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Boards must remain nimble to respond to the pandemic and other risks

The sector has showed impressive adaptability so far, but there are many challenges yet to come and this is no time for complacency, writes Simon Dow

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Picture: Getty
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The sector has showed impressive adaptability so far, but there are many challenges yet to come and this is no time for complacency, writes Simon Dow #UKhousing

Our last Sector Risk Profile was published a year ago. Looking at it now provides a window on another era, a time before coronavirus came to dominate our lives in a way none of us imagined.

This single biggest challenge in living memory – to both the country and the social housing sector – now brings an impressive array of further challenges for boards and their executive teams. Meeting those will be uppermost in everyone’s mind.

Since the arrival of the pandemic, the great majority of registered providers have responded quickly to safeguard their residents and employees and to continue delivering essential services such as emergency repairs, health and safety measures, and care and support.

At the same time, in response to rapidly changing economic conditions, providers have had to quickly revise their business plans, financial forecasts and development ambitions.

Like the sector, the Regulator of Social Housing (RSH) has changed the way it works, focusing its efforts on monitoring the immediate financial impacts on landlords and helping them to maintain key operations.

Through your support for our quarterly financial survey and Coronavirus Operational Response Survey, we have been assured that overall, despite the most difficult circumstances, providers have effectively managed the crisis.

Crucially the sector remains financially strong with significant liquidity and, all things considered, impressive income collection.

We all know it is a truism that we cannot plan for every risk at any time let alone the times we are currently living through.


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But recent experience demonstrates once again that effective board governance is the essential ingredient providers need if they are to successfully navigate uncertainty, preserve viability and deliver the services that your residents, many of whom will be facing great disruption, rely on you for.

To respond effectively to new threats, we know that the best boards have something of a checklist. Do we have full ownership and visible leadership of the organisation’s culture of risk management? Do we have the experience and, crucially, the confidence to test and challenge expert advice?

Can we rely on the quality of the information we receive about performance – not just on finance but on our customer services and the condition of the homes we own? And finally, now more than ever, have we fully considered our key counterparty risks – such as with major contractors, managing agents, care or support providers, or joint venture partners and funders?

“Can we rely on the quality of the information we receive about performance – not just on finance but on our customer services and the condition of the homes we own?”

Many board members have told us that the pandemic has brought into sharp focus the value of rigorous stress-testing and clear risk mitigation plans. This is, of course, music to our ears.

Effective boards understand the potential impacts of a range of adverse scenarios, including severe economic shocks or major counterparty failure, and will have considered how to respond if risks crystallise.

While the combination of events that we have lived through this year is unlikely to have been in many organisations’ stress tests, hopefully individual elements (such as material service disruption or a sharp decline in sales receipts) will have been.

Perhaps this is something boards will want to reflect on when time allows.

It is clear that landlords will have to continue to focus on managing the impacts of the virus and associated economic shocks for many months to come.

This will obviously continue to shape how providers deliver their objectives but the other risks that we highlighted in 2019 have not receded and, in some cases, have been exacerbated by the pandemic.

For example, depending on the outcome of negotiations with the EU, there remains a risk of additional disruption when the transition period ends in December 2020.

Providers are keenly aware of the risks associated with their development programmes, particularly development for sale.

Greater unemployment must affect the housing market and makes it vital that providers regularly test for resilience to shortfalls in sales receipts.

The sector has continued to be able to access the financial markets on very favourable terms over the past few months but the scope for volatility in the funding markets means that boards will want reassurance about their liquidity and covenant compliance.

I mentioned earlier that, of course, residents struggling to cope means that their landlord’s performance is more important than ever.

We emphasised in our Consumer Regulation Review last month that good data and robust internal controls are fundamental to continuing to do the best job possible for residents, especially where the pandemic has caused short-term service disruption.

“Like the rest of society, we are all facing a future that is hard to predict”

Looking ahead, social landlords will need to respond to new building safety measures, start to make progress towards the country’s 2050 net zero carbon target and meet any new requirements in the forthcoming Social Housing White Paper.

At the same time, boards will want to consider their organisation’s transparency to residents and how to address diversity and inclusion. All in all, a long list of complex interlocking tasks.

Like the rest of society, we are all facing a future that is hard to predict. So far, the sector has more than risen to the challenge but boards know they will have to remain nimble to respond to both the pandemic and the pre-existing risks as well as to other unanticipated shocks.

We will be publishing our 2020 Sector Risk Profile in November. This is later than usual to allow us to take account of revised business plans and financial forecasts submitted at the end of September.

We hope that our publication will support boards by providing insights into how the sector is adapting to the pandemic and the range of risks landlords are managing as they plan for what will undoubtedly be a difficult near future.

Simon Dow, interim chair, Regulator Social Housing

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