Marsh Asia Real Estate Industry Leader, Edward Farrelly, was invited by South China Morning Post (SCMP) to share his thoughts and advice on risk management issues that commercial property owners and landlords in Hong Kong should consider.
In the piece, Edward writes about resilience in the face of extreme weather events and climate change, infectious diseases, and cybersecurity threats, among others. Resilience should take into account both physical as well as operational risks. Business interruptions have the potential to cost as much as asset damage.
The editorial also addresses a common misperception that risk management is an expense. Edward explains how making a piece of property more resilient makes economic sense, helping to increase the value of the asset, and command a premium from tenants and occupiers.
As the COVID-19 pandemic has demonstrated, there are many reasons companies may fail to act when faced with evidence of a possible but unlikely or uncommon threat, such as how scarce resources are allocated and possible first-mover disadvantage. It is conceivable that a company allocating capital to mitigate some less tangible risks could be penalised in the short term relative to its peers by investors. However, these companies are also better placed to achieve higher risk-adjusted returns on a consistent basis.
Download a pdf copy of the write-up to read more.