Understanding Risk Management In Property Management

If you are a Property Manager, then one of the most important areas of management that you need to understand is risk management. The owners of the real property that your business is based on are probably counting on you to be knowledgeable in this vitally important area. Risk management that is not handled properly can lead to huge expenses and possibly unexpected law suits.There are three techniques to handle risk… Avoid, Control, and Transfer. These techniques can be symbolized by A.C.T. Let’s discuss the first one.Avoiding a risk is removing the potential for loss. If, for example, the tennis courts at an apartment complex are in need of repair, management could avoid the risk by removing the tennis courts and planting grass. This problem is solved.Controlling risk is proactive and it’s preparing for problems ahead of time. So, in the case of the tennis courts, the tennis courts could be resurfaced with a softer surface and first aid kits could be placed close-by. This would certainly solve the problem and might be an acceptable solution.Transferring risk is moving the risk to another company. Let’s say we contracted with an insurance company to cover any accidents that occurred on the tennis courts. This would transfer the risk to the insurance company.Insurance companies can provide coverage for both tenants and property owners. Tenants can buy insurance to cover their own personal property. Owners of rental property can buy insurance to cover, fire, flooding, and liability. An owner can also purchase insurance to cover loss of rent in the event of an emergency which causes tenants to relocate while repairs are being made.Of course, one can always use the ostrich “head-in-the-sand” technique of “retaining” risk and hope nothing will ever happen. But, it’s the Property Manager’s duty to help property owners identify risks. And, this is relatively easy to do. Just follow the advice of the great philosopher Yogi Berra… “You can observe a lot just by watching.”Property Managers need to also assess the risk that their own business is being subjected to. Remember, you are an in-between-man… between the tenant and the property owner. Either one of these parties could file suit against you and/or your company. So, be sure you cover this risk.Being a Property Manager is a thankless job. Tenants and property owners rarely give praise. But, if property management is your job, keep your head “out-of-the-sand” and properly manage the risk.