“Are my risk management policies protecting me from a second serving of risk?” This time of year many are loosening their belts and fitting in a second serving of turkey, and many lenders are doing end-of-year reevaluations of policy, including risk management policies. This is a perfect time to evaluate whether your physical due diligence policies are protecting you from a double helping of risk in your portfolio.
Seismic Risk During our recent Globe Street webinar on Probable Maximum Loss (PML) Seismic Risk Assessments, I discussed a situation that I see very commonly: brokers call me and ask “Where should I take this deal? I’m concerned this property might not pass a PML, so which bank does not have a seismic policy?” Those lenders who do not have a formal seismic risk management policy often get a double dose of seismic risk:
- High-risk properties are not screened out by Seismic PMLs
- And, more subtly, brokers know that they can take potentially more risky deals with these lenders!
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