The Power Broker Roundtable is brought to you by the National Association of REALTORSÂ®. Watch for this column each month, where we address broker issues, concerns and milestones.
Jim Imhoff, Special Liaison for Large Firm Relations, NAR First Weber Group, Madison, Wi.
Rick Haase, President, Latter & Blum, REALTORSÂ®, New Orleans, La.
Gary Scott, President, Long & Foster Real Estate, Chantilly, Va.
Joe Rand, Managing Partner, Better Homes & Gardens Rand Real Estate, New City, N.Y.
Jim Imhoff: American patriot Ben Franklin, who had something to say about almost everything, once says, â€śan ounce of prevention is worth a pound of cure.â€ť He hit the nail on the head when it comes to business, where effective risk management can mean the difference between devastating losses and successfully coming through a crisis. For brokers, risk management is a multi-headed beast, comprising not just routine exposure to lawsuits, but potential threats ranging from natural disaster to cybersecurity. While those are broad issues, impossible to cover fully in a Roundtable discussionâ€”our panelists today have diverse backgrounds and credibility on the topic. Rick, your company came through Hurricane Katrina some years ago. What did you take away from that in terms of managing risk?
Rick Haase: While most of us carry plenty of insurance as a first line of defense, Iâ€™m not sure anyone is ever adequately prepared to deal with sudden natural disaster. Assigning responsibility and creating manageable lines of communication was critical, and in the aftermath of Katrina, we are better prepared and more than adequately insured. Also, when we show property, we are especially careful to accurately represent flood risk. But disaster recovery, as you mentioned, is one small part of risk management. Today, we have a company mantra: TED. It stands for Training, Education, and Development. We say it often, and put a lot of effort behind it, because great training is the best defense against risk. Our aim, continuously, is to build a smarter community of agents.
Joe Rand: We could hardly have been prepared for the disruption of business when Hurricane Sandy hit. We had no power for 10 days in the majority of our offices. Â But thatâ€™s when you find out how strong you are as a company. Communication, as Rick says, is key. You rely on the strength and initiative of your agents. You set up telephone chains. You do what it takes to survive and get past it.
Gary Scott: In any situation, properly trained agents bring you more than repeat business. They are the best way to avoid exposure to liabilityâ€”any liability. We tell our agents never to guess when a client wants information. If youâ€™re not certain of the answer to a question, promise to get itâ€”and do it. Risk management is effectively minimized when good communication is maximized.
Joe Rand: Iâ€™m well aware that a customer who makes first contact with an office can have a very different experience depending on which agent he or she happens to getâ€”and as brokers, we canâ€™t be eyes and ears to each transaction. What we can do is fine-tune our training to focus not just on good communication but on identifiable risks and how to avoid them. If youâ€™re going to reduce exposure to liability, every agent needs to be well versed in errors and omissions, environmental issues, and the like.
Jim Imhoff: And because we canâ€™t be the eyes and ears, monitoring is just as important. Manager reviews are one good way to do that, but what about legal advice? How important is it to have good access to legal minds?
Gary Scott: We live in a pretty litigious age, but part of the job of a well-trained manager is to resolve or defuse confrontations. My guess is that 85 percent of our complaints are resolved before they come up the line to me. At the same time, we have attorneys on staff who place a very high priority to the whole area of risk management.
Rick Haase. As do we. We have an in-house legal team as well as outside attorneys on retainer, so our managersâ€”no matter how well prepared they areâ€”can get legal advice as needed. In fact, the secretary of our company is an attorney, so we have some pretty good oversight.
Jim Imhoff: Â So brokers, like any business owners, need to mitigate liability. We start by having well-trained people at every level of the company. Then we try to develop best-guess strategies to protect against various types of risk.
Gary Scott: Best guess is right, because risk management clearly doesnâ€™t stop at lawsuit liability. One of the questions we need to be asking is, where do the risks lie?
Joe Rand: These days, risk is all around us. Terrorism. Cyberspace. Certainly natural disaster. What about the loss of top executives flying on the same doomed plane?
Jim Imhoff: Â But you canâ€™t distract yourself with all the possibilities. Anything can happen, anywhere.
Joe Rand: Maybe what we should do is get our smartest people together in a room and ask, whatâ€™s the worst possible thing that can happen to us? Then brainstorm to come up with the best ways to deal with it if it should happen.
Jim Imhoff: Â Remember that NAR has a variety of risk management resources for brokers and their agents. Search for pertinent topics at www.REALTOR.org/topics/risk-management.
Disclaimer: The information and content herein is for general information only and is not intended as legal advice.