A Comprehensive Report on Risk in the Real Estate Sector

This report delves into the multifaceted realm of risk management within the real estate sector, utilizing Savills as a case study. It explores various risk management processes, including standards like ISO 31000 and COSO 2004, and emphasizes the importance of handling complaints and establishing robust risk management policies. The report details a risk analysis template for agencies and consumers, outlining likelihood, consequences, and risk levels. It further examines planning for risk control and monitoring, including auditing processes, and identifies diverse types of risks related to staff, agencies, and consumers, such as personal safety concerns and financial losses. The report provides an in-depth understanding of the challenges and strategies involved in mitigating and managing risks in the real estate industry.

RISK IN REAL ESTATE
STUDENT NAME
STUDENT ID
PROFESSOR NAME
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Table of contents
Introduction......................................................................................................................................3
Project 1: Processes of risk management.........................................................................................3
Project 2: Risk assessment...............................................................................................................7
Q.1 Identifications of various kinds of risk in real estate................................................................7
Q.2 Developing a risk matrix...........................................................................................................8
Q.3 Developing various options for minimising the risk................................................................9
Q.4 Developing a plan to control and monitor each of the risk.....................................................10
Conclusion.....................................................................................................................................11
Reference list.................................................................................................................................12
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Introduction
The assignment mainly focuses on the various types of risk management process and various
types of risk assessments. The researcher has taken Savills, a leading real estate organisation in
the UK, founded in the year of 1855 by Alfred Savill. They have many institutes around the
world. The main purpose of Savills is to consult in the various projects of building, planning and
valuation and so on. The researchers have shed light on the various policies and the procedures
of risk management. Various kinds of risk for the real estate have been discussed in this
assignment. In this assignment, the researcher has discussed in detail how to reduce the various
risk factors in real estate.
Project 1: Processes of risk management
Standards for the matter of risk management
Many numbers of standards are developed around the world, all the standards helped to the
various organisations to solve the various types of risk in the management effectively and
accurately. In all the standards, there are various practices to make the risk management less
risky. There are certain standards for managing risks:
ISO 31000 2009- Risk Management Principles and Guidelines: In this standard, there are
various guidelines are mentioned to manage the risk effectively and properly. The main
principals of the risk management are also elaborated on this standard. This is one of the most
used standards to risk management (McNeil et al. 2015, p.258).
COSO 2004- Enterprise Risk Management Integrated Framework: in this standard, the various
risk for the organisations have been stated. With the help of this standard, the management can
make the risk less and can handle the risk for management effectively (Lam, 2014, p.874).
ISO/IEC 31010:2009- Risk Management-Risk Assessment Techniques: In this standard, the
management of the organisation can be able to know about the techniques of the risk
management. With the help of these standards, risk management can be handled accurately
(Glendon et al. 2016).
Procedures to handle the complaints
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According to Hopkin (2017, p.522), it is one the most important factor to handle the complaints
of the customers, agencies and employees as well. To handle all the complaints of the customers
the employees of the organisation must have complaint box and various service centres to handle
the complaints. It helps to the organisation to get the feedback of the customers more effectively.
The employees of the organisations must be effective enough to solve the complaints as early as
possible. Apart from this by handling the complaints of the customers, the organisation can make
their work more productive. In the case of the complaints of the agencies, the organisations must
take bold steps because the agencies are one of the most important parts of Savills, so the
organisation must take some effective step to make them happy and to solve the complaint of the
agencies as early as possible. To handle the company of the employees, the management of
Savills need to know their basic issues that they are facing in the workplaces; it may be related
salary or might be a related job. So the management of the organisation must be well aware of
the complaints of the employees to make the organisation more productive (Haimes, 2015,
p.236).
Various policy and procedures for Risk management
There are various policies of risk management; they are such as the policy to develop the risk
management that is consistent with the strategy for the risk management. Need to implement the
plans for delivering the risk management policies. Gutteling (2015, p.526) stated that for the
level of management of the organisation need to explain the various purpose of the risk
management, the matter of procedures in the various organisations. Finally, in the support level,
all the risk management factors and the purpose of the risk management factors need to explain
to its components. The procedures of the risk management are such as death or any kind of
injury, the financial loss of the organisation, reputation damage of the organisation, damage of
the environment of the organisational and failure of the requirements of the legislature of the
organisation (Allen and Carletti, 2013, p.28). Apart from this failure of identifying, the
opportunity can be considered as a risk for the organisation.
Template of risk analysis
Risk for the agencies
No. Risk Likelihood Consequences Level of risk
1 Casualty in Possible Minor Moderate
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documentation
2 Items stolen
from the
documents
Rare Major High
3 Personal injury
for the
prospective
purchasers
Unlikely Major High
4 Accidents of
agencies
Likely Catastrophic Extreme
Risk of the Consumers
No. Risk Likelihood Consequences Level of risk
1 Financial loss
of the
consumers
Possible Major High
2 Death of the
customers
Rare Major High
3 Personal injury
of the
customers
Unlikely Minor low
4 Accidents of
consumers
Likely Minor High
All these risks for the agencies and the consumers have been stated in the template. For the case
of agencies, personal injuries and state the premises can be the cause of high risk and all these
factors can lead them to high risk (Bunten and Kahn, 2017, p.52). Apart from this for the matter
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of the consumers, the death and financial losses of the consumers can be at high risk. However,
the risk of any such personal injury of the consumers can be less risky.
Planning for risk control plan
It is very important to have control plan of risk within the organisation. The process of making
the plan to control the risk would be included the risk assessment, and the appetite of the risk and
the evaluation about treating the risk (Lang and Scholz, 2014, p.696).
In the case of risk assessment of Savills, need to consider the below factors
● Need to avoid the risk.
● Mitigation of the risk
● Transferring the risk
● Accepting the risk
Then to mitigate the various types of risk the procedures are such as
● Need to remove the risk
● Need to reduce the impact of the risk.
● Need to reduce the various consequences of the risk that can occur in Savills.
● Need to have combining approaches.
All these plans need to be executed by the management of the organisation. To control the risk of
the agencies as well as the risk of the consumers must be the main priority of Savills. Savills can
include all the above-stated plans to make the organisation more effective and efficient. By
including these plans, the management of the organisation can be more efficient.
Planning for Risk monitoring
It is very important to review the plan for monitoring the risk. Monitoring is always the key part
of an organisation to solve any such issues of the organisation (Hartmann, 2015, p.69). First of
the human resource management of Savills need to monitor the work and the environment of the
organisation to make a daily report so that the organisation can be well aware of the various
factors for the risk that can occur in the organisation.
● Need to identify the new kind of risk
● Need to discuss the existing risk
● Need to check the daily review of the risk
● Need to employ efficient employees to monitor all the work of the organisation.
● Need to execute all the plans to monitor the risk.
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According to Li et al. (2016, p.61), the organisation must have proper monitoring system so they
can monitor the plans for monitoring the risk of the organisation. The organisation must have a
proper plan like how to monitor the risk factors then the organisation must have advanced
technology to monitor the daily activity of the organisation. Effective management systems can
make the monitor system of the organisation more efficient. Savills can include the entire plan
for monitoring the risk planning for their organisation.
Processes for auditing
The first process is to send a letter to the customers and agencies. The second process is to
collect the audit evidence. The third is the documentation of the audit evidence. Fourth is
providing an annual or respective report. Auditing is important for an organisation. To make the
internal process of monitoring the various factors of the organisation can help to the organisation
such as the misuse of the assets of the organisation, physical damage of any property of the
organisation, review of the profit of the organisations. It is very important to audit all these
factors of Savills so that the management of the organisation can be more effective and the goal
and the objectives of the organisation can meet easily. Auditing can help to the organisation to
become more productive and efficient (Solberg et al. 2014, p.60).
Project 2: Risk assessment
Q.1 Identifications of various kinds of risk in real estate
Risk related to the staff of the organisation about personal safety
The first risk is the risk of death of the staff, in this case, the risk is extremely high and it can
affect the entire organisation. Savills must consider this risk to make the organisation more
effective. The organisation must be well organised where the staff death must not occur. The
management of the organisation must have the facility to avoid the risk of death (Zhang et al.
2017, p.147).
Second is the risk of personal injuries during the work in the organisation. Injuries are always the
part of those organisations that are related to the real estate work, so Savills must have proper
treatment process so that in the case of any kind of injury of the staff, the organisation can take
immediate steps. However, this is not a high risk for the organisation as well as for the staff; but
still, personal safety of the staff of the organisation must get the priority from the management of
the organisation.
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Risk of the agency
The first risk of the agency can be the stolen items of the premises; it can affect the business of
the agency. This is a high risk for the real estate organisations. This can lead to the financial loss
and can make the agencies less productive and less effective for the real estate. The real state
organisations must have the proper monitoring system to avoid this risk of the agency (Zhao and
Wang, 2015, p.748).
The second risk of the agency is that the sudden death of any such agency can make the huge
impact on the real estate organisation. This is always the high risk. This can lead to both the
organisation as well as the agency toward loss and less profit. The death of the agency can stop
the present project of the organisation. It can make the organisation less productive. The death of
the agency can be said as one of the high risk in the case of the real estate (Saunders and Cornett,
2014, p.586).
All the six risks in real estate can make the organisation less productive and less profitable.
Risk of the consumers include personal safety
First of all the risk of personal safety can be one of the major risks for the consumers. Personal
safety of the consumers can help to the organisation to make their project proceed. In the case of
any such accidents of the consumers, the organisation can be affected and the organisation can
face loss. The sudden death of any such consumers can break the deal with the organisation so
that the organisation can be less profitable (Cvijanovic, 2014, p.2690).
The second risk of the consumer can happen when any consumers break the deal with the
organisation then the organisation can face various financial loss. The organisation can become
less profitable and they can face difficulty to continue the business. This is another big risk for
the real estate.
Q.2 Developing a risk matrix
Name Likelihood Effectiveness of the
risk
Priority of the risk
Death of the staff Rare High First priority
Injuries to the staff Possible Low Second priority
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Stolen documents of
the agencies
Possible Low Second priority
Sudden death of the
agencies
Rare High First priority
Sudden death of
consumers
Most likely High First priority
Deal cancellation by
the consumers
Possible Low Second priority
Q.3 Developing various options for minimising the risk
According to Wu et al. (2014, p.10), the organisations must have the options to minimise all the
stated risk so that they can deal with all these factors of risk. Savills can make the risk less by
taking some effective process such as to make the monitoring process more effective and
efficient; the organisation can make the percentage of the riskless. In the case of the agency, the
organisation must gather previous knowledge about the agency before making any such deals so
Savills can be well aware with whom they are dealing for making the project successful. The
organisation must have proper knowledge and information about the agency. Apart from this, the
risk of cancellation of any such deals with the agencies can also be minimised by making the
policies of the organisation stricter. The organisation can make the process of dealing with the
agencies more strict way so that the cancellation of any such deal with the agencies cannot make
any harm to the project as well as to the organisation. In the case of stool premise of the
agencies, the organisation can make the monitor system more effective so that they can monitor
the entire process of any such project and it can help to solve the risk of stolen premises. To deal
with the risk of the staff of the organisation, the organisation must have pre-personal safety
policies for the staff of the organisation. So the staff of the organisation must feel safe and
secured to work within the organisation. Monitoring the work environment can help to the
organisation to solve any such issues that can lead to any such risk of the staff. Apart from this
Savills must have emergency department so that they can handle any such risk immediately and
they can solve any such issues of the organisation. In the case of the consumer's risk, to minimise
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the risk of the consumers the organisations must have proper policies to deal with the consumers
and in the case of cancellation any such deal with the consumers, the organisations must not face
any such financial crisis that can deal with financial loss. In the case of the death of any
consumers, the organisation must have the policy to return the entire money to the consumers
(Jowsey, 2014, p.489).
Q.4 Developing a plan to control and monitor each of the risk
According to Masalskyte et al. (2014, p.126), to control and monitor each of the risk
organisations need to make some effective plans. To control and monitor each of the risk Savills
can make plans such as to make monitoring system more effective to avoid the data-missing
factor. The data stored places must be safe and secured so that the organisation can safely store
all the data related the project, consumers as well as of the agencies. Savills must employ strong
security system so that misusing any such data may not possible. Apart from this to reduce the
risk of deal cancellation both the agencies and the consumers, Savills must make the dealing
policies of the organisation strictly, so that the organisation must not face any such financial
crisis. The organisation must not avoid any such risk factor and they have to take care of all the
issues of any department so that the matter of any such risk factor of the staff can be less. Savills
must make the personal safety policies for the staff of the organisation more effectively so that
the risk of the personal safety cannot convey any fear in the mind of the staff of the organisation.
In the case of the risk of any such sudden death of the agencies, the organisation must have other
facilities to deal with the situations (Wu et al. 2014, p.10). The organisation of the real estate
must have alternative option to continue the project. By following thus factor, Savills can reduce
the risk. To monitor the risk first need to identify the risk, based on the risk the monitoring
system can be organised. To make the monitor system of the organisation more effective need to
employ some expert so that the monitoring system can help to the organisation to deal with the
various risk of the organisation. In the case of the outside of the organisation, to monitor the
various project of the task, Savills can make some effective management to review the work of
the project so that the review of daily work can help the organisation to reduce the risk that can
hamper the work or the project. The effective monitoring system can help to the organisation to
the reason of the occurrence of the risk. The risk manager of the organisation can help to
implement the plan to reduce the risk of the real estate (Jowsey, 2014, p.489). In the case of the
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risk manager of the organisation must have the capacity to make the plan of mitigation of the risk
properly. By reviewing the risk, the action can be taken immediately.
In the matter of monitoring, any such new process of the organisation must have to test
practically then it is possible to monitor the new process. After the test of the process then the
process of the evaluation can be done.
The stated plans can be used for Savills to reduce the risk factors of the organisation. They can
also make the process of monitoring system more effective to reduce the risk.
Conclusion
In conclusion, it can be said that the various risk management process for real estate have helped
a lot for Savills to identify the risk and to make solutions the risk. Risk analysis process can help
to the organisation to understand the percentage of the risk. In this assignment, the various
process of risk minimisation can help to the organisation to deal with each of the risks. The
various plans to control the risk can help to the organisation to become more effective and
efficient.
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Reference list
Allen, F. and Carletti, E., (2013). Systemic risk from real estate and macro-prudential regulation.
International Journal of Banking, Accounting and Finance, 5(1-2), pp.28-48.
Bunten, D. and Kahn, M.E., 2017. Optimal Real Estate Capital Durability and Localized Climate
Change Disaster Risk. Journal of Housing Economics.
Cvijanović, D., (2014). Real estate prices and firm capital structure. Review of Financial Studies,
27(9), pp.2690-2735.
Glendon, A.I., Clarke, S. and McKenna, E., (2016). Human safety and risk management.
London: Crc Press.
Gutteling, J.M., (2015). Risk communication. New Jersey: John Wiley & Sons.
Haimes, Y.Y., (2015). Risk modeling, assessment, and management. New Jersey: John Wiley &
Sons.
Hartmann, P., (2015). Real estate markets and macroprudential policy in Europe. Journal of
Money, Credit and Banking, 47(11), pp.69-80.
Hopkin, P., (2017). Fundamentals of risk management: understanding, evaluating and
implementing effective risk management. London: Kogan Page Publishers.
Jowsey, E., (2014). Real Estate Concepts: A Handbook. London: Routledge.
Lam, J., (2014). Enterprise risk management: from incentives to controls. New Jersey: John
Wiley & Sons.
Lang, S. and Scholz, A., (2014). The Diverging Role of the Systematic Risk Factors: Evidence
from European Real Estate Stock Markets.
Li, S., Pan, Q. and He, J., (2016). Impact of systemic risk in the real estate sector on banking
return. New York: SpringerPlus, 5(1), p.61.
Masalskyte, R., Andelin, M., Sarasoja, A.L. and Ventovuori, T., (2014). Modelling sustainability
maturity in corporate real estate management.Journal of Corporate Real Estate, 16(2), pp.126-
139.
McNeil, A.J., Frey, R. and Embrechts, P., (2015). Quantitative risk management: Concepts,
techniques and tools. London: Princeton university press.
Saunders, A. and Cornett, M.M., (2014). Financial institutions management. London: McGraw-
Hill Education.
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