As evidenced through the language used by the Regulator of Social Housing (RSH) in its recently published Sector Risk Profile, the RSH expects the boards of private not-for-profit registered providers (PNPRP) to be able demonstrate that they both set the strategic direction and priorities for their organisation as well as fully understanding their business.
This includes the variety of complex risks present for PNPRPs, particularly given the range of macroeconomic issues which they face.
The RSH sees the requirement for Boards to understand their businesses key to being able to manage risks and to exercise the skill and judgement required in order to deliver the PNPRP's objectives. The RSH has confirmed that it will seek assurance from PNPRPs that the anticipated rewards from any non-social housing activities are commensurate with the associated risks of such activity and that the activity makes a clear contribution to the PNPRP's core purpose, with no social housing assets being put at undue risk.
To provide this assurance to the RSH, boards need to understand (and, importantly, be able to demonstrate through its decision-making process that it does indeed understand) the environment in which it operates (particularly, if group members are undertaking development for outright sale and/or other commercial activities) as well as a clear understanding of the PNPRP's assets and liabilities to ensure that the PNPRP remains financially viable and social housing assets are protected.
This will require boards to have a good understanding of the potential risks associated with its funding structures, including of its non-social housing activities. As part of this analysis, boards will need to have considered impairment implications from potential counterparty failures and ensure that suitable contingency arrangements are in place. They will also need to have assurance that any concentrated risk is being managed and where deemed appropriate monitoring of counterparty robustness and financial standing is put in place to provide additional oversight. The RSH also expects robust governance structures with appropriate ring-fencing arrangements are in place to ensure that social housing assets are not put at risk by, for example, any cross-guarantees.
Reliable data is going to be key for board going forward if they are going to be meet the RHS's expectations set out above. Poor data and/or poor systems holding the data will ultimately undermine the board's decision making so having robust data and systems will be key for all PNPRPs to will provide assurance that the PNPRP is delivering high quality services or identifying areas of improvement.
