5 Ways Commercial Real Estate Can Manage Risk Exposure
When it comes to the management of commercial property risk hazards, most insurance professionals concur that risk management services should be specifically tailored to each client. The International Risk Management Institute describes the practice as “the process of identifying and analysing loss exposures and taking steps to minimise the financial impact of the risks they impose.” If you don’t put a solid asset protection plan in place, you may have to pay out tens of thousands of dollars in medical injury bills and property damage.
A thorough risk management strategy may help you reduce the cost of commercial property insurance, which is steadily rising, and plan for business continuity in an environment where levels of disruption are constantly emerging.
Here are five crucial factors that investors in commercial real estate should take into account when creating loss prevention and control methods.
- Keep precise records
A good records management system is crucial to making the filing of business property damage claims easier. A basic property summary that contains updated information on asset improvements, claims narratives, and a loss history record should be given to the insurance provider by the owner.
Every worst-case situation, including natural calamities, should have a unique risk management plan in place. Before a hurricane or other calamity strikes, make sure to store all crucial vendor contracts in a secure location. It is usually a good idea to have a third party check your insurance plans to ensure their correctness and identify any potential coverage gaps.
- Choosing the right insurance plans
There are several areas around the world that are being affected by severe weather, from wildfires in the West to flooding in the Midwest and coastal areas to extreme cold in areas that are not prepared for extended periods of subfreezing temperatures. Your properties might become inhospitable or unusable due to any of these occurrences. Traditional property insurance does not pay for temporary housing or lost wages incurred during the property repair. In such a scenario, your property insurance policy may benefit from having business interruption coverage to lessen this risk. By covering operating costs and money lost during closures and restorations, it protects your company.
It’s possible that other factors other than extreme weather can cause business disruptions. As cyberattacks get more sophisticated, they may also take down networks and even temporarily halt operations. A social engineering, red team, or tabletop exercise can show you how a cyber security disruption might impact your company and assist you in implementing the best mitigation strategies, such as cyber liability insurance.
- Appropriate safety measures:
Building owners and managers need to make sure that their buildings have fire sprinklers, impact-resistant glass, and sturdy roofs. By taking those actions, the likelihood of potential problems will be significantly decreased. For the safety of your property, tenants, and visitors, be sure to include security measures like cameras, perimeter fencing, locks, and guards.
Property owners frequently worry about slip and fall accidents, so be sure to take precautions and have enough business liability insurance coverage. Safeguard your property to deal with any theft, battery, or assault events in parking lots or retail spaces.
- Personnel Losses and Shortages
Given the state of the labour market and the recent public health crises, it is clear how crucial key staff members can be to sustaining daily operations. Your present performance level and revenue stream would be impacted if a crucial employee left suddenly or without much warning. Key person insurance can assist you in paying a temporary substitute or assisting with employee financial loss. It is made to give you financial security and let your business continue with little inconvenience.
- Know your insurance purchase options
Commercial owners and buyers have been experiencing price shocks every time they refinance, sell, or buy properties. Due to lenders’ recent expansion of insurance requirements, insurance rates have increased by as much as 25%. When looking for coverage for losses brought on by natural occurrences like floods, hail, hurricanes, and wind, knowledge of and awareness of lender criteria are essential.
The level of interest among property owners has increased as national and municipal proprietary programmes are becoming more widespread and insurance regulations have gotten more stringent generally.
To determine which programme is best for your needs, ask your insurance broker to explain the differences between loss limit and full limit programmes. Instead of covering the total value of the property, loss limit plans cover property on an occurrence basis up to a limit of the probable maximum loss.
Reviewing your deductible amounts, inquiring about policy discounts in the form of credits or lower premiums for property enhancements, and making sure that all insurance coverage limits are accurate are further strategies to minimise policy prices.