2.

0 TYPES OF RISK

2.1 Safety and Health Management Risk

Risk evaluation and management is a demanding aspect of today's complex business climate.
It also well-recognized as the most readable text on the subject, Health and Safety. Risk
management is designed to empower with the expertise and skills required to face these
challenges.

Not only that, the construction industry has a major role in contributing to the global economy
and growth. For an example, during the building process, multiple dangers combined with the
peculiar existence of the sector led to high fatality rates. Therefore, there are several types of
risk to be discuss below.

Firstly, not significant Risk. This risk is an exposure in which the possible losses could be met
out of the existing assets or current income of the firm without imposing undue financial strain.

Next, significant Risk. Significant risk is any risk or potential risk that should be deemed to be
important or potentially significant such failure is likely directly or indirectly to threaten the
buildings, roads or other locations where people are likely to be located off-site or is likely to
cause severe or fatal injury to individual on or off-site (Health and Safety Authority, n.d.).

If the knowledgeable person is unable to decide if the danger or potential hazard is important
or potentially significant, he or she then should seek guideline from the geotechnical expert.

Thirdly, uncertain Risk For uncertain risk as referring to the health and safety risk, experts
commonly recognise test the chance and seriousness of failure or damage (Whipple, n.d.).
Uncertainty on the other hand is refers to a lack of definitive information, lack of certainty or
uncertainty. Risk and uncertainty are linked in that both exclude information of potential states
and both can be represented as probabilities.

However, it is important to discern whether a lack of predictability results from a lack of

understanding such uncertainty or a well-understood probabilistic method for risk. The risk
involved with a bet on a reasonable coin flip is understood precisely where there is little doubt
about the risk while the result of the toss is unknown.
2.2 Risk Management (insurance) Perspectives

For risk management perspectives, there are three elements that need to be consider which
consist of pure or speculative risk, fundamental or particular Risk and financial or non-financial
risk.

Firstly, pure or speculative risk. Pure risk is means by there are possible of loss or no loss. For
an example, probability of injuries in road accident. On the other hand, for speculative risk, it
a possibility of loss, no loss or profit. Mostly they are uninsurable because they are undertaken
willingly for the sake of profit. For example, investment.

Second, Fundamental or Particular Risk Fundamental risk is a risk that affects the entire
economy or large number of groups within the economy. It also affects the society in general
and cannot be controlled. For an example, tsunami and earthquake. While for particular risk, it
is those future outcomes that we can partially control. Usually this risk is arisen from individual
decisions. For an example, to further study or to drive a car.

Next, Financial or Non-Financial Risk. Financial risk is an outcome that cannot be measured
by monetary. For an example, property damages can be measured in terms of loss of profit.
Contrary to non-financial risk where the outcome cannot be measured by monetary terms. for
an example choice of career will affect one’s quality of life and choice of spouse.

The risk is the level of uncertainty at any point of life. Various risks occur in the field of
investment and financing, as the hard-earned money of individuals and companies involved in
cycle. There are two types of risks to be discussed which are systematic and unsystematic.

a) SYSTEMATIC

The first type of risk is systematic risk. This risk is referring to the risk present in the whole
business or market segment. Systematic risk or also known as ‘undiversifiable risk’, ‘volatility’
or ‘market risk’ impacts the entire market, not only the portfolio or particular industry (Borad,
2020).

This risk for of danger is both unpredictable and difficult to prevent since it will affect a huge
amount of assets. It cannot be mitigated by diversification, either by hedging or through the
use of the right asset allocation approach.
Moreover, systematic risk is the basis for other investment risks such as industrial risk. For an
example, if an investor places so much focus on cybersecurity, it is possible to diversify by
investing in a variety of stocks in other industries such as healthcare and infrastructure.

However, systematic risk involves adjustment in interest rates, inflation, recessions and
conflicts among other significant changes. Shifts in these domains will impact the whole
market and cannot be mitigated by shifting positions within the public equities’ portfolio
(Ahaduzzaman, n.d.).

Therefore, in order to effectively mitigate systematic risk, the investors should ensure that their
portfolios contain a number of asset types such as fixed income, cash and real estate which
each of it would behave differently in the event of a significant structural transition.

For an example, an increase in interest rate will make some new-issue bonds more expensive
but at the same time create some corporate securities to decline in prices as consumer feel like
management teams are cutting back on investment. In the case of a spike in interest rates,
ensuring that a portfolio contains enough income-generating securities will minimise the loss
in value of such shares.

a. UNSYSTEMATIC

The second type of risk is unsystematic risk. This unsystematic affects a single asset or a small
number of assets. Since this vulnerability is peculiar to particular entities or properties, it is
often referred to as unique or asset-specific threats. In other words, unsystematic risk is special
to a single organization or sector (Campbell R. Harvey, 2012).

Also known as non-systematic risk, specific risk, diversifiable risk or residual risk in the form
of an investment portfolio, non-systematic risk can be minimised by diversification. This can
be compared with the systematic risk which exist in the market.

Unsystematic risk also may be defined as the inherent volatility of an investment by a business
or sector. Unsystematic risk categories involve a new competitor on the market with the ability
to steal substantial market share from the company invested in a regulatory reform which could
bring down company sales, a transition in management or product recall.

Although investors may be able to forecast certain causes of non-systematic risk, it still difficult
to determine when or how they will occur. For an example, an investor in healthcare securities
may be aware there are significant change in health policy, but he or she cannot know in
advance the specifics of the proposed regulations and how businesses and customer will
respond.

For other examples are such things as strikes, the results of court cases or natural disasters.
This risk is also known as a diversifiable risk as it can be minimised by adequately diversifying
the portfolio.

Unfortunately, there is no formula for estimating the unsystematic risk since it must be
extrapolated by subtracting the systematic risk from the overall risk.
3.0 RISK PROFILE

Risk profile is an assessment of an individual’s readiness and capacity to take risks. It also
refers to the risk where the company is vulnerable. The risk profile is essential for deciding the
require allocation of investment assets for the portfolio. Many organizations use the risk profile
as a method of alleviating future risks and challenges (Langbroek, 2008).

The risk profile also means as appropriate degree of risk that the person is willingly and
competent to face (The Critical Reasons to Understand Your Risk Profile, 2020). The
corporation risk profile is determining how risk-taking ability or resistance risk would impact
the overall decision-making approach. The risk profile of the individual should assess the
willingness, capacity and ability of an individual to take that particular risk. This is then
referring to portfolio risk.

The willingness and ability to take a risk can also relates to an individual’s risk tolerance, which
is they aversion or willingly to accept it (UNDERSTANDING THE RISKS INVOLVED
WITH PROPERTY MANAGEMENT, n.d.). If the individual shows a deep desire not to see
the value of the account fall and is willing to forgo future capital gains in order to do this, then
the individual probably have no courages to take the challenges and would be a risk-averse.

Conversely, if an individual shows a preference for the highest possible return and is able to
suffer significant fluctuations in the value of the account in order to obtain it, therefore that
person will have a high will for that particular risk and probably a risk seeker type of person.

Moreover, the willingness to take risks is measured by an analysis of the assets and liabilities
of an individual. In other words, a person with many assets and few liabilities would likely has
high risk-taking capability. While a person with few assets and high liabilities would likely to
have low risk-taking capability.

For an example, a person with a well-funded retirement plan, adequate emergency

contributions and insurance coverage as well as extra savings and investments will likely to
have a high risk-taking potential.

However, the willingness to take the challenges not always make sense. For an example, a
person with high assets and low liabilities as mentioned example may have a high risk-taking
capability, but on the other hand may also be cautious in nature and express a low risk-taking
willingness.
In this situation, the desire and capacity to take the challenges are vary and would likely affect
the final portfolio development phase. In addition, the risk profile also describes the threats,
challenges and difficulties that the organization may faces. This may include the possibility of
adverse consequences arising from the risk and an overview of the possible costs and extent of
disruption for each risk.

It is the best interest of a company to be vigilant when it comes to its risk control processes.
Regarding to this matter, some threats can be reduced if adequately accounted for. Corporations
also set up a regulatory branch to aid with these activities. This is because, a regulatory help to
ensure that the company and staff are follow the legislative and ethical procedures.

In conclusion, failure to mitigate risk will lead to negative outcomes. Not only that, failure to
mitigate risk may also leave the corporation vulnerable to declining stock prices, reduced
profits, poor public perception and lack of trust as well as high possibilities in bankruptcies.
4.0 RISK ASSESTMENT

When assessing the possible risks with negative result, the assessment should start to identify
the roots of the risk itself and examine what the significant issues that could contribute to the
damages to the people or property. Control is one of the ways to overcome the issue in
constructions site and can be as basic yet very effective and efficient strategy.

For an example, the property manager can instruct the worker to involved in training and
wearing appropriate secure attire and equipment in low-risk areas. This way can manage them
to reduce the risk to an appropriate safety degree.

As regards to Occupational Health and Safety (OSHA), the risk assessment involves in two
main concepts which is hazard and risk. Hazard is something with potential to cause harm to
person, which could be only injured or ill, while the risk is the probability that harm will be
realised whether it is high or low (Occupational Safety and Health (Osh), 2017).

In Occupational Health and Safety (OSHA), risk assessments are the efforts and initiatives to
minimising the accidents that potentially occur in the building construction and property
management area. This is also known as a structured and systematic approach in analysing any
potential risks, hazard, injuries or accident at the building property.

Apart from that, this approach is more challenging due to the nature of this property industry
compared to other sectors where the scope of work is basically rigid and static compared to the
property management which not only consist of management of building and construction, but
also the labour and other third parties (Occupational Safety and Health (Osh), 2017).

The Operations of Risk Assessment

It is advised, particularly in higher risk conditions where the workers must be well-trained to
be able them understand and able to carry out the proper risk assessment, which also known as
a dynamic risk assessment (Royal Institution of Chartered Surveyors, 2016). This is not
necessarily difficult or challenging, it effectively allows the employee to constantly re-evaluate
the task, the working environment and their competence to continue.

For an example, identify the condition of working environment, it is safe to continue the project
activity, or does the labour or worker are competence to run the work project and does there
are availability of emergency place to go if there any occurrence of hazardous happens and
etcetera.
If all the situations above will become uncertain and too dangerous, therefore it important to
always in well-prepared and ensure to make the place as safe as possible and consider how to
make it continue safely.

Therefore, in the first step it needs to consider that a proper check up has been made such as
review of the health, safety and environmental risks that may occur at the property sites during
the activity because the health and safety element is an essential requirement in property
management.

The Third Parties in Risk Assessment

The third parties it he responsible person in carrying the occupational Health and Safety
(OSHA). There is a requirement to appoint a competent person to in charge for the safety of an
organization. This responsible person will ensure that health and environment system are in
safe condition. However, he or she must have efficient knowledge and understanding as well
as able to manage the rationale safety risk to fulfil their duties effectively.

Hazard Analysis

As discussed above, the risk or hazards would be prioritised according to the stage of danger,
possibility or seriousness (Occupational Safety and Health (Osh), 2017). In order to understand
the dangers and risk inherent in the related activities, thus the safety procedures are
implemented as a proactiveness to accident prevention.

However, the workers sometimes are not alert with the potential risk at their work area,
therefore due to the inability of the workers to practice the routine, the safety procedures may
be provided for them as safety directions especially during the emergency situations such as
fire incidents.

The purpose of this safety procedures also to encourage the worker to work safely and more
aware of any possibilities of hazardous incidents. Therefore, it is important to understand the
potential risk that might occur in the property site as it will help in the process of reducing or
lessening the potential accidents in the worksites as well as can be considered as and effective
and efficiency safety program.
References
Ahaduzzaman, M. (n.d.). Systematic Risk and Unsystematic Risk- Meaning and Components.
Retrieved from BBA Lectures: https://www.bbalectures.com/systematic-risk-and-
unsystematic-risk/

Borad, S. B. (2020, January 9). Systematic Risk – Meaning, Types And How To Measure It.
Retrieved from eFinanceManagement: https://efinancemanagement.com/investment-
decisions/systematic-risk

Campbell R. Harvey. (2012). Unsystematic Risk. Retrieved from thefreedictionary:

https://financial-dictionary.thefreedictionary.com/unsystematic+risk

Health and Safety Authority. (n.d.). Identifying Significant Hazards. Retrieved from Health
and Safety Authority:
https://www.hsa.ie/eng/Your_Industry/Quarrying/Quarry_and_Sand_Pit_Faces/Appra
isals_and_Geotechnical_Assessment/Significant_Hazards/

Langbroek, W. G. (2008). Return/risk profile focused ratios. Journal of European Real Estate
Research, 6-7.

Occupational Safety and Health (Osh). (2017). International Journal of Occupational Safety
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Royal Institution of Chartered Surveyors. (2016). Health and safety for residential Property
Managers. RICS, 10.

The Critical Reasons to Understand Your Risk Profile. (2020). Retrieved from Property
Mavens: https://www.propertymavens.com.au/blog/the-critical-reasons-to-understand-
your-risk-profile

UNDERSTANDING THE RISKS INVOLVED WITH PROPERTY MANAGEMENT. (n.d.).

Retrieved from AushCo: https://aushco.com/understanding-risks-involved-property-
management/

Whipple, C. G. (n.d.). Dealing With Uncertainty About Risk in Risk Management. Retrieved
from National Academies Press: https://www.ncbi.nlm.nih.gov/books/NBK217564/