Managing risk is one of the most important things you can do to maintain the viability of a business, and what many board members sometimes forget is that their association is just that, a business. Risk management—the process of identifying and minimizing risks—can help you run your building corporation more profitably and effectively. An effective risk management strategy enables you to proactively prepare for potential losses, provide a safe environment for your fellow board members, employees and residents, and even secure better pricing on your insurance.
As a member of the board, when it comes to your association, a risk can be classified as any occurrence that could have a negative impact. The first step a board should do is to identify each risk and then assess the likelihood of it occurring along with its potential consequences. Some risks are prevalent in most associations, such as building safety and security. Other risks will be unique to your association and the services you provide to residents. You should consider everything from accidents on the property to cyber-attacks to environmental risks. To get a complete picture of your risks, review your past accidents, insurance claims, and your industry's loss statistics.
The most obvious risks associated with an association are those concerning its premises. An unsafe environment can lead to any number of costly problems. The first priority should be ensuring that the premises are safe and secure. Physical premises are also vulnerable to natural disasters, including fire and flood. Investing in insurance coverage for these incidences will help your business stay on track in the event of costly damage to its facilities.
While it may be impossible to identify every potential threat to a co-op or condo association, a risk assessment process can help you identify future problems and minimize potential costs in advance.