Understanding Risk Management

Risk management is the identification, assessment, and prioritization of risks, followed by coordinated application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events. Risks can come from uncertainty in the market, failures, legal liabilities, accidents, natural causes and disasters as well as deliberate attacks from an adversary, or events of uncertain or unpredictable root-cause.

In the real estate arena, these types of risks are usually in the form of fraud, a breach of contract, or a violation of an agent’s fiduciary duty or code of ethics. The strategies to manage risk typically include transferring the risk to another party, avoiding the risk, reducing the negative effect or probability of the risk, or even accepting some or all of the potential or actual consequences of a particular risk.