dc.description.abstract | Commercial properties are exposed to financial, physical and legal risks that
affect the profitability and the value of the property once they occur. The losses
that result from these risks are direct, indirect and consequential. For the
property owner to meet his objective of wealth maximisation these losses must
be eliminated or mitigated. It is therefore important for all the risks to be
responded to by controlling and financing them.
The objectives of this study are to identify risks that commercial properties are
exposed to; to establish ways of responding to risks identified; to determine the
factors that influence selection of risk response tools and; to recommend the most
effective tools of risk response in commercial properties. The study hypothesizes
that the choice of risk response tools is directly influenced by its cost.
Primary and secondary data collected was geared towards meeting the objectives
of the study. Primary data was collected through administering of
questionnaires to property managers and discussions held with the property
managers and persons in the risk and insurance industry. Secondary data for the
purposes of this study was obtained from books, journals, research papers and
documented reports.
The data collected was analyzed by use of descriptive and inferential statistics.
Frequency distribution was used to establish the risk response tools while the
risks with the highest frequency of occurrence were identified as the risks
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cdmmercial properties were exposed to. Frequency of occurrence was also used
to determine the criteria of selecting the response tools. The correlation between
the factors influencing selection of risk response tools was also determined. The
information was presented in text, charts and tables.
Once the risks were identified the study went further to explore into ways of
responding to these risks and the factors that influence the choice of the risk
response tools used. The criterion used by property managers to select response
tools is an important lead to establishing why some response tools are preferred
to others. This study found that cost is the main factor influencing the choice of
risk response tools used.
The risks identified were grouped into two. These are risks specific to individual
properties and risks common to all properties. Those common to all properties
are: physical risks caused by perils such as fire, floods and natural calamities;
financial risks such as taxation, economic recession and voids among others and
legal risks resulting from statutes, agreements, contracts and law of tort. The
risks that are property specific include those associated which the tenant mix,
location, lease structure and the building installations and structure.
The overall objective of the study is to recommend the most effective tools of risk
response. The tools used in risk response are insurance, retention, prevention,
loss control, transfer and avoidance. Effectiveness being in terms of cost of the
tools selected and their ability to eliminate or mitigate risk and losses resulting
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from an occurrence. All tools of risk response were found to be of importance in
risk response and therefore should be combined in a way that they complement
each other. The use of the loss matrix method in selecting combinations of risk
response tools was recommended.
The property owner who possesses the duty of care towards his tenants and
other users of his property should have risk response tools in place to control
risks and to finance them once they occur. The property owner is further
responsible for ensuring that these risks do not occur in the first place.
The study recommends the use of the minimum expected total loss approach,
which is part of loss matrix method for selecting the combination of risk response
tools that may be used to respond to risks. This approach considers the cost of
various risk response tools used to minimise the occurrence of risk and the loss
that upon an occurrence.
Further recommendations have been made towards the practice of risk response
in commercial properties and the contribution of professional bodies such as the
Institute of Surveyors of Kenya (15K)and institutions of higher learning such as
the University of Nairobi on the importance of teaching risk management.
Recommendations have been made on areas of further study in the field of risk
management that will assist in building a body of knowledge in a subject that is
still considered new. | en_US |