IDENTIFICATION OF RISK FACTORS AS AN ELEMENT OF THE PROCESS OF RISK MANAGEMENT IN THE REAL ESTATE MARKET - Polish Journal of Management Studies

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IDENTIFICATION OF RISK FACTORS AS AN ELEMENT OF THE PROCESS OF RISK MANAGEMENT IN THE REAL ESTATE MARKET

Abstracts > Vol 7

IDENTIFICATION OF RISK FACTORS AS AN ELEMENT OF THE PROCESS OF RISK MANAGEMENT IN THE REAL ESTATE MARKET
Sitek M.

Abstract: This study presents the systematic of the types of investment risk in the real estate market and its characteristics. Furthermore, the study compares the risk components with the forms of investing, particularly in terms of real estate market.   
The comparison of different classifications of risks presented by various authors shows that the two main categories of risk are macroeconomic risk and microeconomic risk.
Approaching developers as a typical example of investors in real estate market allowed for presentation of risk factors in investment and construction activities of developers, types of risk, areas of risk control and methods that minimize risk and risk management. It was demonstrated that risk factors are the fundamental elements in the process of risk management in the estate market.

Key words:
risk, investments in real estate, risk management.

Introduction

In ISO/FDIS 31000 [8] standards, risk is defined as: "effect of uncertainty on the achieved goals. The effect is deviation from expectations, either positive or negative. 'The goals can have a variety of aspects e.g. financial, health protection, environmental protection and other. They might exist at different levels e.g. project, organization, product and process”.
Jajuga [10] considers the two concepts of risk: negative risk and neutral risk. The negative concept of risk approaches the risk as a threat in the form of loss or impossibility of achievement of a particular goal. In the neutral concept, risk is a threat on the one hand and an opportunity on the other. With the neutral approach, risk means the opportunity of achievement of the effect that differs from the expected one.
Therefore, risk is a set of measurable future results of a particular activity i.e. a set of known probabilities, whereas uncertainty relates to what can be known since it is to some extent unpredictable and thus not quantifiable. Uncertainty cannot be viewed as a countable element such as chance or probability since it describes a degree of knowledge or the lack of this knowledge. This differentiation was developed by Meldrum [12], who pointed to the continuum between the 'pure risk' and 'pure uncertainty'. This author emphasized the difference between the events that occur sufficiently often and allow for statistical function in the analysis of probability and events that do not meet these requirements.
Making investment decisions is associated with high risk. This causes the necessity of risk management by an investor. Variability of the environment necessitates adaptive processes that consist in taking measures to limit threats or aimed at using the opportunities in foreign markets. Jajuga emphasizes that risk management means “making decisions and taking actions in order to achieve the acceptable risk level”.

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Summary

Presentation of the systematic of investment risk in the real estate market and their characteristics allowed for comparison of this risk with the risk in other forms of investing. Analysis of the risk categories presented with respect to the real estate market demonstrates that the factors that impact on individual risk categories are interrelated.
The comparison of different classifications of risks presented by various authors shows that the two main categories of risk that exists in the process of financing the investments in real estate sector are macroeconomic risk, which is the result of activity of the whole market or economy or microeconomic risk, characteristic of a particular investment project.
The risk factors in investment and construction activities of developers, types of risk, areas of risk control and methods that minimize risk and risk management were presented. It was demonstrated that risk factors are the fundamental elements in the process of risk management in the estate market.

References

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[2]. Bechciński A., Ryzyko działalności deweloperskiej, Bankier.pl. Access on: 23.08.2008
[3]. Bryx M., Matkowski R., Inwestycje nieruchomości, Poltext, Warszawa 2001
[4]. Czerkas K., Ryzyko banku w finansowaniu projektów mieszkaniowych, „Bank i       Kredyt”, Lipiec 2004,
[5]. Czerkas K., Ryzyko w kredytach hipotecznych. Wymagania banków,”Prawo Bankowe”,        2003, No. 6
[6]. Fischer J.D.,  Martin R.S., Investment Analysis for Appraisers, Dearborn Financial Publishing, Inc, Chicago 1985, [in:] Wybrane Aspekty inwestowania na rynku nieruchomości w Polsce, red. M. Bryx, Wydawnictwo i Drukarnia San Set, IFGN SGH, Warszawa 2001
[7]. Gordon K., Risk Assessment in Development Lending, „Briefings in Real Estate Finance”, Henry Steward Publications 2003, t. 3, No. 1
[8]. Grodzka I., Ryzyko w działalności deweloperskiej, „Obrót Nieruchomościami” 2001,        No. 7(35)
[9]. International Standard ISO/FDIS 31000, Risk management - Principles and Guidelines, Access on: 13.07.2012
[10]. Jajuga K., Modele ryzyka kredytowego a kredyty hipoteczne, „Finansowanie         Nieruchomości”  2004, No. 1(1)
[11]. Jajuga K., Zarządzanie ryzykiem, Wydawnictwo Naukowe PWN, Warszawa 2008
[12]. Marcinek K., Ryzyko projektów inwestycyjnych, Wydawnictwo Akademii          Ekonomicznej w Katowicach, Katowice 2001
[13]. Meldrum D.H., Country risk and foreign direct investment, “Business Economics”,          vol. 35, 2000
[14]. Ochrona środowiska w działalności inwestycyjnej i inwestycje w zakresie ochrony   środowiska,    Raport Eurofinance, Baker & McKenzie, Warszawa, czerwiec 2001
[15]. Uyemura D.G., van Deventer D.R., Zarządzanie ryzykiem finansowym w bankach,           Związek Banków Polskich, Warszawa 1997
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IDENTYFIKACJA  CZYNNIKÓW RYZYKA JAKO ELEMENT PROCESU ZARZĄDZANIA RYZYKIEM NA RYNKU NIERUCHOMOŚCI

Streszczenie: W artykule przedstawiono systematyczne ujęcie rodzajów ryzyka inwestycyjnego na rynku nieruchomości i jego cechy charakterystyczne. Dodatkowo, badanie porównuje elementy ryzyka w połączeniu z formami inwestowania, przede wszystkim w warunkach realnego rynku nieruchomości.
Porównanie różnych klasyfikacji ryzyka, prezentowanych przez różnych autorów, pokazuje że dwie główne kategorie ryzyka to ryzyko makroekonomiczne i ryzyko mikroekonomiczne.
Podejście deweloperów jest typowym przykładem inwestycji na rynku nieruchomości, umożliwiająć przedstawienie czynników ryzyka inwestycji i budowaniu działalności deweloperów, rodzajów ryzyka, obszarów ryzyka kontroli i metod które minimalizują ryzyko i zarządzanie ryzykiem. Wykazano że czynniki ryzyka stanowią fundamentalne elemeny w procesie zarządzania ryzykiem na rynku nieruchomości.

Słowa kluczowe: ryzyko, inwestycje na rynku nieruchomości, zarządzanie ryzykiem


 
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