A property manager’s work is never done. The everyday job list includes:
- Handling rent
- Maintaining occupancy
- Overseeing property staff
- Conducting maintenance and repairs
- Supervising vacant property work including hiring subcontractors
- Managing the budget and maintaining property records
These tasks easily could fill more than an eight-hour workday, yet a critical “to do” item is missing from the list – managing risk. While the best property managers focus on income-generating and cost-cutting tasks, failing to prioritize risk mitigation and insurance compliance could create the biggest cost of all.
Why make risk management a priority?
Property management is risk management. Consider these numbers that illustrate why:
- More than 4.1 million US workers suffer a serious job-related injury or illness every year.
- About 2 million American workers are victims of workplace violence annually with a higher prevalence among operations exchanging money including retail, restaurant and bar tenants.
- From 2014-2016 non-residential building fires resulted in $2.4 billion in annual property losses with cooking causing about 30% of the fires.
- Costs and compensation paid in the US tort system totaled $250 billion from general and commercial liability exposure in 2016.
With numbers like these, luck cannot be a loss prevention strategy.
Where do I begin?
A true risk mitigation process systematically safeguards against claims and losses. The best first step includes leveraging the “financial first responders” – insurance policies – in all contracts.
Start verifying all tenant, vendor, and subcontractor certificates of insurance (COIs). Require the property owner and manager be named as additional insureds. Validate insurance complies with all contractual requirements prior to any tenancy or work project.
How do I find the time for risk management?
You understand the risk and where to start in preventing it. Finding time for a good risk mitigation plan may be the big challenge. Following are few time management strategies for winning at loss prevention:
Pair risk management with everyday tasks
Rather than making risk management “another thing to do,” connect it to existing tasks. Add reviewing COIs as part of the vendor and subcontractor vetting process and check them again before work begins. Only hand new tenants the keys after validating their COI. Use routine maintenance or repair requests as opportunities to check insurance compliance. Add a lease agreement clause requiring all third-party vendors or subcontractors hired by tenants be approved by the property manager in advance or create a repository of approved third parties for tenants. These tactics ensure anyone operating or working on the property carries the proper insurance without creating much additional work.
Property management platforms with COI tracking or independent insurance tracking systems are worth the investment. Look for technologies like myCOI that digitize document storage, capture COI expiration dates, and automate third-party renewal alerts. Identify threats proactively using risk dashboards. Some systems also integrate with financial technologies to withhold payments for non-compliance. Most importantly, insurance tracking technologies lower risk by performing several critical preventative tasks automatically rather than adding work to a busy property manager. In fact, a 2018 study conducted by Buildium showed 32% of building managers indicated efficiency as their top concern outscoring maintenance, growth, and profitability. (Interested in purchasing COI tracking technology? Download our Buyer’s Guide here for helpful advice and questions when shopping around.)
Establish risk management metrics
Loss prevention becomes everyone’s responsibility when part of a company’s key performance indicators. Establish metrics around third-party insurance compliance and make them visible. Create staff incentives for meeting milestones or achieving goals. KPIs establish risk mitigation as an important priority for the company and help eliminate “do it tomorrow” time management. The worst claim is the one that could have been avoided yesterday.
Overcome the fear of risk
The phrase “what you resist, persists” often proves true. People frequently avoid things that make them uncomfortable. Lacking proficiency in legal or insurance jargon is not uncommon. Property managers must make time for learning the basics and feel comfortable leveraging external specialists for help. Hoping a claim or litigation will not happen without taking actual preventative steps almost guarantees its occurrence. Education can be the first step of a risk mitigation strategy. Start small and add loss prevention procedures incrementally. Every new process reduces risk.
Risk management does not have to be labor intensive or time consuming, but it does need to be a priority. Surveyed property owners and managers indicated 40% benefited from premium reductions based on good risk management practices. Add this to the cost savings of avoided claims and the financial benefits are significant. There is no time like the present for a better risk strategy.