nature can throw at you.

Emergency Preparedness and Training

Emergency Preparedness and Training

This is often an overlooked component in the overall risk management strategy of many organizations. How would your facility and staff handle a bomb threat, or active shooter? Having an acute understanding of each of these questions can save lives, and reduce the effect such an event can have on your bottom line.

So what is security risk management?

Now that you know some of the possible risks out there, you probably want to know how to take control of them. That’s where risk management comes in.

Risk management is the action of putting policies, systems and procedures in place to reduce the likelihood that a risk event will occur. It can also minimize the impact of a risk event if it does happen.

There are a number of strategies you can put in place to help mitigate risks as a property manager. However, the exact solution is dependent on the scenarios surrounding the project. You will have to predict, assess, measure, and evaluate the best solution or strategy to prevent or prepare for a risk event.

Utilize Enterprise Risk Management Strategies

Thankfully, you don’t have to burden yourself or your team with every risk out there. Federal and state agencies have established certain guidelines for businesses to follow to mitigate certain risk situations. These guidelines (otherwise broadly known as Enterprise Risk Management) serves as a fundamental approach for the management and evaluation of risk in an organization. They don’t necessarily instruct how to manage risk but dictate that certain proven frameworks must be in place to mitigate them.

A couple examples in the US include the US Sarbanes-Oxley Act of 2002 (which oversees corporate financial corruption and consumer protection) and the US Health Insurance Portability and Accountability Act (also known as HIPAA). Failing to follow all the various regulations can expose your project to significant liability, and or legal action.

Why Are Risk and Vulnerability Assessments Important?

Though these can cost significant time, money and resources, risk and vulnerability assessments can save you even more in all of these areas.

Depending on the level and probability of risk, you can:

  • Ruin your reputation with clients, partners, governing bodies and the public
  • Find it difficult to justify costs behind different stages of the project and the resources and time necessary to keep it on track
  • Sacrifice meaningful productivity that could delay, prevent the completion or even cancel the project
  • A lack of risk management or mitigation plans can expose the you to significant liability exposure, seeing as how the outcome of many lawsuits can be based on “reasonably foreseeable” events, and failing to be prepared for a reasonably foreseeable event can be quite costly.

However, the rewards of carefully preparing risk and vulnerability assessments extend beyond the success of the project. These reports can be eye-opening into the efficiency and costs behind similar future projects performed by your team or organization. This will give you the advantage when it comes to pricing yourself, organizing yourself, and building your reputation in the private and public eye.

These assessments also break barriers across teams and departments in your organization. They help everyone understand the larger goals of the company, establish a strong chain of communication, and influence policy and relevance of installing risk countermeasures company-wide.

The 5 Best Strategies to Combat Possible Project Risks

Handling risk tends to follow one of 5 strategies in risk management. These include risk buffering, risk avoidance, risk control, organizational flexibility, and risk assumption.

Risk Buffering
This is often performed in the early planning stages of any project. Risk buffering in most cases is preparing insurance against risk so that you’re prepared to handle it when it comes about. This may include setting a reserve fund for the project, adding additional resources and manpower, or even protecting your organization from liability through an insurance company.

Risk Avoidance
This is the strategy most property managers hope for. Risk avoidance is a strategy or policy that will eliminate a risk from happening in the project. By doing this, the property manager looks at the causes of the risk event and takes such measures to eliminate it completely or minimize the nature of its impact.

Risk Control
When risks can’t be avoided but can be mitigated in some way, risk control is the strategy to follow. This means as property manager that you take steps to minimize the impact or likelihood of the risk.

Often this comes in the form of data-gathering and early-warning systems to keep awareness and control of the situation as it comes.

Organizational Flexibility
When risks are unpredictable, it’s best to leave a little breathing room in your project plans. In this strategy, you may defer making key decisions until more information is presented. You may also have to adjust the scope or structure of the project to account for a risk.

Another flexible option to consider under this strategy is breaking the project into stages and determining at the end of each stage whether to go forward or stop the project in its tracks.

Risk Assumption
Most property managers hope that it will never come to this. However, when risk is inevitable, you may have to accept that a risk factor will impact the project and will have to account for the damage it may do.

It’s important to ensure that everyone participating in leading the project is aware that a risk event will occur and to expect it somewhere along the project phase. Risk assumption often occurs in cases where a property or project manager has to choose between the two or more risks that are inevitable in a project.

In Conclusion

While it may seem overwhelming at times, being proactive about recognizing your risk exposures can help save lives, money, and headache. That's why it pays to have a true partner to help guide your organization through the myriad risks you may face. If you have questions, or seek expert advice don't hesitate to contact us. We'll take care of the worry, so you can get back to business.

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