Opinion: Risk management key to registered providers’ future success
Published by Max Salsbury for 24dash.com in Housing and also in Finance
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By Jo Savage, for and on behalf of Croftons Solicitors LLP
Although “the social housing sector remains financially robust”, as quoted in a recent statement from the HCA, the necessity exists for registered providers to focus on and manage their risk if they are to remain strong.
The 2013 Global Accounts demonstrate financial strength in the sector; however, they are cautious about the economic future. RPs and their boards must ensure that they both understand and manage an increasing range of risks.
It seems therefore inevitable that the consultation on the regulatory framework, to be issued by the HCA in April, will emphasise the necessity of risk management across an increasingly diverse range of exposures and require RP boards to demonstrate their understanding of, and strategies for assessing and managing, risk.
This was further highlighted by the comments at the NHF’s Housing Finance Conference that RPs will be asked to consider whether they would walk away from failing subsidiary organisations and stress testing RPs to see how they would manage their way out of serious economic downturns.
The greatest areas of risk for RPs and their boards include higher costs of debt, risks arising from development activity which is cross-subsidised from other activities (such as sales) or debt funded, diversification and demonstrating value for money.
The HCA has warned that boards must effectively manage and mitigate a wider range of risk exposures and have strategies in place to deal with the impact of multiple risks crystallising at the same time.
It would appear that RPs’ structures and activities will potentially be under tougher scrutiny, and treading a line between operating commercially and meeting the requirements of the regulator will be something that RPs will necessarily have to consider very carefully.