Risk Management of Real Estate Industry in Dubai

Risk Management of Real Estate Industry in Dubai
Table of Contents
Scope 2
Overview 2
Definition 3
Processes 5
Risk Description 5
Negative Cash Flow 5
Tenants 6
Lack of appreciation 6
Repairs 6
Loss of Employment 7
Lack of exit strategy 7
Fire 8
Rent Lapses 8
Financial Recession 8
Objectives 8
Risk Assessment Methods 9
Technical Risk Factors 10
Identification of the risk level 10
The Risk Factor 12
Severity of Risk 12
Overcoming Risks/Risk Abatement 13
Risk Abatement Implementation Schedule/WBS 15
Conclusion 16
Works Cited 17
Scope
In the measurement of the risk, it is essential to consider the degree of uncertainty in relation to quantitative estimate through the cost, schedule, and resources. It is also essential to offer adequate illustration of the scope of the project in the determination, evaluation, and minimization of risk factors in the context of a workplace. Poor illustration and understanding of the scope of the project and its requirements will result in an increase, in the extent of the risk. This indicates that it is essential to incorporate and integrate management concepts effectively and efficiently in the understanding and reflection of the scope towards the completion of the project. Real estate in Dubai is exposed to several risk factors that require critical examination with the aim of managing and limiting their influences in the pursuit of the goals and objectives. It is ideal to experience risks in the Real Industry in Dubai, but it is a massive mistake to oversee or ignore the impacts and implications characterizing the risks to the individuals (residents), investors, and other relevant stakeholders. In this report, the focus will be on the identification, assessment, and minimization of the risk factors and management of the Real Estate in Dubai.
Overview
In the understanding and completion of this report, it is essential to grasp the concepts and aspects of the risk management. This indicates crucial analysis and interpretation of the various terminologies in relation to risk management and assessment. This section of the report will offer critical and essential overview of the concept of risk management with the aim of offering valuable understanding to the context of Real Estate industry in Dubai.
Definition
Risk Management refers to the identification, evaluation, and management or control of the various uncertainties causing delays, excessive costs, performance failure, environmental implications, and relevant unappealing consequences (Borghesi & Gaudenzi p. 163). In a broader perspective, risk management offers identification, assessment, and management of the incidences of harm or hazardous conditions in relation to the work place. In the examination of risk management, it is essential to identify and elaborate on the processes or forms. There are five critical processes in the completion of risk management in the context of various workplaces or environments. The five processes for the development of risk management include planning, identification, assessment, analysis, and mitigation.
Risk planning process focuses on a prior decision on the effective and efficient management of the risks. In the completion of this first process, it is essential for the project to include various specifications of the risk management and organization roles and obligations. This indicates that the planning should outline the contribution of the departments of the organization, needs, and participation of each employee within the organization. In the context of the Real Estate in Dubai, the focus of planning should be on the functions, roles, and responsibilities of each stakeholder in the achievement of the goals of effective risk management.
Risk identification or recognition process focuses on recognizing the potential risks, relevant causes, and development of priorities in the evaluation concept. This focuses on the identification of the potential risk while relating them to the relevant causes with the aim of prioritizing them in relation to the most risky criteria. This offers opportunity for quality management of the risks by the relevant authorities in consideration of the environment of operation.
Risk assessment follows the completion of risk identification or recognition in the context of quality risk management. The assessment of potential risks offers the opportunity for the organizations, investors, and relevant authorities to quantify or characterize the risks. The outcome of the risk assessment will determine if the potential risk merits the attention of the authority thus adoption and integration of quality management criteria.
Risk analysis consists of critical evaluation of the options or alternatives at the disposal of the stakeholders in the management of the potential risks following the completion of the first three processes. The last process of risk management focuses on handling of the assessed risks with the aim of minimizing failure, cost, or harm that might results in case they are ignored. This relates to the mitigation strategies essential for the management of the identified risks in consideration of the environment. Effective and efficient completion of the five stages or process of risk management will offer accurate and substantial opportunity for the relevant authority to manage the potential risks. Examination of the risk management in real estate industry in Dubai must incorporate the five processes in order to develop and present quality risk-assessment report.
Risk Management
Processes
Risk Description
There are several risk factors in the context of real estate industry, in Dubai. This report will focus on the identification and illustration of the potential risks facing the real estate industry in Dubai (Jian p. 1).
Negative Cash Flow
Financial risks and factors contribute to failure in the desired outcome, in the context of the real estates in Dubai. Negative cash flows develop under the influence of failing to manage uncertainties within the industry thus affecting the growth and development of the organization. This makes it difficult for the procurement of the real estates in Dubai in case entities operate or depend on the concept of appreciation. It is essential to manage risks, in relation to cash flows, effectively and efficiently with the aim of improving the level of income or revenues thus increment in the profitability levels.
Tenants
Tenants are crucial factors in the development and achievement of desired outcome in the context of real estate industry. For the real estate industry to prosper adequate, it is essential to adopt quality tenants. This is the most difficult aspect of the real industry because of the complexity in its completion and accomplishment. Tenants are risk factors in that inability to management them effectively and efficiently will result in overrunning of the rental property in a quick rate.
Lack of appreciation
It is a tendency for the real estates to escalate in value. This is a common phrase in the real estate industry with the aim of attracting several investors and other relevant shareholders into the sector. Negative cash flows would lead to the essence of lack of appreciation thus subjecting the owners to financial losses. Lack of appreciation is an indication of the hazardous condition in the real estate industry in Dubai thus initiating failure for the achievement of the desired outcome or objectives.
Repairs
Real estate industry relates to the concept of maintenance and aspects of vacancy in the achievement of the financial and other relevant goals. Majority of the investors in the real estate industry in Dubai do not focus on the concepts of maintenance and vacancy in the examination of their cost of operation. There are uncertainties in relation to the aspect of maintenance. Several factors contribute towards the development of a hazardous condition through the essence of repairs. One of the essential risk factors forcing the investors in the real estate industry to fail in the achievement of the desired outcome is the aspect of damage. Damages have the ability to force investors into incurring maintenance cost thus increase in the cost of managing the real estate property. This is risky to the industry because of the opposite anticipation of the investor in achievement of improved revenues while minimizing cost of operation.
Loss of Employment
This becomes a risk in the real estate industry in Dubai when the investor depends on one employer for the execution and accomplishment of the objectives of his or her investments. This occurrence is a reflection of inability by the investor to manage and mitigate the risks effectively and efficiently for the achievement of the desired goals and objectives. His risk factor will result in minimum or lack of appreciation to the value of the real estate property thus affecting the pursuit of objectives.
Lack of exit strategy
It is ideal to note the difficulties in the accumulation of wealth or financial resources within the real estate industry. This makes it vital for investors to have several or alternative options to the investment in the real estate industry in Dubai. Exit strategy becomes a risk factor when the investors have only one exit option at his or her disposal thus limiting the opportunities for the pursuit of financial gains (Lore p. 204). It is, therefore, ideal and effective for investments in the real estates in Dubai to focus on the inclusion of different options for the accumulation and achievement of financial objectives of the investor. This will offer the opportunity to enable the investor curb the problem of lack of appreciation in relation to value of the investment in the real estate industry in Dubai.
Fire
Fire is another element of risk in association with the real estate industry in Dubai. It is essential for the investors to manage their investments in Dubai with reference to the case or incidence of fire. This is essential for the minimization of risks that would result into loss of value or lack of achievement of the desired outcome.
Rent Lapses
The course of the real estate industry depends on the financial relations of the tenants. This concept becomes a risk when tenants fail to pay the due rents thus decrease in the level of revenue. This indicates that lack of effective management of the rent lapses by the tenant will result into decrease in the value of the real estate industry in Dubai.
Financial Recession
Another factor that might result in hazardous condition of the real estate industry in Dubai is the case financial recession. This affects the economy adversely thus limiting the achievement of the desired outcome in the real estate industry in Dubai. It is essential to focus on the management of such uncertainties in the minimization of costs and undesired outcome.
Objectives
The main reason behind the adoption and incorporation of the concept of risk assessment of the potential risks and relevant causes is to estimate the probability of failure in relation to possible outcomes. It also offers valuable information on the consequences or implications of the failure of the possible outcome. The evaluation and presentation of the outcome of the risk assessment present an opportunity for the demonstration of the risk matrix for the computation of the factors. The outcome of the risk matrix will provide the opportunity for the illustration of the factors causing the development of hazardous conditions in the real estate industry in the context of Dubai. Another objective for the execution of the risk assessment and management is to offer substantial ground for the projection of the overall risks within the industry. This is essential for the planning, prevention, identification, assessment, and mitigation of the hazardous conditions in relation to the potential risk factors.
Another objective of the risk management of the real estate industry in Dubai is to provide adequate risks in association with the environment of interest. This is essential for the planning and management process thus, vital towards the pursuit of goals and objectives of the industry. It is essential for the industry to identify and plan for the risk factors in order to protect the investments and individuals interacting with the environment of interest (Real Industry in Dubai). The other objective of the risk management process is the achievement or development of the best strategy in the handling of the risk factors. This relates to the development and implementation of quality mitigation approach in the management of the potential risk factors thus minimization of harm to the properties, individuals, and other stakeholders within the environment of interest.
Risk Assessment Methods
There are several methods in the assessment of the risk in relation to the environment such as the condition of real estate industry in Dubai. One of the most common methods is the application of the standard risk matrix in the evaluation of the risks within the real estate industry in Dubai (Penza p. 124). Another method in the demonstration of the risk assessment is the Boolean representation for the series-parallel systems. This is a reflection of denoting the elements of the consequences or components of the risk factor in contributing to the risk factor. The model of Boolean representation for series-parallel systems indicates that the X1 = 1 in case the component i failed to achieve the desired outcome otherwise it denotes zero. These representations of the risk factor are essential towards the determination of the risk management and mitigation criteria for the achievement of the quality or desired outcome.
Technical Risk Factors
Identification of the risk level
In the identification of the risk level, it is essential to calculate the risk factor. Calculation of the risk factor is achievable through assigning of values to the potential risks in relation to the previous experience or interactions within the real estate industry in Dubai.
Risk Analysis Guideline- Value definitions
Magnitude 0.2 0.5 0.8 P C
Implications Low Moderate High Probability Consequence

Component Component Description Value Rationales
P1 Probability of failure due to ineffective management of resource 0.6 Cash flows depend greatly on effective management of the resources. Inability to manage resources results in negative cash flow
P2 Probability of failure to obtain quality tenants 0.7 Obtaining quality tenants is complex thus requires substantial management to minimize the implication of failure in the achievement of desired outcome.
P3 Probability of failure to have different exit strategies 0.5 It is difficult for the investors to accumulate wealth or financial resources focusing on the real estate industry in Dubai
P4 Probability of failure to depend on numerous employers for the accomplishment of desired outcome 0.7 Dependency on one employer within the real estate industry will lead to the concept of lack of appreciation.
P5 Probability of failure to include maintenance and vacancy cost in evaluation of financial status within the industry 0.8 Damages contribute to the limitation of the increase in value of the real estate in Dubai.
P6 Probability of failure to manage appreciation of value effectively 0.6 Appreciation is the main concept in the real estate industry
P7 Probability of failure to manage fire uncertainties 0.5 Fire is a risk factor in relation to its influence in the destruction of properties
P8 Probability of failure to manage rent lapses by tenants 0.4 Tenants contribute massively for the achievement of the desired outcome in the real estate industry
P9 Probability of failure to plan for the economic recessions 0.6 Economic recessions become risk factors when investors fail to manage the uncertainties effectively and efficiently

The Risk Factor
The calculation of the risk factor P (f) = (P1 + P2 + P3 + P4 + P5 + P6 + P7 + P8 + P9)/9
(0.6 + 0.7 + 0.5 + 0.7 + 0.8 + 0.6 + 0.6 + 0.5 + 0.4)/9
= 5.4/9
= 0.6
Severity of Risk
Consequences
Likelihood Severe (1)
Major (2) Medium (3) Minor (4) Negligible (5)
Almost Certain (A) E H H M M
Likely (B) H H M M L
Possible (C) H M M L L
Unlikely (D) M M L L T
Rare (E) M L L T T
Where E =Extreme risk, T = Trivial risk, H = High Risk, M = Moderate Risk, and L = Low risk.
In the examination or assessment of the severity of the risk in the real estate industry in Dubai, it is essential to note that the application of risk matrix indicate Extreme Risk (Cox p. 58). This indicate that the need for adoption and implementation of immediate action with the aim of minimizing the level of risk exposure to the investor of the real estate industry in Dubai. It is essential to determine and implement effective and efficient mitigation plan with the aim of minimizing the extreme risk facing the industry of real estate in the context of Dubai.
Overcoming Risks/Risk Abatement
Risk Mitigation Plan
Risk Issue Mitigation/Solution to Overcome the Risk
Negative Cash Flows Quality management of the financial resources, internal, and external factors in relation to the real estate industry in Dubai
Tenants Adoption of quality tenants to minimize the extent of damages and losses resulting from their interactions
Lack of Appreciation Effective and efficient management of uncertainties or financial resources in relation to the size of the investment
Repairs Incorporation of maintenance and vacancy costs in the calculation of the estimates and profitability projections within the real estate industry in Dubai.
Lack of exit strategy Development of numerous opportunities, options, or alternatives for the accumulation of wealth thus greater capacity for value escalation
Loss of Employment Dependence of numerous employers for the achievement of substantial opportunity for the fight against depreciation

Risk Abatement Implementation Schedule/WBS
The completion of these factors should take approximately three months with the aim of minimizing the extent of risk implication of the investments and real estate industry in Dubai. The implementation process will be executed in the order of merit.
Number Title Description Implications
1 Financing the project The government should set aside substantial capital for the pursuit of gains in real estate industry in Dubai This will enhance the financial status of the investors thus positive appreciation in relation to value or accomplishment of the desired outcome
2 Extensive Advertisement Integration of quality and massive advertisement programs for the popularization of the real estate industry in Dubai. This is also essential for obtaining quality tenants thus positive cash flows within the industry Advertisement will attract more investors to the industry thus quick escalation in the value of investment. Investors will also have the opportunity to interact with quality tenants thus improvement in the course of revenue and minimal cost of operation.
3 Sub-Contract This entails sub-contracting tasks of the projects of the real estate industry to unique companies. This is vital for the improvement of effectiveness and efficiency in the operations of the industry of real estates in Dubai.

Conclusion
Risk management focuses on the completion of five essential processes. These processes include planning, recognition/identification, assessment, analysis, and mitigation. It is essential for the working environments and workplaces to focus on the identification and minimization of the risks thus achievement of the desired outcome. The real estate industry in the context of Dubai represents an example of booming markets in the modern economies (Noack p. 56). Despite this essence, there are several factors contributing towards the development of hazardous situation in the real estate industry in Dubai (Banard p. 26). These factors include lack of appreciation, lack of exit strategies, tenants, damages/repairs, employment loss, and negative cash flows.
Works Cited
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Jian, Pan. “Global Financial Crisis Takes Toll on UAE.” Chinaview . N.p., 12 Feb. 2008. Web. 26 Jan. 2013. <news.xinhuanet.com/english/2008-12/02/content_10445926.htm>.
Worth, Robert F.. “Boomtown Feels Effects of a Global Crisis – NYTimes.com.” The New York Times – Breaking News, World News & Multimedia. N.p., 4 Oct. 2008. Web. 26 Jan. 2013.
Cox, L. A. Risk analysis of complex and uncertain systems. New York: Springer. 2009. Print
Lore, M., & Borodovsky, L. (2000). The professional’s handbook of financial risk management. Oxford: Butterworth-Heinemann. 2000. Print.
Penza, P., & Bansal, V. K. Measuring market risk with value-at-risk. New York [u.a.: John Wiley. 2000. Print.
Noack, S. Doing business in Dubai and the United Arab Emirates. München: GRIN Verlag GmbH. 2007. Print.
Borghesi, A., & Gaudenzi, B. Risk management: How to assess, transfer, and communicate critical risks. Milan: Springer. 2013. Print.