Advancing real estate decision making: Understanding known, unknown and unknowable risks
Higgins, David and Perera, Treshani (2018) Advancing real estate decision making: Understanding known, unknown and unknowable risks. International Journal of Building Pathology and Adaptation, 36 (4). pp. 373-384. ISSN 2398-4708
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Abstract
Whilst existing literature on real estate risk management focusses almost exclusively on holistic risk management techniques, documented increases in frequency and magnitude of unforseen, rare and extreme events can throw up sudden, unexpected shocks that can challenge recognised real estate decision making strategies.
To advance real estate decision making practice in this area, this research paper takes the skilfully conceptualised downside risk framework presented by Diebold et al (2010), being the Known (K), the unknown (u) and the Unknowable (U) risk categories, to provide a blueprint for effective real estate decision making in a changing global environment.
In recording categories of risk, managing uncertainty can be achieved by an interrelated approach of adaption, robustness and resilience. This is important part of a real estate manager’s decision making toolkit as risk recognition and knowledge of KuU event categories can augment an effective management strategy.
The mastery of modern real estate risk management can be better served by understanding and managing extreme downside risk events. Creating a comprehensive risk management framework can enhance comparative real estate performance whereby unprepared competitors fail in a world increasingly affected by large, highly improbable and unpredictable events.
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