Risk identification takes place on two levels. One is identification of the risks associated with being involved in real estate transactions. The other is the risk associated with operating a business. Potential losses associated with owning buildings, equipment, hiring staff, interacting with clients and customers and the like are fundamentally the same regardless of the business enterprise. You can think of such risks as “generic risks.” Real estate transaction risks are, on the other hand, specific to being in the business of helping clients buy or sell specific real property. You can think of such risks as “transaction risks.”
Businesses, all businesses, have assets in the form of buildings, tools and staff. These assets must be protected and managed in a way that reduces risk of lost – both loss of the asset and losses caused by loss of the asset. A fire or a car crash, for instance, can cost a business asset and staff losses that cause further losses.
The real estate industry is mostly structured around independent contractor relationships. That structure creates businesses within businesses. Real estate companies, many of them franchised entities within still larger businesses, associated with individual agents running their own small businesses as independent contractors. General business risks exist at each level. Typically, generic business risks are handled independently at each level. Analysis of these generic risks is covered in the Risk Analysis section of this subject.