Risk Management Strategies for Condo Associations
Managing risk in condo associations is one of the most important parts of daily operations. This helps to maintain the viability of a business, which is what a condo association essentially is. Risk management strategies, which is the process of identifying and minimizing risks before they get out of control, can help condo associations run their building corporation more profitably and effectively. An effective risk management plan helps boards to proactively prepare for any potential losses and condo association risks while providing a safe environment for fellow board members, employees, and residents.
Here’s a better look at condo association risk management, and how it can help to keep liabilities and insurance costs low.
Identifying Condo Association Risks
When it comes to a condo association, a risk can be classified as any occurrence that could have a negative impact. A board should identify each risk and then take steps to assess the likelihood of it happening along with its potential consequences.
Some condo association risks are prevalent in most condo associations, like building safety and security. There are other risks that may be unique to a specific condo association and the services that are provided to residents. Condo associations should consider everything from accidents on the property to environmental risks, robberies to cyberattacks to get a complete picture of the risks they face.
A major risk with a condo association is anything having to do with its premises. An unsafe environment can lead to a wide range of costly problems. The first priority should be to ensure the safety and security of a condo association’s premises. Whether it’s violence or natural disasters, a condo association needs adequate insurance coverage to ensure that everyone is kept safe and every aspect of its premises is financially covered.
Once the risks have been identified, an association needs to lay out which ones are most likely to occur and which ones have the greatest adverse impact on a building community. By prioritizing risks, a condo association can assign a monetary value to each one, which, in turn can simplify the overall process.
After risks are identified and prioritized, a condo association should begin developing their strategies to manage them and limiting their potential to grow into major issues. Once a response plan is in place, a condo association needs to ensure that it’s effectively implemented.
First, a condo association should look to eliminate an activity, service or practice that puts itself at a level of risk that threatens its future viability. Certain association activities may prove to be too costly when compared to the benefits that would be related with that activity.
Next, an association should investigate opportunities to transfer the risk of loss to other parties. Shifting the risk of financial loss to a condo association insurance company is looked at as the most common form of risk transfer. It’s important to review risks and risk management plans on a regular basis, usually every year, to ensure that coverage meets the needs of an association.
Lastly, there’s mitigation. Since it may be impossible to transfer risk to a third party, an association should determine what steps can be taken to lessen the impact of potential losses if they happen. If an association can demonstrate effective strategies that limit losses, they may be able to take advantage of reduced insurance premiums over time.
A condo association should also keep accurate records to demonstrate that it is doing what it can to reduce existing risks and identify emerging ones. This helps show that they are committed to risk management and have experience with implementing well-planned strategies.
Contact McDaniel Insurance Agency to help you with your condo association insurance needs. We can help your association plan for the risks through a thorough analysis of your association's risk factors and potential losses. We'll market association insurance policies with our carriers. Contact Deanna or Tonya at 502.909.0920 or Deanna@McDanielins.com