Community Risk Management: How A HOA Management Company Can Help


One of the things a homeowners association board or HOA board oversees is community risk management, which entails all the possible risks a community may face legally and financially. Without proper risk management, the community can face huge money losses from things like market fluctuations and natural disasters that could’ve been prevented if the HOA board prepared for them ahead of time. 

Four Areas of Community Risk Management

According to the Community Associations Institute or CAI, these are the four areas of risk management:

1. Property

Under property risks, there are four categories:

  • Natural disasters –from flooding, hurricanes, hail, windstorms, etc.
  • Human perils –from pollution, theft, negligence, property damage by humans
  • Economic perils –from market fluctuations, strikes, new technology 
  • Technological perils –from hackers, Internet viruses, construction costs

2. Liability

Liability is considered another big category for risk management in community associations. This involves loss from liability that would’ve resulted from harm or injury of an individual or a breach of a legal requirement. A common scenario with HOA boards is when they hire third-party vendors that increases the chances of having liabilities when these vendors do not comply with requirements, liability insurance, and safety measures.

3. Net Income

This involves the risk of loss in the HOA’s cash flow if there is an increase in expenses, a decrease in revenue, or both. This risk becomes higher when the HOA board are not financial experts.

4. Personnel

Personnel risks involve a key person in the HOA board, volunteer, or employee passing away, resigning, retiring, or becoming disabled. Further, any worker’s compensation claim falls in this category as well.

How Can HOA Management Companies Help?

HOA management companies have professionals and experts that knows community risk management. They are capable of assessing risks per community and plan the necessary steps to prepare for these risks. A HOA management company will come up with a risk-management protocol according to the needs of a specific community, which includes both risk control (minimize loss) and risk financing (funding for loss).

What are the steps to ensure a solid risk-management program for a community?

  • The HOA management company will get a comprehensive insurance program to make sure the community is financially covered for any loss. At the same time, the HOA management company will implement a claims administration program, wherein the HOA manager and board will explain the claim system to homeowners as well.
  • The HOA management company will then implement the risk-management policies and make sure everyone in the community follows the policies. The HOA manager will monitor the compliance and regularly review the policies and adjust them accordingly if needed.
  • HOA boards will no longer have to screen third-party vendors; the HOA management company can take the helm on that. This makes sure that the screening process is detailed to guarantee that nothing falls through the cracks, such as checking vendor licenses, vendor references, etc.

Don’t Take the Risk

When it comes to managing the finances of the entire community as well as having the responsibility of making sure the common interests of homeowners are met, you just cannot take the risk of accidental losses. Risk management is all about preparation, and the more prepared your community is, the fewer losses you will suffer. Don’t hesitate to seek the help of professionals who knows the ins and outs of risk management so that your community is always protected!