HCA publishes second sector risk profile
Published by Max Salsbury for 24dash.com in Housing and also in Central Government, Finance
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The Homes and Communities Agency's (HCA) second sector risk profile claims that the context for social housing continues to change, meaning that providers need the skills and capacity to manage these risks effectively to ensure viability.
Published today, the profile reveals that the HCA believes the sector to be in good financial health and should be able to manage risks.
The publication emphasises that strong governance and effective risk management underpin well run organisations and that the HCA remains firmly committed to a co-regulatory approach, where boards and providers are responsible for managing their own businesses.
The areas discussed in the publication, which is being promoted at the National Housing Federation's annual conference in Birmingham this week, include:
• Asset related risks – including risks associated with development, diversification into other activities and exposure to the housing market.
• Liability related risks – including risks associated with existing debt, mark to market exposure and new forms of debt.
• Income related risks – including risks associated with affordable rents and welfare reform.
• Cost related risks – including risks associated with impact of component accounting, pension issues, differential inflation rates.
The document also highlights that boards and providers must not only fully understand the risks they face, but be appropriately skilled to manage them – providers need to ensure that they have an appropriate strategy in place to ensure they have access to the expertise to constructively challenge and make sound business decisions.
Julian Ashby, chair of the regulation committee, said: “We are highlighting some of the underlying issues affecting the sector and the ways in which providers can mitigate some of their risks and carry on complying with our economic standards.
“Whilst our global accounts show that the sector is in good financial health, it also faces some major challenges and risks. Boards need to understand the interaction between the various risks and their overall ‘portfolio’ impact.
“We have dealt with a number of cases where poor governance has led to ineffective risk management. This has resulted in boards receiving poor quality or incomplete information, when making key business decisions. They did not have sufficient skills to challenge or did not recognise the need for specialist or professional advice.
"Even when any resulting financial loss is minimal, there can be significant reputational damage either to the individual provider or the sector as a whole. Where the Regulator believes that organisations are sub optimal in their risk management, we will continue to reflect it in our judgements and take action if necessary.”