VAMA Conference Preview: Speaker Rick George

What's the risk - a common sense approach to managing risk.

Richard George, NOI Coach 

As a property manager, I have always struggled with the concept of Risk Management and how it can serve customers successfully and improve profits. In my career, I have worked for companies that had in-house counsel and risk management departments as well as companies where this responsibility has fallen onto the property managers. I have spent decades befuddled by questions like:

When you flip on the television during the day you will find commercials advertising slip and fall attorneys. They all look and sound the same: a narrator that says something like this, "Is there anything at all wrong in your life, have you been injured, or have you been made to feel bad....Just call my 800 number because I am sure that your landlord is at fault. We will make them pay." Then they have testimonials from a few "real clients" that say "I called this lawyer and he got me $100,000." Because of attorneys like these we as an industry are afraid of our own shadows which lead us to behave like defendants.

We have devolved into an industry in which, when a resident or employee comes to inform us about an injury they have sustained on our property, we react like robots. We start thinking about filling out forms, taking pictures and making notes of what type of shoes the injured person is wearing. By going directly to this line of thinking and behavior, rather than just showing sincere concern for another person’s suffering, we are, in essence, telling people that they should consider filing suit. We have to inject more human emotion into our behavior and be sincere about it.

When it comes to managing real property we have an obligation to protect three things: people, physical assets and our reputation or stature in the community.

1. People: Every decision that we make as professional property managers should always take into consideration the health, safety, security and well-being of our residents and their guests, our employees, our vendors, and our prospects. The one thing I have learned in my career is that if a person or a pet gets injured, or loses their life on our property, it is likely to make the news. As property managers we are the guardians of all of the people and animals within our domain and that is serious business that cannot be taken lightly.

2. Property: Second are the physical assets that we manage: things like buildings, amenities, landscaping, and equipment. This is the area where most property managers thrive. We are great at managing things because with most things we have no emotional attachment. We must do our best to eliminate and reduce the threat of dangers from threats such as fires, floods or any other threats or natural disasters to our assets.

3. Reputation: The third obligation that we have is to protect our stature in the community, our reputation. This asset that we must protect requires a more nebulous solution as it does not have a physical manifestation and is far more difficult to measure if we are successful or not. Whenever we have incidents to people or property our reputation is in jeopardy and most of the time it is how we handle these incidents that will dictate the damage that we will suffer. Most of us have experienced managing a property that has a reputation. The place that has bedbugs, or the place where cars are stolen, or the place where that guy was murdered, these are the kinds of things that can have a dramatic effect on our success.

Once we understand what we are protecting, we must ascertain the threats and determine the likeliness that they will occur. Should an incident occur, we must then estimate the impact or severity. When we have prioritized the infinite number of possibilities, we then seek to eliminate or minimize the likeliness of occurrence. From there we can build plans to mitigate or minimize the damage. Finally we buy insurance to cover the remaining risk left behind. An effective plan should include all of these elements and should not become a barrier to the operational effectiveness of the business. 

Real risk management acknowledges that we cannot eliminate risk altogether, and it goes further to recognize that we must take calculated risks to obtain the greatest return for our investors. I wish I could give property managers a shield that is bullet proof against risk but it simply does not exist. What seasoned property managers have learned is the delicate balance of accepting calculated risk in order to enhance our effectiveness and ultimately our net operating income.

There was a time when I felt as though risk managers and attorneys existed solely to inject negativity into our worlds, constantly reminding us of what we can’t do by telling us stories of the boogey man that lurks in the shadows waiting patiently to sue us and obliterate our success. What I have learned over the years is that their job is to look for the elements of risk and our job is to look for elements of opportunity. As operational managers we must be the voice of reason and decide when the potential upside outweighs the calculated risk that you accept.

The formula that I use consists of utilizing resources like attorneys, risk managers, or insurance specialists to determine the "worst case scenario". I use experience and common sense to determine the "likely scenario". Once I have the possibilities firmly implanted in my mind, I make what is now a simpler decision as to what course of action to take. I find that if I live in a world paralyzed with fear and make all of my decisions with a "worst case scenario" mentality, I cannot rise above the pack. We live in a world filled with risk and every decision we make could end badly, and many will in your career. The nice thing is that we have insurance and our obligation is to do what we do intentionally. I firmly believe that whatever you do intentionally is usually right, it when we act without thought that is when we get ourselves in trouble.