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Assessing Property Risks: The Importance of Property Risk Management

Assessing Property Risks: The Importance of Property Risk Management
Assessing Property Risks: The Importance of Property Risk Management

Property owners commonly need to manage a wide variety of risks, whether they own or manage a commercial, residential, investment, or industrial property. Those risks might relate to security, liability, environmental hazards, loss of value or the threat of tenant disputes or non-payments impacting their profitability.

 

Risk management is a prevalent concern, where property owners with high-value sites or a larger portfolio of properties may have an evolving and ever-changing potential risk profile, which could impact each property differently.

The key to effective and proactive property risk management is to maintain complete oversight, working with security advisers and consultants with expertise in risk controls who can offer independent assessments, recommendations and monitoring.

How Can Property Owners Assess and Control Risks?

There are, in general, three ways to address risk – avoiding or eliminating the hazard, controlling the level of exposure to the risk, or transferring responsibility or the monitoring of the potential threat to a third party. Risk transfers can involve insurance providers, for example.

In real-world scenarios, the norm is to incorporate all three approaches into property risk management, implementing ongoing reviews and appraisals to identify when and how risks have changed and what steps must be taken in response.

vacant property inspections

What Is a Property Risk Assessment?

The risk assessment process involves:

  • A comprehensive inspection of all the risks or hazards associated with a property.
  • Identifying the likelihood or severity of each threat should it materialise.
  • Determining the risk strategy to remove, control or transfer that risk to bring the property risk profile down to an acceptable level.

Regular risk assessments, performed at least annually and whenever any circumstance changes, can be highly beneficial. Property owners who know precisely what risks are relevant to each building and how they are dealing with those risks have the peace of mind that their investments and premises are well-managed.

Risk management is also a mandatory legal responsibility in many cases, such as having an up-to-date fire risk assessment or taking steps to protect properties, assets and workforces in line with insurance requirements.

In this guide, the Clearway property risk team summarises core hazards that may affect your property or portfolio and some possible solutions to ensure every risk is correctly managed, logged and monitored.

Physical and Security Property Risks

The first risk category is physical – where a property could be exposed to:

  • Break-ins, thefts, vandalism, squatters and other intrusions.
  • Damage caused by tenants, unauthorised visitors or extreme weather conditions.
  • Fire, flooding and gas leak risks.

Many property owners opt for a security strategy, including perimeter patrols, physical guarding, access control systems at entry points, electric gates and barriers, anti-climb fencing, robust security locks and CCTV surveillance.

However, your physical security assets must be suitable and provide the necessary level of assurance. For example, a property with a large outdoor space may benefit from concrete barrier blocks to prevent vehicular access and mast-mounted CCTV to deliver adequate coverage.

A vacant property may be better protected with wireless intruder alarms, fixed CCTV camera systems, routine inspections and steel security doors and screens.

The assessment process is important since it defines the most serious risks, where and how they could emerge, the right security measures to defend against a threat, and how this feeds into a broader property management strategy.

Property owners also need sufficient insurance coverage, which can transfer a proportion of risk to their provider. Excellent levels of physical security typically mean insurance carries lower premiums.

Clearway Wireless Fire Alarms

Risks Linked to Property Management

Every property requires management, whether a commercial rental property, a premise from which the owner runs a business or an investment property. Properties that are correctly managed and supervised are considerably less likely to experience issues such as:

  • Unidentified maintenance issues, such as leaks, damp and outdated fire systems.
  • Poor record-keeping, including tenant documentation, user databases, entry logs and details of inspections, certifications and safety checks completed.

Any ongoing risk that could have been dealt with immediately has the potential to become far more serious if left to escalate. Examples include outdated fire and smoke detection systems. The repercussions can be costly if the system has not been tested, does not work correctly in an emergency, or is found unsuitable during a property audit.

From an insurance, risk management and property protection perspective, having ongoing, professional oversight of your property, its condition, usage and compliance with compulsory regulations is just as important as preventing thefts or criminal damage.

Property Tenancy Risks

Around 55% of all UK commercial properties are rented to the tenants rather than being owner-occupied sites. Commercial tenancies are often regarded as lower risk than residential tenancies, but there remains the potential for issues to spiral.

Negative scenarios could include tenant disputes, breaches of lease clauses and covenants, unauthorised subletting, lack of property upkeep and maintenance, non-payment of rent and the need to pursue evictions.

Tenants can pose a financial risk if they default on their rental obligations or service charges, cause damage to the property, or do not comply with the terms of their lease agreement.

The right approach to tenant risk management depends on the nature of the property and tenancy but always begins with a professional assessment of rental agreements and contracts to ensure you have the legal right to pursue eviction proceedings if the tenant breaches the terms of their tenancy.

Many property owners also rely on certified eviction agents and enforcement officers to step in if they experience problems with a tenant. Our commercial teams can, for instance, assist with peaceful re-entry proceedings and lease forfeiture processes and ensure you comply with the law at every stage.

The Vital Importance of Property Risk Assessment

Alongside the prominent risks explored here, property owners may also need to consider market risks, where a commercial or investment property depreciates, and liability risks. If a property contains an unlawful fixture or utility connection or has not been inspected or certified, a liability claim may be made against the owner.

The approaches we recommend depend on a thorough property risk assessment, the types of risk of greatest concern, and how likely those risks are to occur.

By implementing security controls, professional property management and long-term supervision and monitoring, property owners can reduce their risk to the level they are comfortable with, without being exposed to significant time, cost and reputational pressures should a risk arise.

Scott Bowers

Scott Bowers

Insurance Director

Scott is an experienced, results driven director, used to managing client relationships at senior/board level, both UK and internationally.
He’s a successful, self-motivated commercially-focused individual with a track record of surpassing challenging goals. Scott has worked within the Legal Services, Insurtech, Insurance, Utility, Counter Fraud and in Investigations for the past 25 years.
As a seasoned Sales Director, Scott has over 20 years’ executive-level experience in B2B & B2C SaaS sales solutions and is passionate about technology & innovation and delivering an excellent experience to customers.

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