RISK ASSESSMENT CRITERIA: Determining The Level Of Risk
Consequence Criteria
Likelihood of Occurrence
1—INSIGNIFICANT
2—MINOR
3—MODERATE
4—MAJOR
5—CATASTROPHIC
A- B- C- D- E-
The consequence is almost certain to occur in most circumstances The consequence is likely to occur frequently Possible and likely for the consequence to occur at some time The consequence is unlikely to occur but could happen The consequence may occur but only in exceptional circumstances
Medium (M)
High (H)
High (H)
Very High (H)
Very High (H)
Medium (M)
Medium (M)
High (H)
High (H)
Very High (H)
Low (L)
Medium (M)
High (H)
High (H)
High (H)
Low (L)
Low (L)
Medium (M)
Medium (M)
High (H)
Low (L)
Low (L)
Medium (M)
Medium (M)
High (H)
The highest consequence tripped for ANY ONE “thing you value” sets THE OVERALL CONSEQUENCE (re the Risk Statement under consideration).
Consequence Thresholds (Insert your agreed criteria against the things you value below) e.g. Descriptors of catastrophic consequences for 1. People; 2. Services; and 3. Reputation e.g. Descriptors of catastrophic consequences for 1. People; 2. Services; and 3. Reputation e.g. Descriptors of catastrophic consequences for 1. People; 2. Services; and 3. Reputation e.g. Descriptors of catastrophic consequences for 1. People; 2. Services; and 3. Reputation e.g. Descriptors of catastrophic consequences for 1. People; 2. Services; and 3. Reputation
Consequence Criteria Catastrophic Major Moderate Minor Insignificant
the individual multi-factorial events and iterative processes (e.g., getting paid rent on time, having contractors show up on time, detecting water leaks or pests before they become a problem, etc.), over time add up to the expected outcome.
likelihood indicates likeliness or pro- pensity for realization. With each event, determine the con- sequence and likelihood of occurrence to apply a risk score and determine if it requires some form of mitigation man- agement. With Renter B, for example, perhaps a remote monitoring alarm should be installed that would warn you of a high-water level. Consider how to mitigate, and then re-assess: • Eliminate the possibility for the event from happening (risk of ceiling fan breaking, replace with a dome light instead if the market isn’t sen- sitive to having ceiling fans). • Substitute with an alternative option (unreliable and poor-quality maintenance contractor, utilize a more competent and professional contractor that gets it done right the first time). • Utilize automation and controls (put in place as a proxy assistant to make operations easier and results in less hassle for both you and the tenant — could be soft- ware and hardware). • Administrative controls with clear policies and procedures (move-in and move-out procedures, and security deposit management are a big source of dispute, or have
your own Terms and Conditions, or quality standards that you expect contractors to follow). • Develop policies, procedures, practices and guidelines, for rent- ers and contractors to mitigate against possible symptoms of dis- pute. Provide training, instruction, and supervision. The matrix shown above is an in- teractive spreadsheet that contains a series of multiple worksheets with in- ternal linking as a roadmap to assist with Risk Management planning. •
RISKMANAGEMENT METHODOLOGY
There is a simple methodology that does not require the use of any statis- tics to assist with managing mis- take-prone qualitative risk factors: Consider what can go wrong (this is often the hardest part) • Determine how bad the outcome would be (consequences) • Determine how likely it is to hap- pen (likelihood of occurrence) • Determine the risk level of the event with application of a risk score • Manage the event; eliminate or reduce the likelihood; mitigate the consequence. HOWITWORKS: Below are some examples to sub- jectively score criteria. Consequence criteria may be how severely could it cause financial or legal harm and
BrianWojcik is a housing industry advocate who transitioned into real estate, both as an investor and property manager, after more than two decades of experience in engineering, sales, ex-
ecutive management, and operational/business pro- cess reengineering consulting. He resides in Howard County, MD, where he volunteers to teach a “Tenant Success” program he created for Bridges to Housing Stability, and where he created Landlord411 to assist rental housing providers. His expertise of the inde- pendently owned rental-housing market has been sought after for local and state level legislation/policy development. Mr. Wojcik has been published in na- tional publications about legislative issues, affordable housing matters, and rental housing advocacy. He holds a Bachelor of Science degree in Manufacturing Management from Clarkson University and a Master of Science degree in Real Estate from The Johns Hop- kins University. He is founder of diyRealty.co.
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