Are registered providers failing to effectively manage financial risk?

Almost one third of the regulatory judgements published by the Regulator of Social Housing last month related to a registered providers management of financial risk. In one case, the Regulator stated that in order for a non-compliant organisation to fully comply with the governance standards it ‘needs to improve board oversight of its strategic financial risk management’.

Another case involved an organisation that was previously downgraded, as a result of a lack of evidence used to inform its decision making on the disposal of its stock. The Regulator stated in its judgement that providers undertaking stock disposal activity, must ensure that ‘key decisions of this nature are informed by a sufficiently broad range of quality information’.

How can providers avoid scrutiny from the Regulator?

In order to comply with the Regulators Governance and Financial Viability standards, an organisation must be able to demonstrate the following, in relation to its management of risk:

1. Have an effective risk management and internal controls assurance framework.
2. Produce financial forecasts that are based on appropriate and reasonable assumptions.

More recently, the Regulator has introduced the Value for Money standard, whereby providers are also expected to be able to demonstrate how optimal benefit is being derived from their assets, and how these assets help in the delivery of their strategic objectives.

The Regulator’s expectation is that organisations have a ‘forensic understanding’ of the costs and benefits of holding each of their assets, and that organisations use this information to drive decision making. The outcome should be decisions to invest and di-vest in assets that ultimately improve overall organisation value for money performance, reduces operational costs, increases surplus, and leads to better performance in meeting organisational objectives.

Complying with these standards remains the most fundamental responsibility for Boards of registered providers, because it is essential that that they are able to demonstrate that they are meeting their obligations. The recent cases of poor management of risk demonstrate the lack of grip most Boards hold in relation to compliance.

How we can help

We offer Stock Profiling – the perfect tool for providers to provide assurance that future investment decisions are aligned with their long term housing objectives. Most importantly in meeting with the Regulators standards, Stock Profiling ensures providers have all of the required information on their stock, including; stock condition data and financial performance information, in order to allow for the ongoing monitoring and control of stock performance.