Property owners can reap rewards from risk mitigation
As we've witnessed in recent years, the fate of the commercial real estate industry is closely tied to the rise and fall of the economy.
Tougher economic conditions oftentimes lead to a decreased spend on insurance, risk management and property maintenance – which in turn increases risk exposure and the chances of a property owner suffering a loss.
However, risk planning and preparedness in the sector is now more important than ever, with the presence of a significant number of unoccupied commercial spaces in our city centres, and crime levels steadily on the increase.
These potential risks were highlighted recently in data from the Small Firms Association stating that over half (57pc) of Irish firms have experienced an increase in crime in the past two years – an unfortunate consequence of a significant proportion of businesses not putting in place sufficient security protocols and procedures to mitigate against risk.
Commercial property owners have also felt the impact of damage caused by natural catastrophes over the past number of years with a number of businesses in Cork being affected by flood damage as recently as two months ago.
These recent events prompt the questions – have you put procedures in place to protect your property against such a threat? Will your insurer be able to respond to the specific needs of your commercial property portfolio in the event of a catastrophe?
Recent research undertaken by Zurich Insurance Group reveals that although the majority of medium-sized and large companies recognise the potential risks posed by natural catastrophes, more than a quarter (27pc) do not systematically assess business risks related to such incidents.
In addition, although most companies have taken some steps to mitigate against risk, they have not developed a holistic approach to protect themselves and their property by considering how they would react to threats despite being aware of their potential severity.
Although insurance is an essential cost for all businesses, if a property owner can show their insurer that they are committed to implementing certain precautions and procedures to protect their premises, it is proven that they will reap the benefits each year when they renew.
With this in mind, frequent and thorough property maintenance, and putting in place an effective risk-management strategy, is essential to minimise your property's exposure to threats such as theft or flooding, and reduces the likelihood of a claim which could potentially increase your premium.
Simple steps like ensuring that guttering on your premises is checked on a regular basis so that it is clear and can cope with heavy rainfall, and that water pipes are properly serviced before the winter months so that they are not liable to freezing, can have a significant positive impact on premiums.
Owners of multiple commercial units should also ensure that this maintenance is carried out in spaces that are vacant as well as those that are occupied as the risk is just as great.
Lessons can also be learnt from the damage caused by flooding in recent years, and those in the market for commercial space should always do a thorough background check before considering moving their business into new premises.
For example, check if there is a history of flooding in the area and refer to local flood maps. If it is a possibility, however minor, consider the associated threats to your business, discuss them with your property owner's insurance provider and adopt the appropriate preventative measures.
While it is undeniable that the economic downturn has increased businesses' exposure to risk, this merely reinforces how important it is that property owners continue to champion and put forward a compelling business case for an effective risk-management strategy.
By ensuring that you are proactive and taking simple but effective precautions for your property, your business will be in the best position possible to respond appropriately and efficiently should disaster strike.
Conor Brennan, is director of broker distribution, Zurich Insurance