Risk management planning template
\\n\\n
Dr. Pletser’s experience includes 30 years of working with the European Space Agency as a Senior Physicist/Engineer and coordinating their parabolic flight campaigns, and he is the Guinness World Record holder for the most number of aircraft flown (12) in parabolas, personally logging more than 7,300 parabolas.
\\n\\nSeeing the 5,000th book published makes us at the same time proud, happy, humble, and grateful. This is a great opportunity to stop and celebrate what we have done so far, but is also an opportunity to engage even more, grow, and succeed. It wouldn't be possible to get here without the synergy of team members’ hard work and authors and editors who devote time and their expertise into Open Access book publishing with us.
\\n\\nOver these years, we have gone from pioneering the scientific Open Access book publishing field to being the world’s largest Open Access book publisher. Nonetheless, our vision has remained the same: to meet the challenges of making relevant knowledge available to the worldwide community under the Open Access model.
\\n\\nWe are excited about the present, and we look forward to sharing many more successes in the future.
\\n\\nThank you all for being part of the journey. 5,000 times thank you!
\\n\\nNow with 5,000 titles available Open Access, which one will you read next?
\\n\\nRead, share and download for free: https://www.intechopen.com/books
\\n\\n\\n\\n
\\n"}]',published:!0,mainMedia:null},components:[{type:"htmlEditorComponent",content:'
Preparation of Space Experiments edited by international leading expert Dr. Vladimir Pletser, Director of Space Training Operations at Blue Abyss is the 5,000th Open Access book published by IntechOpen and our milestone publication!
\n\n"This book presents some of the current trends in space microgravity research. The eleven chapters introduce various facets of space research in physical sciences, human physiology and technology developed using the microgravity environment not only to improve our fundamental understanding in these domains but also to adapt this new knowledge for application on earth." says the editor. Listen what else Dr. Pletser has to say...
\n\n\n\nDr. Pletser’s experience includes 30 years of working with the European Space Agency as a Senior Physicist/Engineer and coordinating their parabolic flight campaigns, and he is the Guinness World Record holder for the most number of aircraft flown (12) in parabolas, personally logging more than 7,300 parabolas.
\n\nSeeing the 5,000th book published makes us at the same time proud, happy, humble, and grateful. This is a great opportunity to stop and celebrate what we have done so far, but is also an opportunity to engage even more, grow, and succeed. It wouldn't be possible to get here without the synergy of team members’ hard work and authors and editors who devote time and their expertise into Open Access book publishing with us.
\n\nOver these years, we have gone from pioneering the scientific Open Access book publishing field to being the world’s largest Open Access book publisher. Nonetheless, our vision has remained the same: to meet the challenges of making relevant knowledge available to the worldwide community under the Open Access model.
\n\nWe are excited about the present, and we look forward to sharing many more successes in the future.
\n\nThank you all for being part of the journey. 5,000 times thank you!
\n\nNow with 5,000 titles available Open Access, which one will you read next?
\n\nRead, share and download for free: https://www.intechopen.com/books
\n\n\n\n
\n'}],latestNews:[{slug:"webinar-introduction-to-open-science-wednesday-18-may-1-pm-cest-20220518",title:"Webinar: Introduction to Open Science | Wednesday 18 May, 1 PM CEST"},{slug:"step-in-the-right-direction-intechopen-launches-a-portfolio-of-open-science-journals-20220414",title:"Step in the Right Direction: IntechOpen Launches a Portfolio of Open Science Journals"},{slug:"let-s-meet-at-london-book-fair-5-7-april-2022-olympia-london-20220321",title:"Let’s meet at London Book Fair, 5-7 April 2022, Olympia London"},{slug:"50-books-published-as-part-of-intechopen-and-knowledge-unlatched-ku-collaboration-20220316",title:"50 Books published as part of IntechOpen and Knowledge Unlatched (KU) Collaboration"},{slug:"intechopen-joins-the-united-nations-sustainable-development-goals-publishers-compact-20221702",title:"IntechOpen joins the United Nations Sustainable Development Goals Publishers Compact"},{slug:"intechopen-signs-exclusive-representation-agreement-with-lsr-libros-servicios-y-representaciones-s-a-de-c-v-20211123",title:"IntechOpen Signs Exclusive Representation Agreement with LSR Libros Servicios y Representaciones S.A. de C.V"},{slug:"intechopen-expands-partnership-with-research4life-20211110",title:"IntechOpen Expands Partnership with Research4Life"},{slug:"introducing-intechopen-book-series-a-new-publishing-format-for-oa-books-20210915",title:"Introducing IntechOpen Book Series - A New Publishing Format for OA Books"}]},book:{item:{type:"book",id:"3385",leadTitle:null,fullTitle:"Thermal Power Plants - Advanced Applications",title:"Thermal Power Plants",subtitle:"Advanced Applications",reviewType:"peer-reviewed",abstract:"Thermal power plants are one of the most important process industries for engineering professionals. 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He received his Master of Engineering in Energy Technology from Asian Institute of Technology (AIT), Thailand, in 1990. His first degree is in Mechanical Engineering from Bangladesh University of Engineering and Technology (BUET), Bangladesh, completed in 1987. Currently, he is an Associate Professor in Mechanical Engineering, School of Engineering and Technology, Central Queensland University, Australia. He is specialised and experienced in research, teaching and consultancy in the areas of energy (industrial, building and renewable energy) and thermodynamics (energy intensive process industries). He has published over 240 research articles both in reputed journals and conferences including 7 book chapters. He has edited two books and has supervised a dozen of research higher degree (RHD) students (PhDs and Masters) to completion and attracted about $3 millions research funding. 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Venkateswarlu",coverURL:"https://cdn.intechopen.com/books/images_new/371.jpg",editedByType:"Edited by",editors:[{id:"58592",title:"Dr.",name:"Arun",surname:"Shanker",slug:"arun-shanker",fullName:"Arun Shanker"}],productType:{id:"1",chapterContentType:"chapter",authoredCaption:"Edited by"}},{type:"book",id:"72",title:"Ionic Liquids",subtitle:"Theory, Properties, New Approaches",isOpenForSubmission:!1,hash:"d94ffa3cfa10505e3b1d676d46fcd3f5",slug:"ionic-liquids-theory-properties-new-approaches",bookSignature:"Alexander Kokorin",coverURL:"https://cdn.intechopen.com/books/images_new/72.jpg",editedByType:"Edited by",editors:[{id:"19816",title:"Prof.",name:"Alexander",surname:"Kokorin",slug:"alexander-kokorin",fullName:"Alexander Kokorin"}],productType:{id:"1",chapterContentType:"chapter",authoredCaption:"Edited by"}}]},chapter:{item:{type:"chapter",id:"38990",title:"Importance of Risk Analysis and Management – The Case of Australian Real Estate Market",doi:"10.5772/50669",slug:"importance-of-risk-analysis-and-management-the-case-of-australian-real-estate-market",body:'Life is full of risks for example risk is involved in simple things like turning on the gas at home or when dealing with life threatening medical emergency decisions. Risk plays an important role in the way we manage our economy, organization or our family. Risk can be rather complex when household money is involved; such as for individuals or families – for example, mums and dads stand to either gain or lose large sums of money. The types of risks involved influence decisions on how to manage or invest money in shares, bonds or property. When faced with risks, the challenge is how well prepared are we to overcome risks. Risk awareness may be limited in which case there is a high likelihood of risk turning into hazard -leading to disastrous outcomes. Successful businesses make constant efforts to change or update their in house administrative polices and frameworks to allow for possible risks in their business requirements. Some decisions that are likely to have been factored into the component of risk are: rigid corporate governance requirement, human resource planning, succession planning, training and development, merger and acquisitions, adapting to different cultures, foregoing or discontinuing some existing products, outsourcing, new market development etc. No matter how important a decision is made, strategic alignment is critical in business decision making. New ideas should be implemented according to the business needs a company. The introducing of novel ideas should involve all personnel particularly during the decision making processes of development and setting of targets. A well-managed business is also well prepared one and thus able to confront challenges of the modern dynamic business environments.
Yet managing risk is rather challenging for the world is mostly unpredictable. The processes are continuously changing and evolving in terms of resources that are available - technology, innovation, human resources and time to name a few. In order to adequately address an impending risk, it is important to gather as much factual information as possible for analysis to help manage and thus minimize risk.
Risk can be classified into both voluntary and involuntary [1]. This classification depends on how an individual or an organization judges the situation. For example, a person with a habit of smoking or drinking fails to associate the habits as involving risks; yet often the habit becomes hazardous and they can significantly affect a person’s quality life. Involuntary risk places a person or the organization in a state of ambiguity, where the people involved in the decision making process have not been exposed to a particular circumstance or they lack knowledge and awareness of the particular risk situation. The ability to deal with such risks is a crucial factor in determining successful outcomes irrespective of the stature of an individual or an organization.
For some individuals, the ability to deal with risk appears to be built in their character but for the rest of us it seems, it is knowledge that can be acquired through training. In order to gain the skill set required so that one to deal with risk, it is important to step out of one’s comfort zone and be willing to change, learn, develop new skills, or be challenged to manage risk. Risk management is a methodical approach that could be taught and learnt by most. The general process and steps involved is presented in Figure 1.
The process of risk management
This paper is organized in the following manner: In the next few sections risk is defined and risk management explored focusing on types of risks associated with real estate market. The Australian real estate market is then reviewed and possible risks involved are explored in some depth particularly in terms the global financial crisis. The paper compares the market with the rest of the world and summaries investor risks and rewards in Australian real estate market.
In the international context, the ISO 31000/ISO Guide 73: 2009 [2] defines risk as the “effect of uncertainty on objectives” (p. 1). When there is a lack of knowledge or exposure to a certain event then such a situation can be termed uncertain. Taking decision on an uncertain event or situation may or may not be successful, which is what risk is about. Many definitions of risk exist in common usage [3-4]; however the ISO definition of risk was developed by an international committee representing over 30 countries and is based on the input of several thousand subject matter experts.
Risk is defined in Australia by the Australia/New Zealand standard for risk management [2] as “the possibility of something happening that impacts on your objectives. It is the chance to either make a gain or a loss. It is measured in terms of likelihood and consequence…” (p. 2). Risk can also be defined as the uncertainty of future events that might influence the achievement of one or more objectives such as an organization’s strategic, operational and financial objectives [3]. Risk management may produce positive opportunities for developers although the negative aspects of risk are usually the once that are emphasized [4].
Likelihood of risk occurring varies from industry to industry and how complex a job maybe. Some areas where there is a high chance of risk are construction, transport, mining, health care, sports, finance and banking, insurance and superannuation.
Risk can be broadly understood and explained in three different scenarios [5]: risk versus probability; risk versus threat; and all outcomes versus negative outcomes. It is believed that any risk can be managed through the engagement of a proper risk management process.
There seems to be an increasing demand of organizations to meet and exceed the financial expectations of shareholders. In the pursuit of growth, many organizations (for example: Toyota) have adapted and responded to expectations of the shareholders by becoming lean and efficient. It is always easy to think that risks and their potential consequences could have been predicted and managed. This is clearly not true when it comes to success in a business. Business success usually requires some acceptance of risk and, as such any risky strategy undertaken may lead to a failure.
In large organizations and corporations there are designated personnel; namely, risk managers. Hillson [6] argued that risk is mostly managed “continuously, both consciously an unconsciously, though rarely systematically” (p. 240). Risk manager’s main role is to be aware of the market, collect data and predict forthcoming threats so that a company can manage the risks in a successful manner. Risk manager duties include developing and communicating risk polices and process, building risk models involving market, conducting credit and operational risk analysis, coordinating with concerned stakeholders involved in the process and creating a risk awareness culture in the organization.
Risk management not only prevents organizations from entering a dangerous and uncertain territory, which could lead to a catastrophic failures, but also ensure the development and growth of the business. The depth and clarity with which a risk is defined is critical for risk management. In an event where an organization has a low risk situation at hand and decides to postpone rather than resolve the issue involved for financial or other reasons, the risk may eventually become a threat of moderate to high level and this could prove to be disastrous for management. Ignoring the risks that apply to the business activities or the events that have been planned could impact on the following:
customer and public confidence in the organization;
credibility, reputation and status;
equipment and the environment;
financial position of the concerned; and
health and safety of employees, customers, volunteers and participants.
A systematic approach to managing risk is now regarded as best management practice. The approach taken almost always benefits the organization irrespective of type of risk involved. Once the risk is identified it is documented in detail; subsequently the concerned stakeholders undertake possible risk management and mitigation processes. A comprehensive review of the situation and critical feedback are usually required that may ultimately lead to changes in the organizational polices and structures; particularly in case of a major events.
Organizations that thrive to be successful constantly monitor themselves and willfully undertake only calculated risks. In doing so, they enjoy a competitive advantage in addition to meeting their business objectives. In era of globalization, companies are often expanding their business opportunities and in the process, they may undertake challenging and ambitious projects. In most cases, they need to take a number of risks. In this regard, businesses such as Microsoft, Google, and Wal-Mart appear to have been successful global players mainly because they were able to manage risk in a timely manner.
Risk management decisions should be a part of business objectives. Every new project, policy or invention should include all the possible anticipated risks that one may possibly confront. Decision making process needs to consider threats identified, its impact and reaction on the business. By making a careful analysis, companies will have fewer surprises and thus may in the end spend less time recovering from the losses that may be inevitable at times. When companies do not have “a keen eye on the kind of risk”, risk retention can become a legitimate way of managing the risk. Figure 2 shows the six steps involved in the risk management process: establish the context, identify the risk, analyze the risk, evaluate the risk, and manage and review the risk.
The steps in risk management
To establish context and define goals is an important step. Once the context is established it is critical that the risk is defined and the objectives are set. Also important is to know the limitations of the risk strategies proposed. An effective risk management team understands the needs of the organization and the way it operates. Once the goal is defined there is a need to identify the scope of the context. In general, these factors can be classified into strategic and operational risks. Strategic risk management includes economic, social, environmental, political, legal and public issues; while operational risk management includes technological, human resource, financial, reputation and other relevant strategic issues. Clearly, management may not be able to totally control the many factors but the risks posed by them could indeed be minimized.
The process of risk management has to be simple, precise and effective. For it to be effective, organizations should consider strength, weakness, opportunities and threats (SWOT) type analysis of the situation. By conducting SWOT analysis, the management can identify and analyze different situations [7]. Once threats are identified, appropriate measures and decisions may then be taken to convert the threat into an opportunity. The organizational context provides an understanding of the organization, its capability and goals, objectives and strategies. In establishing the context the identification of stakeholders is critical; these are individuals who may affect, or be affected by decisions made by the risk management team. For example, stakeholders may be employees, volunteers, visitors, insurance organizations, government agencies or suppliers etc. Each stakeholder will have different needs, concerns and opinions; therefore it is important to communicate with the stakeholders involved in the process of addressing risks.
Identification of risk involves a systematic process of examining situations and finding solutions. The process includes stages such as group discussions and brainstorming sessions to generate a variety of ideas. While all the ideas or issues generated may or may not be relevant, it is important to document all problems, possible impacts and solutions identified. There are four primary areas in which risk can occur in a general business environment:
financial: this could mean loss of funding, insurance costs, fraud, theft, fees etc.;
physical: this involves physical assets of the organization, personal injuries and environmental;
ethical or moral: involves a perpetuated, actual or potential harm to the reputation or beliefs of an individual or organization; and
legal: this includes responsibilities and adherence to the law, rules and regulations of governing bodies such as the federal, state or local governments.
Risks can be identified by examining records of previous activities or events. Other ways in which risks could be identified are results from past experiences (personal, local or overseas) [8], through conduction interviews of stakeholders (example: Susilawati and Armitage [8]) or by analyzing specific real life or generated scenarios.
This step determines and addresses the impact of threats that have been documented. Threats identified are rated according to the likelihood of occurrence. The potential of an identified risk can be estimated by the effect it has on financial and other resources. When analyzing a risk, one decides on the relationship between the likelihood of a risk occurring and the consequences of the risk identified. The level of risk is then defined and management of it is then explored. Managing risk can be done in several ways such as contingency planning, using existing assets or making an investment in new resources. The levels of the risks can be classified into
extreme: an extreme risk requires immediate action as the potential could be devastating to the enterprise;
high: a high level of risk requires action, as it has the potential to be damaging to the enterprise;
moderate: allocate specific responsibility to a moderate risk and implement monitoring or response procedures; and
low: can manage a low level of risk with routine procedures.
The tools most commonly employed to measure risks include qualitative techniques [10]. Melton [11] described the tools as probability and impact analysis tools and Webb [4] called these likelihood and consequences tools. A risk matrix presentation tool (qualitative technique) can provide better insights to the nature of a risk. Risk matrix is often used as a tool to display different risks once they have been analyzed. It allows an organization to mark a threshold above which risks will not be tolerated; or will receive additional treatment from the board or delegated staff. In Figure 3 the threshold is set at risks score of 5 or above. It is then important to ask the following questions in relation to each of the identified risks:
What is the likelihood of the risk occurring?
Are there any controls currently in place to manage the risk - if yes then, are there any remaining risks?
What are the consequences if the risk should occur? and
What is the level of the risk?
Risk matrix Source: adapted from Austrac
In this step the tolerance of the risk is determined; that is, whether the identified risk is acceptable or unacceptable. The evaluation takes into account the following:
importance of risk management and possible outcomes of a risky activity;
potential and actual losses that may arise from the risk;
benefits and opportunities presented by the risk; and
degree of control one has over the risk.
An acceptable risk is a type of risk that that a business can tolerate; a loss for example- the risk does not have major impact on business. An acceptable risk has to be constantly monitored, reviewed and documented so that it remains tolerable. A risk is deemed to be an acceptable risk because of following reasons:
risk level is low and the benefits presented by the risk outweigh the cost of managing it;
risk level is so low that it does not warrant spending time and money to manage it; and
risk presents opportunities that are much greater than the threats posed by it.
A unacceptable risk is when a business is bound to experience significant losses and such losses cannot be tolerated. In such an event it is important to address and treat the risk in an appropriate manner.
Risks may be dealt with in several ways; it can be avoided, reduced, shared or retained. Risk is avoided when appropriate decisions are taken to eliminate all possible pitfalls thereby preventing the situation from occurrence. In most decision making processes, calculations are made and ideas are contemplated to strike a balance between the cost and effect. In such situations calculated risks are accepted and a high risk situation may be reduced by:
identifying options to treat the risk;
selecting the best treatment option;
preparing a risk treatment plan; and
implementing a risk treatment plan.
In other cases, risk is shared between the stake holders in terms of how profits and losses are shared. This is done mainly to share the impact of a risky event when it occurs. For example, in the era of globalization it is challenging for the companies to enter new markets and countries. In order to minimize uncertainty and exploit business situations that may exist, companies often decide to share risk; careful consideration and research undertaken by the companies often suggest risk sharing. Risk sharing develops opportunities while engaging all partners in achieving strategic goals and the gains and loss are then shared accordingly. The nature of strategies to mitigate risk often depends on the experience of the risk manager who may consider one or more of the following [3]:
avoid the risk by deciding not to proceed with the activity or choosing another way to achieve the same outcome;
control the risk by reducing the likelihood of the risk occurring, the consequences of the risk or both;
transfer the risk by shifting all or part of the responsibility of the risk to another party who is best able to control it; and
retain the risk after accepting that the risk cannot be avoided, controlled or transferred.
It seems the simplest of all methods of addressing a risk is by retaining an identified risk that may not potentially impact upon the operations of a business. It is important to continuously monitor such risks for in the absence of careful monitoring, the risks may become threats in due time.
A dedication towards risk management often projects a wiser professional image to the community. In doing so, the stake holders recognize the fact that the concerned organization has a keen interest in safeguarding its assets as well as that of its employees, visitors and volunteers among others. In the process of identifying, analyzing and evaluating risks an organization improves its management team’s ability to make educated decisions.
Every organization irrespective of size clearly strives to reduce the risks involved. In order to reduce risk organizations have to align their policies and structures in a consistent manner and constantly monitor business activities. Also, there is a need to allocate resources (financial, human resource, technology etc.) efficiently to improve performance and to win the approval of all stake holders. It is also important to ensure personnel working at different levels in the organization report to the appropriate authorities when a risk is identified. Such a culture enables an organization to document and then undertake suitable and timely measures to avert risks. In the risk management process, data capture and reporting can provide valuable insights into the risk management process. A sample risk management planning template is shown in Table 1. As discussed, risk management team play a vital role in identifying and addressing risks.
Risk management planning template
It is necessary to constantly monitor and evaluate the strategies that are employed to manage risks. This is because risks do not remain the same - new risks are created, existing risks are increased or decreased, some risks may no longer exist and previous or existing risk management strategies may no longer be effective. In the end risks can originate from accidents, legal liabilities, natural causes and disasters, uncertainty in financial markets, credit risk, project failures (at any phase in design, development, production, or sustainment life-cycles), or events of unpredictable root-cause. Several risk management standards exist including those from the Project Management Institute, National Institute of Science and Technology, Actuarial Societies, and ISO standards. The risk management definitions, methods and goals vary widely according to the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, public health and safety and real estate.
An important aim of the paper is to study and review the real estate market in Australia to identify risk and rewards as well as compare the Australian market conditions and performance with the rest of the world. Therefore, the focus of the next section is on risks in the real estate market.
Types of risk in real estate market
As is the case with every other industry, there are several risks in the real estate market. For example, there exists a risk factor in land procurement; housing development; asset management; property management; tenancy management to name a few [13]. The risks may be classified as internal or external risks (Figure 4 ). In turn, the internal and external risks can be divided into various other risk categories shown in Figure 5 and Figure 6 [14]. Builders, project managers, owners and investors who plan to make an investment or hold an investment in the property market may need to consider one or more of the following risks and then implement appropriate strategies for their projects to be successful.
Internal risk can be divided into financial management, human resources, property management, legislative compliance, corporate governance and housing management as shown in Figure 5.
Financial management: A detailed analysis of any proposed or existing projects need to be conducted for project viability. It is also important to plan the cash flow and management of the same. A poor cost control may lead to a budget over shoot and the project may run into un-chartered territories. When it comes to servicing the debt due care needs to be given to income streams - to take into account either reduction or loss of future income streams. In this regard, banking organisations need to be diligent in testing the capacity to repay the loans that are being offered. Fraud often occurs in real estate market mainly involving the use of false documents regarding number of properties, outgoing fees or rates, income streams and so on.
Internal risk Source: adapted from Sheryl and Adam [
Insurance also plays a vital role in financial management of a project or investment. Adequate insurance is needed to cover the various risks that may be involved such as the type of property, its location, exposure to natural calamities etc. to name a few. Insurance also need to be updated with the changes in conditions.
Property management of a construction project: During the construction of a new project the builders needs to plan their inventory and keep control of their stocks irrespective of the size of the project. Stock control starts from buying goods to using and maintaining them, and also reusing or reordering as required. Quality of the stock also plays a vital role in real estate business. To maintained quality several techniques are adapted. Just in time technique (where items are ordered when necessary and used immediately), minimum stock level technique and stock review technique.
Contractors play an important role in success of a construction project. They are responsible for recruitment and supervision of employees working on the project. Contractors are also responsible for material management coordinating with suppliers thus acquiring necessary goods in time for the construction phases. Poor response from the contractors or failure to perform their duties will delay the project and overshoot budgets.
Legislation compliance: Often a property holder has to disclose his personal and financial information to third party. Protecting information plays a key issue in this business. Once all the parties are ready to proceed it is necessary to have a privacy act is in place so that all information is secure. The corporation act provides the guidelines for conflicts or issues arising in construction or maintenance of a property. There are several agencies that provide comprehensive legal services to better understand the litigations involved. Anti-discrimination law and disability service act also play an important role in real-estate. Property owners are liable for any discriminatory acts.
Occupational health and safety (OH&S) also arises in real-estate and a number of OH&S compliance officers are usually assigned to monitor the safety and health; for example, conditions provided to the workers at construction sites. OH&S officer duties include inspecting construction sites and providing support to internal clients. It is important to report any hazard or incident and all incidents should be attended to and documented for future reference.
Corporate governance: Corporate governance plays an important role in risk management in the real estate industry. It is important to properly align the ideas, interests and decisions of managers to the interests of both internal and external shareholders. For example, failure to recruit appropriate personnel may lead to conflicts of interest. If the conflicts are not managed effectively they may have a substantial impact on the company bottom line. It is required and expected of the managements or boards of construction companies always carefully analyze performance in terms of the market so that they are able to keep track of their company’s performance and progress in a dynamic environment. It is also expected that the managements re-inspect and update their policies and procedures to meet the market trends and demands of all concerned stakeholders.
Housing management: A holistic management of the investment made in real estate can be defined as housing management. Housing management includes keeping track of maintenance and financial arrangements. As a common and popular practice the management of an investment property is outsourced to property management companies who appoint property managers to manage and oversee duties as required. Property managers on a daily basis are responsible for taking maintenance requests, collecting rent, dues or other fees and are responsible for the overall upkeep of the property. They also perform routine property inspections and organize inspections for the owners. Poor performance of the property managers leads to more grievances for the tenants as well as the owners.
External risk depends on a number of factors such as economic risk, funding, regulation, environment, reputation, competition, partnerships and natural disasters (Figure 2.6). Each of the factors noted are discussed briefly in turn.
Eternal risks Source: adapted from Sheryl V and Adam W, 2008
Funding: The availability of funding depends on a number of aspects such as the economic situation in general, market performance, and credit based upon any future cash flow. Some factors that influence economic performance are: change in political regime, rise in the price of raw materials, emergence of a new competitor and disruptions in production process. Market performance usually depends on changes in interest rates, changes in laws, and political and financial market factors. The risk of loss of principal or loss of a financial reward stemming from a borrower\'s failure to repay a loan or otherwise meet a contractual obligation falls under the funding risk. It is important to take into consideration as many of the previously mentioned factors while undertaking an investment decision, even when one already has an investment portfolio. Investors often anticipate future cash flow situations while borrowing money to pay a current debt. The failure of the anticipated cash flow leads to credit risk. However credit risk can be considered less likely since most often the investors are compensated by way of interest payments made by the borrower in end.
Regulatory environment: Investors in real estate projects should be aware of the local, state and federal laws and regulations. These laws depend on economic, credit and market risk as explained above. Failure to comply with the rules and regulation often leads to delays or in the worst case - complete scrapping of the project; all of which may lead to a complete or partial loss of capital invested.
Reputation: The reputation of a project developer often attracts investor attention and also provides favorable environment for investments. Joint ventures and partnerships are possible if the reputations are well known and have been built over time - providing partners the opportunities to win potentially new clients and investors, as well greater opportunities for new investments. An investor has to study the “people” perception of the organization and the credit history and rating of the project developer. An investment made into a company with poor credit history may end up losses of the principle amount invested. It could also be wise for an investor to know the value of the tangible and intangible assets and the market value of the organization into which an investment is being planned.
Competition: Property market plays an important role in the economy. There are several players in the market who usually try to attract investors. While a healthy competition is good for growth in the industry, it is important for the investors to research exactly what they are being offered because the agents often utilize high pressure selling strategies to gain client’s cash. It is possible that in the process the investors may receive inappropriate financial advice. For example, consumers may not be aware of non-disclosed information pertaining to advice they receive.
Partnership: Partnership plays an important role in investing, as it reduces the impact of potential risk on the individual or company investment. For an investor to be successful in a real-estate partnership it is important to know the partner well and therefore trust plays a vital role. The role of each partner does need to be well defined and documented. Having a clear legal document will protect the interest of all partners. It also important to plan and document an exit strategy for all involved, because personal situations may change over time. Clearly, before a partnership agreement is made it is necessary to conduct a detail research to become self-confident about the deal.
Natural disasters: In the real real-estate market, location plays an important factor in the investment decision. A property purchased at an appropriate location is expected to provide a good return on the investment. One of the main factors affecting location is the potential exposure to natural calamities such as bushfires, floods, sea level raise and erosion to name a few. If the location has a history or is likely to be exposed to a natural disaster it can be expected that the property prices will eventually be exposed to the risk. Therefore, it is wise to not be enticed into such toxic locations. Other factors that need to be accounted for are the costs of maintenance of properties and the nature and level of insurance required for risky locations, if chosen.
The nature of risk definition and management process is such that it should be integrated into “the philosophies, practices and business plans” of any individual investor or large organization’s culture (Hillson [5], p.240). It is certain that there are many risks involved in real-estate market as mentioned. While real-estate provides variety of investment options every investor has to find their comfort level upon taking risks involved. It is not easy to decide if a selected property for investment is appropriate, but the decision should be made based on the consideration of all the factors discussed earlier. In the end however, the willingness to take risks largely depends upon individual preferences and circumstances.
The elements that usually determine the scale of risk or reward are the amount of money that is invested, length of time investment, rate of return or property appreciation, depreciation, fees, taxes, inflation etc. While it is natural for the individual and organizations to invest and expect returns it is important the investors make the informed choice to reduce the odds of losing the principle invested. The potential risks and rewards in investing in the Australian real estate market are investigated next.
The speculation about Australian housing market has been intense since 2003. First it was the international monitory fund (IMF) which warned of the housing bubble in Australia “would bust” [15]. In mid-2008, IMF stated that the Australian property market was overvalued by about 25% [16]. In more recent times (April 2010), “The Economist” house price indicators estimated Australian house prices were the most overpriced in the world (56.1% overpriced - against long-run average of price to rents ratio) [17]. The US based analysts Jeremy Grantham (Boston-based hedge fund GMO analysts co-founder) and Heather Hagerty (Fidelity Investments), were also speculating whether or not the Australian residential market is experienced a housing bubble, after the US housing crisis. According to Edward Chancellor [18], a US-based investment strategist and financial author, Australia was "in the midst of an unsustainable housing bubble that could burst at any time" and the "house prices are more than 50% above their fair value - a once in 40-year event." (p.1). In 2011 Morgan Stanley’s global strategist Gerard Minack said that "we\'ve had 20 years where the Australian consumers have been willing to borrow more to buy an asset that they believe always goes up in value. The classic sign of an asset bubble." and that "home prices are 30 to 40% above fair value [p.1, 19].
The house price-to-income ratio has been the main focus in Australia. The house price-to-income ratio is comparatively high when compared to other countries. Also, the price-to-income ratio in Australia since has been more than 40% higher than the long term average. In the next sections a discussion of the fundamentals that govern the house prices in Australian residential housing market is examined. Also, the potential risks and rewards to the investors are explored in terms of the risk analysis framework presented earlier.
Since the U.S. housing crisis, analysts have been speculating about the potential housing bubble in the Australian residential property market. A report by Real Estate Institute of Australia (REIA) argued that analysts primarily focused their attention on the higher house price-to-income ratio in Australia as compared to other countries (REIA 2010). Moreover, it is observed that the house price-to-income ratio levels are at levels that are similar to that in the US before the housing market there crashed in 2008. The raise in the price-to-income ratio in Australia since 2003 by over 40% higher than the long term average adds fuels the speculation. However, it is important to analyze the fundamentals that govern Australian residential market price growth against the rest of world.
In the US, the residential finance system played a significant role in the housing bubble of 2008. The regulation, residential finance institutional arrangements, and mortgage characteristics aided the excessive demand for housing finance. Housing finance was available and offered to borrowers with poor borrowing capacities. Consequently, excessive borrowing led to the housing bubble and the collapse of the financial system in the U.S in 2008. There are some fundamental differences in the lending practice in Australia when compared to the US [21].
In Australia the lending process is highly regulated by the institutional arrangement. The lending practices enforce the regulatory provisions on financial institutions forcing them to avoid excessive risk taking behavior. Table 2 outlines the characteristics of housing loans both in the U.S and in Australia. The table highlights the systemic susceptibility to riskier mortgages in the US and that availability of such funds to finance the mortgages were more common than in Australia.
Regulation is high on mortgage loans | No full recourse of mortgages |
No negative amortisation of loans | yes |
Securitization is low in housing finance | Securitization is high in housing finance |
Non-conforming loans | Subprime loans |
Full recourse of mortgages | No full recourse of mortgages |
Mortgage characteristics of Australia as compared to US
In the US, the non-conforming housing loans represent 13% compared to 1% in Australia [21]. Negative amortization loans are common in the US but no such loans existed in Australia at the time of the crisis. In Australia the mortgages are “full recourse” lenders and hence the incentive that is offered to households to take out loans they cannot repay is reduced. This is also deters financial institutions from offering risky loans. These primary differences stand out to support and contribute to a relatively strong performance of the housing loans in Australia when compared to the US. It is important to note that the share of non-performing loans in Australia were less than 1.5% even during the financial crisis.
Another fundamental difference is that there is no government sponsored enterprise (GSE) in Australia while they exist in the US. The GSE in the US holds a guarantee of the loans that are offered. This potentially provides an impression that bad loans offered to borrowers with poor repayment capacity would be covered by the Federal Government [23]. This is not so in Australia where commercial banks provide 90% of all housing loans. The commercial banks are mainly funded by the bank deposits, short term and long-term wholesale debt [24]. The absence of the so called Federal guarantee restricts Australian banks from any excessive risk taking behavior. In 2007, at the beginning of the financial crisis, GSE’s possessed 90% of these securities. The shadow banking system in which the financial institutions have a greater participation and the GSE’s can be said to have led the excessive risk taking behavior and practices in the US [21]. In addition, according to the RBA [21], the regulation level of financial institutions in Australia is about 80% while in the US only 50% of all the financial institutions are regulated [21].
Non-performing housing loans Source: Real estate Institute of Housing America
The Loan to Value Ratio (LVR) refers to the amount of money borrowed against the total value of the property in a home equity loan. For example, a $50,000 loan against a home worth $200,000 has a Loan to Value Ratio of 25%. In Australia, loans with an LVR exceeding 80% require mortgage insurance - the risk of the borrower defaulting is far too great for the lender. The value of the property is determined by the lender and is often significantly less than the purchase price, which often surprise first-time borrowers. Typically, the amount that lenders have been prepared to lend for housing has been restricted by one or both of the following:
scheduled repayments should not exceed some fixed share of the borrower’s income – the repayment-to-income, or serviceability, constraint; and
the loan should not exceed a certain proportion, most commonly 80% [21] of the property’s purchase price – the LVR constraint.
The analysis presented in the previous section shows that Australia is fundamentally different to the US when it comes to the residential housing market. But, how does Australia compare to the other countries in the world? New research conducted by Lloyds TSB [27] - International Global Housing Market Review, shows that Australia just made it into the top 10 list of countries with the highest house price increases over the past decade (Table 3). Four of the six top performing housing markets since 2001 were in the emerging economies of the world. India with a booming real estate market tops the list - house prices rise by 284% over the last decade; Russia coming second - house price increase of 209% over the same period. China faired only marginally when compared to other major economies - ranked 14th with a 47% growth rate since 2001.
8.7 | 284 | 14.4 | |
-24.3 | 209 | 12 | |
-1.1 | 161 | 10.1 | |
-1.3 | 143 | 9.3 | |
13.6 | 125 | 8.4 | |
-10 | 106 | 7.5 | |
4.3 | 82 | 6.2 | |
-2.1 | 79 | 6 | |
6.9 | 72 | 5.5 | |
0.4 | 69 | 5.4 |
Real house price changes – A global comparison.
According to the findings of the report Australian house prices increased by 76% and had the ninth fastest growing house prices during 2001-2011. During the same period house price declines were seen in the world’s largest economies such as Germany, Japan and the United States. Japan registered the largest house prices fall of 30%, while house prices in Germany and US were down 17% and 2% respectively during the same time. Other major findings of the research include:
housing markets have typically risen fastest in countries with the fastest growing economies. On average, the countries with the biggest rises in house prices since 2001 have seen GDP increase by more than 100%. Countries that had large rises in pre-crisis times lost the most after the GFC affected their economies; and
house prices within countries that form part of the Euro have climbed an average of 23 percent since 2001. France saw the largest increase with 82%, Belgium rose 69%, Spain 26% and Italy was up 31%. But Spain has seen a major decline in 2012.
The performance of the established house prices in Australian housing market provided by the Australian Bureau of Statistics (ABS) is presented in Figure 8. The Australian housing over the past five years has seen some corrections. The period can be divided into pre-global financial crisis (GFC), during GFC and post GFC. Prior to GFC, there has been a considerable growth in the established housing prices. This growth pattern however changed course and reached the worst levels in August 2008 when the GFC was setting in. However, the prices of established homes climbed steeply during the peak of the GFC when markets around the world were playing havoc. This defiance could be mainly attributed to the management initiatives taken by the RBA [21] and government of Australia. The RBA drastically reduced the interest rates to a record low of 3.25% supported by the federal government incentives such as economic stimulus plan, which included substantial increase in first home grants among others.
This financial incentive was “too good to miss” for anyone considering their first home purchase. This led to flood of first home buyers entering the market that drove the prices up against all odds. Since the time the incentives have been wound back, and the market and investor sentiment took over. This led to a fall in the growth when compared to the preceding three years and has been mostly in the low sentiment in the past two years. Therefore, although Australian market prices are influenced by the global events, a collapse similar to that seen in markets elsewhere seems appears a distant possibility. This can be attributed to the underlying government incentives to manage the risks during the crisis. Other micro-economics aspects also helped manage the downturn.
Australian housing demand has been strong and can be also attributed to the following:
strong overseas migration from 2004 to 2007;
housing shortages due to a rapidly growing population;
Australian household sizes are shrinking;
lending standards stricter than most advanced economies including the US; and
interest rates at record lows.
Australian annual house price change in the last decade
House prices have been underpinned by a chronic housing shortage in Australia. This was brought about by an ever increasing population and constraints placed on housing supply over time. Figure 9 shows the increase in population growth from both natural growth and migration since 2006. From 2006 to September 2010 natural population growth has only seen a marginal increase, but during the same period the net overseas migration growth has been substantial.
Trend of natural population increase and net overseas migration
Figure 10 shows that there has been an increase in the total population by about 1.6 million people 2006–2010. During the same period, the Net Overseas Migration (NOM) accounted for 1.02 million people compared to only 600 000 increase in natural population. However, given that there has been a large influx of people into Australia, the question was whether there was enough housing infrastructure in place.
Net overseas migration and components of population change
Figure 11 shows the trend in the population and dwellings commenced from January 2007 to October 2010. As shown earlier, the population growth showed an upward trend over the entire period. The number of dwellings commenced shows a rather distressing trend. Figure 11 shows the commencement of new dwellings significantly fell short and did not keep pace with the rapid growth in population. For an addition of 1.25 million people during this period only about 235 000 new homes were built demonstrating a significant shortage in the housing market. Interestingly, this situation presents a case for more property investment as people search for a place to live.
Historically, Australia has been behind in the demand versus supply of residential dwellings, but more so in the last decade than any time earlier. Figure 12 shows the dwelling gap in the previous decade. Australia continues to run large annual deficits in housing supply - the underlying demand for dwellings and the completion of dwellings has not matched. In view of this it can be expected that in the longer term Australia’s housing market is underpinned by insufficient supply in addition to robust underlying demand.
Trend in the number of dwellings commenced and population
Estimated dwelling gap in the last decade
National housing supply council (NHSC) estimates a demand versus supply gap of approximately 640 000 houses in 2030; and an increase in the gap from 250 000 in 2012. Figure 13 shows the projections in the supply gap to 2030. The figure shows an increase over time till 2015, and indeed a higher rate of increase predicted from 2015 till 2030.
Supply and demand gap projections to 2030
To examine whether the situation is the same throughout Australia or mainly confined to a few states, data from all the states are explored in more depth. Figure 12 and Figure 14 both show that not all states have an acute shortage of housing such as South Australia (SA), Tasmania (Tas) and Australian Commonwealth Territory (ACT). Their data runs against the trend for the last decade but more so during 2009-2010. The larger states of New South Wales (NSW), Victoria (Vic), Queensland (Qld) and Western Australia (WA) all continue to have high deficits year after year and the deficit is increasing – however, Victoria being an exception in 2009-2010 where it managed to go against the trend temporarily (Figure 14). To further understand the nature of the differences between states, the net population increase in the demand across states needs to be compared. Figure 15 shows the state by state net change in population as well as housing issues. The states with a high influx of population showed higher dwelling demand.
Not surprisingly, the high demand has led to a rather strong rental market particularly in the larger states and this has provided an impetus for higher rental returns and an ideal time for new investors to consider for the longer term. With recent housing approvals declining, this demand supply gap can only be expected to widen. Clearly, the population increase cannot only be driving the market. Therefore, other aspects need investigation such as house price to income ratio; and house hold debt to income ratio.
Housing demand and supply by states
Net population change - state by state over 2000-2011
The house price-to-income ratio is generally calculated using average income of the whole population. This method of calculating house price may not be appropriate in that a set of buyers whose incomes are above the average income of the wider population, and have the ability to service the loans tend to bid in the auctions there by inflating house prices [28]. Such competition is visible across all capital cities but more so in Sydney, Melbourne, Perth and Canberra than other cities. Figure 16 shows the median change in the house prices across eight capital cities since 2007.
Figure 16 shows that the increase in house prices in the major capital cities have been greater than those of other cities. This suggests the increase in house prices in Australia over the past five years was driven mostly by house prices in the most expensive cities, where home buyers tend to be higher income earners. The house price-to-income ratio does not seem to pick up the distributional differences. The household debt to disposable income ratio can provide valuable insights while assessing the vulnerabilities. Therefore, disposable incomes of people need to be considered when assessing the vulnerability of an average mum and dad investor.
Dwelling prices in capital cities in Australia Source: ABS
Figure 17 shows the distribution of debt to income since 2006. The data indicates that the debt to income ratios has been fairly high – but consistent around 160% for the total debt, of which close to 140% is towards the mortgage. An indication to the scale of vulnerability can become salient when the house hold income to debt and the annual change in established home price are compared. Figure 18 shows that there has been a somewhat volatile situation in the housing market in all capital cities during 2006-2011; yet, during the same period, the debt to income ratio seem to be approximately constant over time. The comparison shows the average households are not so vulnerable to at least a change in their income situation given there was volatility in house price changes over time.
Owner occupier debt Source: RBA
Annual change in established home prices Source: ABS
The aim of this paper was to define risk and risk management in terms of real estate investment thus demonstrating the in depth nature and complexity of the process. Another aim was to conduct risk analysis of the Australian real estate market in particular, in terms of the global financial crisis – pre GFC, during GFC and post GFC. The review shows that risk analysis involves a number of steps with each step in turn involving another set of procedures. Risk analysis is a process that it is often ignored by investors particularly by the individual or smaller investors who tend to be more vulnerable. Similarly, risk management involves a number of processes and stages with steps and these have been outlined in the paper. A risk analysis is conducted here for investors in Australia real estate market. The results are rather interesting in that several conditional differences exist between Australia and the rest of the world. The factors identified that influence Australia’s house price are different from the rest of the world; including for example the rather stricter and well regulated lending practices of Australia’s financial institutions. A tight financial system regulation in Australia means a highly disciplined financial sector. The tougher regulation of the industry therefore prevents financial institutions from taking on excessive risks, contrary to the US counterparts. In fact, increasing house prices was identified in Australia after the crises of 2007-8; and this was associated with the changes in mortgage lending rates, rising family income, increasing overseas migration demand, government incentives to name a few. Together the market situation suggests that Australia is unlikely to face a US style housing bubble. The results of the risk analysis show that:
rising incomes and population growth ensure the demand for housing outpaces current supply, thereby increasing the prices;
high capital growth in larger cities where there has been large population migration such as Perth, Sydney and Melbourne;
high demand still exists for residential and commercial real estate to accommodate growing expatriate working community;
increased property prices has to many Australians increasingly seeking rental accommodation, making housing investment a healthy growth area for investors;
higher growth rate in property investment in Australia - superior to most OECD countries, including the UK, Spain and the US; and
foreign exchange rate changes have been favorable, making property purchase in Australia a valuable option; that in turn driving property prices higher. This has changed in 2011-12 when the higher Australian dollar has posed interesting challenges for the Australian investments.
The findings are in line and relate to that of the Australian housing and urban research institute’s findings [29], which further suggest:
investors are motivated to invest in the private rental market for a number of reasons such as financial factors, personal goals (retirement or future home for children at university), and household circumstances (proximity to their own dwelling);
investors use their own measures of quality and personal preference when selecting a dwelling even though they will not be living in the property;
investors perceive property as a long-term, safe and stable investment that is low risk and will produce guaranteed returns;
investors largely expect capital gains from investing rather that rental yield only and this is how success is measured; and
informality characterizes investor approaches to the housing market where property is considered familiar, relatively easy to invest in when compared to other investments.
In summary, Australian housing industry continues to experience significant housing shortages in major cities due to a rapidly growing population; in particular, the growth has been fueled by strong overseas migration during 2004-2007, but the Australian current government immigration laws suggest that the strong levels of immigration will continue for some time due to the lack of skills in the labor market. The housing demand is further supported by the fact that the size of the Australian household appears to be shrinking adding to the pressure on housing both in rental and investment. The demand of rental housing together with somewhat lower house prices in recent times (buyer marker) has lured many new investors in the market. This aspect, the negative gearing benefits, and the first home ownership schemes supported by significantly lower interest rates have all led to a favorable and stronger real estate market in Australia. All of this has occurred within a framework of a stronger, tightly regulated financial sector that has been more-stricter than most advanced economies including the US. Such a regulated real estate market appears to have kept the mortgage repayment failure and housing related bad debts at a minimum in Australia.
A necessity animates the argument in this essay: to expand the horizon of our thinking about earth beyond the opposition between Ptolemean (geocentric) and Copernican (heliocentric) worldviews. The Copernican worldview undergirds modern science and technology in approaches to the environmental crisis today. By contrast, the Ptolemean worldview is relegated to outdated beliefs. Yet the both run a version of centrism, a claim that there always is a center or a number of them. Opposing Ptolemy and Copernicus too strongly takes any other (call them “a-centric”) approaches to earth off the table. These tacitly suppressed approaches can promise more in how one goes about environmental crisis today.
The argument is also responding to a much more obvious but much harder to face necessity: The environmental crisis is political and human in nature; as such, it cannot be fully addressed—let alone understood—by technology. Instead, a critical rethinking of the fundamental assumptions about politics and about humanity in approaching earth becomes due. The essay contributes to such rethinking by asking how thinking earth as “environment” preempts one from thinking earth1 Attempting to manage the crisis is always only the second step. The logically first step is in having committed to the terms in which one thinks of the crisis. One has to rethink the first step before getting too far into second.
Facing the contemporary “environmental crisis,” one therefore needs “to step back” both in time and in the conceptual scope, in order to revisit the notion of environment as defining and possibly also blindfolding one’s approach to the crisis. This essay commits such a stepping back to rethink the relationships between earth and environment. By necessity to become clear below, that evokes “old” bodies of text and thought, not only from the last century, when environmentalism was first taking shape, but also from the late antiquity, from the long durée of the Western thought. The working assumption is that a simple passage of time does not automatically render “old” irrelevant, but rather that placing a modern issue into a framework of an “older” tradition of thought yields a double new result. It invites “to step back” in thinking through a modern issue and also to rethink the pertinence of the “old” corpora of thought in a new light.
To provide an in-advance outline of the argument-structure and result of this essay: The analysis first turns to Edmund Husserl’s (d. 1938) deductive-analytical mereology (a theory of whole as always more than its parts) of earth as a simple bodiless whole, from which all bodies split off. The essay further compares Husserl’s mereology with Augustine with structurally (but not thematically) similar mereology of “mind” in Augustine (d. 430 C.E.), for whom mind is an equally simple whole without parts. That in turn allows to juxtapose both approaches to the the nineteenth to twentieth centuries mereologies of organic and complex bodily wholes, from which modern notions of environment and environmentalism stem. That delineates the origin and the limit of organicist mereologies and of environmentalism having stemmed from them. This framework of analysis allows to show that environmentalist crisis is not only a crisis of preserving environment but also and more foundationally a crisis spurred by environment as a notion purporting to regulate human attitude toward the earth.
My argument arises in rethinking Edmund Husserl’s 1934 work about earth2 as a way to address limitations of the notion of environment as the constitutive notion for any discussion of “environmental crisis.” After a preliminary exposition of such limitations, I will first of all show how, in thinking the earth, Husserl committed a more radical move than either environmental localism3 or environmental cosmopolitanism (or globalism) can afford. Husserl was offering a more demanding and, in his view, more precise notion of the earth than any locality-driven nationalist environmentalists did, as they sported the specter of “blood and soil.” (I take the most extreme version of this kind of political thought, which also manifested itself in the magnanimous figure of “the Soviet Land” and in a miniature of “the little motherland,” each one was to love.) Husserl was not a localist. Nor was his notion of the earth a cosmopolitan one: The cosmopolites’ specter of the “citizen of the world” would only negate and thus still depend upon (even if only negatively) on the locality-driven politics of “blood and soil.” Effectively leaving both the locality-oriented and cosmopolitical versions of environmentalism behind, Husserl offers what I interpret as a holistic approach to earth—a mereology of the earth, which both localism and cosmopolitanism fail to account for properly.
After outlining Husserl’s mereology of the earth, I will second of all introduce its structural (rather than thematic) parallel, Augustine mereology of the
A constitutive and guiding notion in all discussions of “environmental crisis” is that of “environment.”
According to Oxford English Dictionary, etymologically “environment” suggests an “action of surrounding something.” The German synonyms for “environment”—“
The notion of environment is thus unavoidably centrist. This remains unchanged, no matter whether one subscribes to Ptolemean views, which are considered by some outdated; or to Copernican views, which are considered by others misleading in their reduction of humans to just objects of science. Do humans on the earth mark the center of the universe (the word “universe” designates no more than an extended version of the “environment”) around which the sun and stars are rotating? Alternatively, is the earth only one of the many planets? Is there one privileged center of the world (which is also “ours”) or are there many centers and thus no Center with the capital “C”? Either answer must begin from a version of centrism. There simply is no environment without at least one—but potentially also several—centers. Centrism and environmentalism are inseparable one from another.
The notion, of “environment,” is thus too geocentric and too anthropocentric to not obfuscate the discussion of the “environmental crisis,” which it seemingly purports to be leading. My argument below responds to that obfuscation. Is that possible, and if so, how to avoid such a centrism? In search for an answer, I first turn to the geo-thought of Edmund Husserl.
Looking for a logically necessary foundation (“source,”
However, Husserl’s is not the only mereology, in which the whole consists of neither parts nor of organs; Augustine view of the
Husserl departs from an understanding of the Earth as a body in either Ptolemean or Copernican sense and arrives to a mereological understanding of Earth “as a whole which is not a body,” from which, however, all bodies—planets, stones, cars but also visceral living bodies, like “my own” living body emerge through a process of separation. Highlights of Husserl’s argument are as follows. (1) Apodictically (but not necessarily empirically) on the way to earth and people in space, there first must be an initial absolute earth-body (either an ellipsis or a flat plateau), which neither moves nor rests; this would be a base-earth in relation to which the movement and rest of all other bodies become determined in the first place. (2) On such a base-earth, there is and must be a visceral, living Ego, which, like the initial (Ptolemean) base-earth, is neither moving nor resting, thereby allowing for the Copernican earth-planet to move and to rest. The visceral ego allows to transition from the (1) to the earth-planet as a relatively moving and relatively resting body among other bodies. That means that the visceral living Ego takes place of the base-earth in (2): the visceral Ego neither moves nor rests, giving a foundation for movement and rest of all bodies. (3) This living visceral Ego logically
Husserl builds this argument in response to what for him are unsurpassable “difficulties in establishing Earth as body.”10 However, as shaped as they are by the notion of environment, the discussions of the environmental crisis do not account for these difficulties, thereby, as Husserl helps see, missing the very earth these discussions purport to preserve. Yet, making this missing of the earth clear and loud might invite rethinking the terms of the “environmental crisis” in the first place. As this interpretation of Husserl highlights, these difficulties in establishing Earth as body apply to both Copernican and Ptolemean notions of the earth, thus revealing the common ground behind the two worldviews, a ground pertaining to the very notion of environment, however conceived. Whether the earth is thought of as a Copernican body (a planet among others) or as a Ptolemean body (an absolute center and an absolute neither moving nor resting ground for determining movement and rest), the “difficulties” Husserl lays bare remains the same: It is only possible to establish earth as body when and if earth is a mereological premise, foundation or ground (logical, physical and humanitarian alike) on which and only on which a body, indeed any and every body, can be ever thought or experienced.
To understand these “difficulties,” a more detailed exposition of Husserl’s 1934 argument is required. In the development of his argument, Husserl has four notions of earth: (1) a neither moving nor resting ground/base of experience of all moving and resting bodies; this is an outlook, which “I” gets through transferences to other Egos; this for Husserl holds for Copernican and Ptolemean and all other possible world-outlooks alike; (2) a moving and resting body (a planet among other planets); (3) the Ego-viscera [
Moving through these four senses of earth, Husserl arrives to a practical application of his mereology: If earth is not a body, there is and there can be only one earth12 and only one humanity: On whichever planet you (the visceral ego) go, you cannot arrive to another earth as such a whole or such a totality which is not a body.
The result of his argument is especially important in the context of polemics between local and national environmentalists on the one hand and the global environmentalists on the other: Both parties reduce the pieces of earth (Germany, France, continents) or even the whole planet Earth to a body, and this precludes the discussion of how to preserve earth by reaching its proper scope: How to think the only earth and the only humanity in the first place.
How then to evaluate Husserl’s mereology, both in its own terms, that is, as a mereology, and in terms of its application for the discussion of the environmental crisis? The second part of the question cannot be addressed without a due diligence with the first part. How then to place, that is to say, how to find proper limits to Husserl’s mereology of the bodiless earth. As already noted, his is not a mereology of an organic whole, for his earth is not a body, and thus is not an organism either. The closest to Husserl’s mereology of the earth can therefore be found in Augustin’s mereology of the mind. As we will momentarily see for Augustin mind is a whole without parts, which therefore entails a bodiless whole, as well.
Augustine
This mereology comes by way of polemics Augustine stages against Cicero.14 For Cicero, he argues, at stake is a virtue of prudence. A prudent one is to differentiate three kinds of phantasms one experiences from one’s intellectually clear cognition. The phantasms about the
Based on this concern with the prudent person, Augustine creates a time structure. Phantasms of the
Augustine result is a mereology of the mind which is a whole—in his case the who—who does not encounter oneself as a part of oneself, but only remembers oneself as a whole, that is to say as the present without parts.
What Husserl’s earth and Augustine mind have in common is a presence (Earth or Human/Divine mind) which/who is not defined as anything specific. For Husserl, it was the Earth which is not a body, from which all bodies are stemming. For Augustine, it was the mind remembering its own presence before the mind recalls, anticipates, perceives and/or contemplates things and matters.16 Mind is first of all memory and humanity is first of all earth; the two thinkers conclude respectively and almost in structural unison with each other. For both, there is a whole, a presence, which has no parts and from which all parts stem.
The differences between the two mereologies are too obvious to enumerate, yet one is particularly important: Husserl locates thinking in the visceral ego, while Augustine does not afford for the mind (which would be the best candidate for that) any bodily status whatsoever beyond what transpires from the memory of the present.
To understand the limits of these two mereologies is to relate them to what might be revealing about their common theological root. Other derivations from that same root can be instructive for understanding a particular direction Augustine mereology took and Husserl’s mereology followed. That common root will become clearer through juxtaposing the two mereologies with that of Philo of Alexandria in his philosophical reading of the G-d of the Septuagint.
If both Husserl and Augustine offer mereologies of bodiless wholes without organs or parts, an interpretative move of Philo of Alexandria in his understanding of relationships between the Septuagint’s G-d and the world (
At this juncture, the key is a polemical background, against which Philo’ creates a notion (and a neologism):
The world “subsists” under G-d, even if G-d is not a part of the world, Philo’s innovation further suggests to his Latin adherents. With Marcus Victorinus (fourth century C.E.), Latin theology mirrors Philo’s invention of
In this context, Husserl’s “earth” and Augustine “mind” present themselves as versions of Philo’s polemical mereology of huparxis.19 Augustine argues against reducing
The masters and students of rhetoric in Palestinian Rabbinical schools did not consider polemical contexts extraneous to the results of polemics. This general stance of any school of rhetoric found a particular configuration in a mereology of the Divine law the Palestinian rabbinical schools of rhetoric displayed in their extant archives, known today as the Palestinian Talmud or Jerusalem Talmud.20 What pertains to the context of this essay is that the Palestinian’s schools developed a mereology of the past as mereology of the divine law. Looking at their mereology sheds a new light on the mereology of
The Palestinian schools concern with a necessity and impossibility to testify for the divine law of the past. Such testifying, testimony or testament come in two forms: as an exemplary act (
The conflict of the impossibility and necessity to recall the law of the past is a version of mereology. The past is a whole that has no parts (in this case no fully specified laws/rules of procedure); and the recitations stemming from that past are (to use Husserl’s language) separations from the law of the past (just as the planets and other bodies were separations from the bodiless earth.) The paradoxy is that the characters in the Palestinian rabbinical schools of rhetoric in reciting the law make it present and thereby loosen or weaken its power, the power of the law of the past. This is why the characters in the Palestinian Talmud are often concerned with “what are we to testify to” or “what are we to establish” as the divine law (lit “what are we making stand” [
What does that mean by way of differing versions of mereologies considered heretofore? The Palestinian schools display a mereology of the past, which celebrates uncertainty of one’s standing between the impossible and the necessary, rather than committing to the would be false certainty about parts and parcels of the law of the obligation. Whereas this law comes from the past as a whole with no parts thereto, citing and detailing this law threatens its very power. Standing between Scilla of necessity and Haribdah of impossibility, the Rabbis, however, do not refuse to testify. They instead suspend testimony, thereby humiliating their own power of citation. They thereby suspend both the impossibility and the possibility to testify to the Law.
By comparison with Augustine memory of the present, the rabbis and students in the schools prefer the memory of the mereological past of the law over the recollection of the law in the present. That also means they prefer the memory of the law of the past to a recollection of that law in the form of definitive rules. Yet, facing the necessity of such recollection, they suspend such recollection/citation by committing to no final formulation of the law but only to a provisionally accepted number of recollections/citations. A community living by mutual obligations with G-d lives in suspension of any given recollection about the past of these obligations. Back to Augustine, instead of certainty of the memory of the present, this community lives by the uncertainty of the memory of the past. That celebrates a programmatic uncertainty as an authentic condition versus any certainty that Augustine offers in his “memory of the present.”
What that means, however, is that the mereologies of the bodiless whole without parts in Husserl and Augustine alike find a contrasting parallel in the rabbinic Palestinian mereology of the divine law. If the former strive for a certainty in the foundations of human life in a such a bodiless whole without parts, the Palestinian rabbis in their continuation of Philo’s mereology of
To conclude, Husserl’s mereology of the bodiless earth induces reservations about approaching the earth as environment. In its either localist or globalist versions, the notion of environment not only reduces the earth to a body, but also either begins with or stays within the anthropo- and geo-centric element. Husserl gestures toward a way to overcome such centrism: to approach earth as more than a body, that is, as not a body. His mereology of the bodiless earth, however, is as promising as it is also limited by his commitment (shared with Augustin) to finding a
Then what? Ascribing science the sole or even predominant responsibility for creating and resolving the “environmental crisis” needs a radical rethinking in view of the competing mereologies outlined above. For, they collectively put both earth and humanity back into consideration, while letting the Copernican science do what it does best, to work with the bodies. That also means keeping Copernican science apart from what is not a body, that is to say from the humanity and the earth.
The above analysis affords a conclusion that environmentalist thinking needs a sustained critique of its over-commitment to science, including the scientific view of wholes as organisms. Beyond and in addition to organicist holism of the bodies, a mereology of bodiless wholes without parts, in the competing versions thereof outlined above, needs to be brought forth and to claim its role in the understanding of what we do not understand when we lock ourselves into thinking about nature in terms of “environmental crisis” today.
Preparation of this article for publication was in part supported by Gordon and Gretchen Gross Professorship in Jewish Thought, University at Buffalo, SUNY. I thank Edouard Nadtochii and Elad Lapidot for many conversations and exchanges that contributed to shaping this argument.
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Thus proteomics, an area of research that detects all protein forms expressed in an organism, including splice isoforms and post-translational modifications, is more suitable than genomics for a comprehensive understanding of the biochemical processes that govern life. The most common proteomics applications are currently in the clinical field for the identification, in a variety of biological matrices, of biomarkers for diagnosis and therapeutic intervention of disorders. From the comparison of proteomic profiles of control and disease or different physiological states, which may emerge, changes in protein expression can provide new insights into the roles played by some proteins in human pathologies. Understanding how proteins function and interact with each other is another goal of proteomics that makes this approach even more intriguing. Specialized technology and expertise are required to assess the proteome of any biological sample. Currently, proteomics relies mainly on mass spectrometry (MS) combined with electrophoretic (1 or 2-DE-MS) and/or chromatographic techniques (LC-MS/MS). MS is an excellent tool that has gained popularity in proteomics because of its ability to gather a complex body of information such as cataloging protein expression, identifying protein modification sites, and defining protein interactions. 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