Later on today I’m on the CIH Conference platform (follow along at #housing2012) talking about the new regulatory environment and the potential impact that it has on housing associations and I thought I’d post my thoughts about this topic too. The only condition of putting this blog out now is that if you’re reading this and coming along to the conference later then you have to promise not to shout out the ending, no one likes spoilers.
The new regulatory environment is the latest in a long line of changes faced by housing associations. From the recent past, the twin impacts of the collapse of Lehman Brothers in 2008 and the budget statement in November 2010 changed our finances and challenged some association’s business models. And when I say challenge I don’t mean solely that it’s going to be a tough period, I mean that maybe some housing associations will find that the Mayan prophecies for 2012 relate directly to them.
In the near future lies the further challenge of Welfare Reform but right now it’s the approach of the Regulator to those who find those twin challenges difficult that is playing out. Those attending the conference will be hearing from Julian Ashby about how the Regulator views risk in the sector and that promises to be a revealing listen.
As I think about the massive changes we face, three particular items suggest themselves. First there’s a “new normal”. Our new operating environment looks like it’s here to stay and we must accept that. Innovation and invention are the new competitive advantage, but the regulatory risk of getting those things wrong has become tougher. Secondly, this is a time when new skills are needed. Boards, executives and staff need to be equipped with abilities and – perhaps most importantly – new attitudes that allow them to operate in this new world. Finally, there’s a new (or perhaps a renewed) understanding that questions of value for money are essential. This is the biggest challenge because our organisations need to know the most effective ways of spending to add value, which is rarely a straight-forward decision.
So in this brave but challenging new world – how do you prepare? As I see it there are three steps to take:
1) Review your approach to risk – Do you have a formal statement on risk appetite? Do you know how you will assess risk against reward? Do you have clear processes to identify and address potentially risky activity – always remembering that doing nothing can often be the most risky approach? And wherever you are in the organisation, is risk management everyone’s everyday job, or just that of the Audit Committee once a year?
2) Know your competitors – Remembering that those competitors now include for-profit providers with a different rationale for entering this market than the traditional housing associations that we have normally “benchmarked” ourselves against.
3) Secure your cash-flow – The ultimate no-brainer, but are you really sure that your cash will hold up in the immediate future and in the longer term? And if you aren’t sure about your cash-flow, are you sure that you can flex your aspirations to ensure you don’t get over-committed. As we all know you certainly can’t afford to get a V3 or a V4 rating from the Regulator.
At the same time, the relationship between housing association and customer continues to evolve at a rate of knots. At Trafford Housing Trust we’ve undertaken three initiatives in the last 12 months to see that what we do is more relevant and more accountable to our tenants and stakeholders.
Firstly, we’ve consulted widely about what we should provide and at what cost. This has given us a new approach to budgeting, where consumer choice on the “basket” of services (and the standards they are provided to) drive resource allocation. So last year we asked our customers what services they really valued and they told us Repairs and Tenant Involvement – so we have allocated additional resources to enable these to reach the level of “the best of the best.”
Secondly, we have issued “The Promise” which is a transparent and solid understanding of what tenants and stakeholders should and could expect from us and to which we can be held to account. This paves the way for the third initiative which is our publicly available “Trading Statement” which reveals exactly how we’re doing and is one of the documents reported to our Scrutiny Panels. And with these three initiatives now underway, we are looking to take this accountability work one stage further and to declare a “community dividend” - a sum to be used to further tenant and community aspirations for their neighbourhoods.
My feeling is that we are now at a point where we need to take responsibility for our own businesses. Not that this wasn’t true before, but never again should we let the answer to the question, “What would the regulator want us to do?” be the determining factor in what we choose. Instead we must develop a greater understanding of our customers and the risks and opportunities presented by the markets we operate in; we must be clear about the trade-offs between the costs and benefits of alternative courses of action, we must define our purpose in terms that our customers and stakeholders would expect; and finally we must stand up and be counted for delivering it.
The new regulatory environment is the latest in a long line of changes faced by housing associations. From the recent past, the twin impacts of the collapse of Lehman Brothers in 2008 and the budget statement in November 2010 changed our finances and challenged some association’s business models. And when I say challenge I don’t mean solely that it’s going to be a tough period, I mean that maybe some housing associations will find that the Mayan prophecies for 2012 relate directly to them.
In the near future lies the further challenge of Welfare Reform but right now it’s the approach of the Regulator to those who find those twin challenges difficult that is playing out. Those attending the conference will be hearing from Julian Ashby about how the Regulator views risk in the sector and that promises to be a revealing listen.
As I think about the massive changes we face, three particular items suggest themselves. First there’s a “new normal”. Our new operating environment looks like it’s here to stay and we must accept that. Innovation and invention are the new competitive advantage, but the regulatory risk of getting those things wrong has become tougher. Secondly, this is a time when new skills are needed. Boards, executives and staff need to be equipped with abilities and – perhaps most importantly – new attitudes that allow them to operate in this new world. Finally, there’s a new (or perhaps a renewed) understanding that questions of value for money are essential. This is the biggest challenge because our organisations need to know the most effective ways of spending to add value, which is rarely a straight-forward decision.
So in this brave but challenging new world – how do you prepare? As I see it there are three steps to take:
1) Review your approach to risk – Do you have a formal statement on risk appetite? Do you know how you will assess risk against reward? Do you have clear processes to identify and address potentially risky activity – always remembering that doing nothing can often be the most risky approach? And wherever you are in the organisation, is risk management everyone’s everyday job, or just that of the Audit Committee once a year?
2) Know your competitors – Remembering that those competitors now include for-profit providers with a different rationale for entering this market than the traditional housing associations that we have normally “benchmarked” ourselves against.
3) Secure your cash-flow – The ultimate no-brainer, but are you really sure that your cash will hold up in the immediate future and in the longer term? And if you aren’t sure about your cash-flow, are you sure that you can flex your aspirations to ensure you don’t get over-committed. As we all know you certainly can’t afford to get a V3 or a V4 rating from the Regulator.
At the same time, the relationship between housing association and customer continues to evolve at a rate of knots. At Trafford Housing Trust we’ve undertaken three initiatives in the last 12 months to see that what we do is more relevant and more accountable to our tenants and stakeholders.
Firstly, we’ve consulted widely about what we should provide and at what cost. This has given us a new approach to budgeting, where consumer choice on the “basket” of services (and the standards they are provided to) drive resource allocation. So last year we asked our customers what services they really valued and they told us Repairs and Tenant Involvement – so we have allocated additional resources to enable these to reach the level of “the best of the best.”
Secondly, we have issued “The Promise” which is a transparent and solid understanding of what tenants and stakeholders should and could expect from us and to which we can be held to account. This paves the way for the third initiative which is our publicly available “Trading Statement” which reveals exactly how we’re doing and is one of the documents reported to our Scrutiny Panels. And with these three initiatives now underway, we are looking to take this accountability work one stage further and to declare a “community dividend” - a sum to be used to further tenant and community aspirations for their neighbourhoods.
My feeling is that we are now at a point where we need to take responsibility for our own businesses. Not that this wasn’t true before, but never again should we let the answer to the question, “What would the regulator want us to do?” be the determining factor in what we choose. Instead we must develop a greater understanding of our customers and the risks and opportunities presented by the markets we operate in; we must be clear about the trade-offs between the costs and benefits of alternative courses of action, we must define our purpose in terms that our customers and stakeholders would expect; and finally we must stand up and be counted for delivering it.
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