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How to Effectively Manage Business Risks

By December 19, 2025Real Estate Pros Show

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Show Summary

In this conversation, Dr. Keith Pettiford, a seasoned financial services executive, discusses the critical aspects of risk management in banking and real estate. He emphasizes the importance of proactive risk assessment and management strategies, the evolution of risk management practices over the decades, and offers valuable insights for new investors in the multifamily real estate space. Dr. Pettiford shares his extensive experience and provides practical advice for businesses of all sizes to navigate potential risks effectively.

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    Investor Fuel Show Transcript:

    Dr. Keith Pettiford (00:00)
    Whereas you want to be more proactive. so any organization really needs to think about that. And again, when you talked about when I mentioned the 60 plus types of risk, that’s part of the process is really understanding what potential risks are to your business. And even in certain economic situations and environments, again, you have to be able to navigate those waters and understand how the environment could potentially impact your business as well. So again, that proactive approach should happen all the time.

    Dylan Silver (01:58)
    Hey folks, welcome back to the show. Today’s guest, Dr. Keith Pettiford is a financial services executive and educator with 35 plus years of experience in risk management and credit strategy, having led teams at Barclays, Citibank, Bank of America, JP Morgan Chase, and Harley Davidson Financial Services. He’s also an adjunct professor at Wilmington University and a published scholar in banking and finance. Dr. Pettiford.

    Welcome to the show.

    Dr. Keith Pettiford (02:29)
    Thank you for having me. Appreciate being here.

    Dylan Silver (02:31)
    It’s great to have you on here. And I always like to start off at the top of the show by asking guests how they got started in the space that they’re in, in your case, a long career in banking, risk management, credit strategy. How’d you get into this space?

    Dr. Keith Pettiford (02:48)
    No problem. So it really started in college. As junior, I ended up getting a part-time job at MB &A America, one of the premier banks in Delaware years ago. I was there part-time doing telemarketing while I was in college. And once I graduated with my degree in mathematics from Coppin State University, I jumped right into management. And ever since then, I kind of fell in love with banking. Later on in my career, I was able to actually apply.

    my mathematics degree with my career where I was actually digging into data analytics, got into the analytical space and the rest is history, right? So was really just having that part-time opportunity in college, learning a lot about banking at that age, being able to have build relationships and really learn. And once I got in it, I kind of stayed in it the rest of the rest of my career.

    Dylan Silver (03:38)
    So when we talk about risk management, and I had mentioned this to you before Hop and I’m here, for those who are not familiar with the term, help describe to myself and our audience what risk management encompasses.

    Dr. Keith Pettiford (03:52)
    Absolutely. So risk management is literally two things, looking for ways to minimize the risk of the business, but also to maximize revenue because you want to have that balance, right? You want to protect the company from any potential risks, whether it be credit, financial, regulatory, reputational. There’s over 60 plus different types of risks out there that a lot of businesses are not familiar with, right? And so

    You really have to think about that in the risk management space. And so that’s what you really have to do. You have to kind of look at the company or organization inward, really identify any key areas or gaps that there may be, and then really work for ways to help mitigate those risks. But at the same time, especially for the profit-oriented or any businesses, you want to make sure that it doesn’t severely impact your revenue as well. So it’s a very very good balancing act.

    to really make sure that you’re hitting the bottom line or really again, making sure that your business is operating efficiently. You’re providing that surprise and delight for your customers, but also again, bringing some profit to the business. So like said, it covers all different types of consumer lending products. It covers insurance. You look at it in any space within the financial services umbrella. And then even for those nonprofit organizations, same thing.

    They may have potential risks that are out there. So it’s really just about understanding where the gaps are, where the opportunities are, and walking through the steps to really help make sure that you mitigate that risk as you move forward.

    Dylan Silver (06:10)
    Now, when we talk about the 60 different areas of risk, right? And then also the size and scale of these businesses, at what point does someone have to start looking at risk management? At which point where they’ve scaled to a certain size or volume or a volume of transactions, would they start looking at, okay, I need to identify the areas where I may be

    exposed at some level.

    Dr. Keith Pettiford (06:37)
    Yeah, honestly, they should always be looking at risk management because risks happen every day, whether it’s a part of your process that could potentially be harming consumers or harming your business, whether there are certain strategies that you put in place that are not as effective, whether there’s potential regulatory compliance guidelines that you may not be aware of, even down to documentation. Your documentation may not be where it should be.

    Any it happens any and every day, regardless of the organization. So every organization should be taking some sort of proactive approach because the reactive approach takes a lot more time to fix, right? When when problems happen, situations arise. Now you have to spend more time analyzing, have to spend more time taking people off off of key projects and now having to jump on and fix these problems. You have to kind of figure out the financial situation. So there’s so many different things that happen reactively.

    Dylan Silver (07:23)
    That’s right.

    Dr. Keith Pettiford (07:32)
    Whereas you want to be more proactive. so any organization really needs to think about that. And again, when you talked about when I mentioned the 60 plus types of risk, that’s part of the process is really understanding what potential risks are to your business. And even in certain economic situations and environments, again, you have to be able to navigate those waters and understand how the environment could potentially impact your business as well. So again, that proactive approach should happen all the time.

    You have some organizations that have large risk management groups and have the ability to do some of these things where some of the smaller and mid-size banks don’t really have those resources. So again, you really want to be prudent in your thought process with respect to managing risk.

    Dylan Silver (08:14)
    Now, when we talk about the size of these businesses, I mean, the businesses that you’ve worked for major banks and companies, at what point in maybe a small business, let’s say a main street business, right? Maybe you’re an accountant, you have a tax preparation business of some kind, right? And maybe you’ve opened up a second or a third franchise. At what point would it make sense for someone like that to start looking at risk management?

    Dr. Keith Pettiford (08:30)
    Okay.

    Yeah, especially before you embark upon expanding or anything like that, you definitely want to do what we call like a risk management self-assessment, right? You want to be able to kind of take some time and really look inward and look at all of your processes, all of your procedures, documentation, strategies, whatever it is within the type of business that you run and really identify if there are any gaps, anything that could potentially harm the business.

    Right? So it’s definitely before expansion. You definitely need to take an approach to that. Outside of that, if you’re just a small business and you’re really kind of moving along, ⁓ you know, most of the larger organizations will do an audit at least once a year. Many of them are highly regulated. So they have like the, know, the FDIC or the CFPB or some other governing body kind of coming in as well. But they also take the time at least once a year internally.

    internally to look at their business and again, make sure that they’re running sound processes, strategies, et cetera. And that would be normally the recommendation for any business. So at least once a year be able to do that, but even more so if you’re looking to expand.

    Dylan Silver (09:46)
    Now, how long has risk management been around for? How long have major companies had teams for risk management?

    Dr. Keith Pettiford (10:30)
    for decades. I’ve been, like I said, I’ve been in the financial services arena for 35 years. And ever since I stepped in the door, I knew about risk management within financial services. And it’s just grown and evolved over the decades. But even before I jumped into the arena, risk management existed. know, some of the, many of these organizations had risk management departments that looked at some of these key areas. But definitely over the last 30 years,

    pretty much most of your larger financial institutions, some other institutions do have these robust risk management departments, and they’re able to look at everything from originations to portfolio management. They’re able to look at everything across the board with respect to, again, legal and compliance, fraud, which is a huge issue, even more so today. They have these huge fraud departments. everything has just grown and evolved. And now with the emergence of machine learning and artificial intelligence.

    It’s even more important for people now to really take that lens in terms of risk management, but it’s been around for a while.

    Dylan Silver (11:33)
    Now, I’m imagining that a huge benefit of being able to have a team or a dedicated person to this is if you’re not thinking about the risk, if that’s not your job, then it could easily become something that you don’t do, because you’re not focusing necessarily on what’s positive, you’re focusing on potential negatives, and so it may feel like a distraction. As far as

    Dr. Keith Pettiford (11:58)
    ⁓

    Dylan Silver (12:00)
    how most businesses approach risk management on that level. The JP Morgan’s, Bank of America, Citibank, Barclay, right? Holly Davidson Financial Services. Are they looking at it from a perspective of, hey, these are the things that have

    historically gone wrong in our business and we need to prevent this from happening again or they also looking at it from their sector. This hasn’t happened yet, but we’ve seen it happen in another one of our competitors or this is something that could be on the horizon and we need to prepare for this.

    Dr. Keith Pettiford (12:32)
    It’s actually both. You know, they kind of understand their business, especially because it’s a lending business. So you want to make sure that you’re lending to the right people, that people will pay you back, all those different things. Right. So as a lending business, there’s something that happens every day. You’re booking loans every day. Loans, unfortunately, go to collections every day. Right. So you have to be in the mindset of looking at this stuff on a daily basis. And those are things that have transcended over time. Right. So

    from that perspective, definitely. But in a broader sense, you know these organizations look at the industry. They look at what’s going on with competitors. look at what went on with, if you’re in the auto business, you kind of see what’s going on in the credit card business, because there could be some similarities. If you’re in insurance, you kind of look at, how certain lines of businesses are being impacted, and how could that impact us, right? So in any case, you’re always looking at the broader sense of it to really understand, OK, hey,

    Not only do we potentially have some risk internally with how we operate and what we do from a normal day to day activity, but there could be some outside influences that could potentially harm us down the road. So you have to be able to have that ability to pivot and also start to look at some of those pieces as well.

    Dylan Silver (13:42)
    Right.

    Now, I want to pivot a bit here and ask you about the multifamily space in real estate. I’m a realtor in Texas and I’ve now come across many investors who are looking at multifamily and a lot of them because they recognize that there’s some level of distress on the part of the operators who invested in these deals five, six years ago, maybe at a time where they felt like they couldn’t even

    you know, buy a wrong deal that everything was, was going to be great. And I think that that’s probably a trap that people fall into at the tail end of a bull market. You can you can get caught either overpaying or not taking into account, you know, some of the risk in your pro forma. When you think about what’s transpired in the multifamily space in real estate, what’s your perspective on how, you know, some of these syndicators and fund managers

    may have gotten themselves into some trouble buying the deals the way they did five, six years ago.

    Dr. Keith Pettiford (15:31)
    Yeah. And again, that’s where the proactive piece that I mentioned comes into play, right? Because you have to think about these deals and kind of anticipate what potential risks could come, right? And again, a lot of times they go into these deals, they don’t really think about that. They’re kind of moving forward, but they don’t think about the impacts on insurance and potentially insurance rates going up. They don’t think about the arms and any potential impacts from the arms that could potentially go up, which could potentially impact again, the parts of the business.

    They don’t think about the affordability aspect or the availability aspect again, which are potential impacts to your business. Right. And so they’re not really, really, really leveraging a lot of their resources to potentially understand the potential risks that are out there before they make these deals. And then when something happens now, again, they have to kind of circle back and figure out how to kind of manage through that. Whereas at least if you anticipate these things happening, you almost kind of have a blueprint or.

    a set of readiness that in case these things happen, you know how to make adjustments and make them pretty quickly. Right. But unfortunately, they don’t, they don’t foresee that they really kind of going in kind of, as I always call it with blinders on. Right. And then unfortunately, when these risks potentially happen now, all of a sudden you realize you don’t have any returns. You’re not, you know, making what you know, what you need to make. You’re not accomplishing what you need to accomplish because you didn’t think about all of these other factors that could potentially

    impact you down the road. really just taking that proactive step even before those deals could be able to help you on the back end.

    Dylan Silver (17:02)
    Right.

    You know, when I think about these larger funds who are buying these types of properties, you know, commercial residential apartments, multifamily housing, several hundred doors, it would make sense to me as an outsider looking in that they have someone who’s evaluating these components of the deal. But apparently it’s less common than I thought it is because so many people have

    Dr. Keith Pettiford (17:12)
    ⁓

    Dylan Silver (17:29)
    have bought wrong over the last several years. And on top of that, on top of buying wrong, what I’m also seeing now is that people have gone the opposite direction and have been extremely selective in what they are able to make offers on because they’ve seen this happen. So it’s almost like the response to some of these,

    for deals has been we’re just going to buy less. And I don’t necessarily know that that’s the right answer. It could be something to the effect of, we need to identify the potential exposure that we have in these deals rather than say, hey, we’re gonna remove ourselves from the game.

    Dr. Keith Pettiford (17:56)
    That’s right.

    Absolutely. again, that’s where I talked about the balance, right? Because again, with any business, you have to have that balance. know, just think, I always think about it and align it to like a football team, right? You have offense and defense, right? You can’t, you know, in order to win the game, you need the support from both pieces, right? And that’s how you have to think about it, right? As you’re going into these deals, just take that, you know, little bit of time to really assess the potential risks that are out there and…

    being able to understand, if I go in this direction, this could potentially happen. What would I do? Or if I take this specific path of action or these specific deals, what do I do? Right? And again, that’s really what it’s about. Really just taking that additional time before you go into these specific deals and these specific purchases and that sort of thing to identify what funds are the right funds. You know. What’s the short-term value, long-term value, these properties, where are these properties located? What are the potential?

    issues that could potentially happen if I start to go that direction. From a commercial perspective especially, right? Are these the right properties? Are these the right locations? What potential things could happen there? And if something does happen again, what would be the plan of action, right? So it’s really just about taking that additional step in. That should be standard and part of your process. Unfortunately, with a lot of people, they may do their due diligence to some degree, but there’s some additional steps that they can definitely take to really make sure that

    they protect themselves across the board.

    Dylan Silver (19:35)
    So for folks who are looking at getting into the multifamily space now, right? And they’re considering, you know, the type of deals that they’re going to be looking at. Are they going to be looking at 50 plus stores, 50 or less stores? Are they going to be looking at class A, B, C? Are they going to be looking at, you know, managing this property themselves or the team or having your third party property management on site? I feel like most of the time, especially newer folks,

    They’re looking at it from the lens of, we’ve just got to get an acquisition or in some cases they may be looking at it from, have to be real selective. But some of these other factors that we mentioned can really make or break the long-term health of the deal. Do you have any advice for folks who may be just starting out in the multifamily space, things that they could do on a granular level to make sure that A, they’re setting themselves up for success and B, they’re

    Dr. Keith Pettiford (20:05)
    Mm-hmm.

    Dylan Silver (20:29)
    taking into account maybe some of the risks that they did not initially foresee.

    Dr. Keith Pettiford (20:35)
    Absolutely. Definitely do your homework before you start, right? So if there’s data out there that’s available that you can potentially leverage that may give you some insight, that’s a huge opportunity. If there’s people in the space that have done this before, that again, you may want to connect with and get some feedback and some insight from them as well. Those are the types of things, again, that’s additional due diligence that you’re just basically taking an extra step or two before you actually engage.

    Because again, there could be a good amount of good wealth of information out there that you may not be tapping and that information could help you as you determine Okay, how how much am I going to invest? How deep am I going to invest where? Etc right and so really just leveraging a lot of other resources and really taking advantage of that is what’s going to help you As you start to make make a lot of these deals

    Dylan Silver (21:23)
    Now we are coming up on time here Dr. Pettiford Where can folks go if they’re interested in reaching out to you or maybe they would like some feedback on a deal that they’re looking at or they may be a larger company and are interested in your perspective on risk management. How can folks reach out to you?

    Dr. Keith Pettiford (21:40)
    Absolutely. So again, I’m actually kicking off my new risk management consulting business, KRP Strategies Incorporated. You can see definitely, Fomule LinkedIn under Dr. Keith R. Pettiford. ⁓ But I do have a website that’ll be up and running in the next couple of days, www.krpstrategiesinc.com. You can also email me at kpettiford, P-E-T-T-I-F-O-R-D.

    at krpstrategiesinc.com. You can call me at 657-667-9208. So there’s a number of different ways that you can reach out to me. Again, I’m on LinkedIn. You can send me a note there as well. ⁓ I’ll be more than happy to have conversations with people to really help them kind of understand the risk management space in their respective areas, some things that they may want to look out for, some processes that they may want to install.

    ⁓ So then that way, again, as they’re looking to make these deals, as they’re looking to invest, they at least have that ⁓ level of insight before they go into it.

    Dylan Silver (22:44)
    Dr. Pettiford, thank you so much for coming on the show today.

    Dr. Keith Pettiford (22:47)
    No, I appreciate you having me. been a great experience. Thank you.

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