Compliance and risk in the housing sector: 5 areas for strategic consideration

Posted on 7th August 2019

Since the Grenfell Tower disaster in June 2017, risk management has been top of the board agenda for both housing associations and housing development companies partnering with them to provide social housing. The government commissioned an independent review of building regulations and fire safety in England, and legislative changes are expected in respect of health and safety measures. It became apparent during the review that there were failings in the procurement process, which led to the purchase of flammable material used for cladding. Risk must be managed effectively through the entire procurement process and beyond, from the pre-procurement pipeline through to supplier management.

Responsibility for this and satisfying regulatory compliance requirements fall to housing association or development company boards. Boards must identify and manage risks taking into account the government's Sector Risk Profile. The document explains the risks that organisations are responsible for and how to address them.

The implications of not managing risk effectively

If housing associations or development companies become aware of something non-compliant with regulatory standards, they must tell the Regulator of Social Housing. If the regulator thinks an association can’t manage its risks effectively, it will work with them to help them improve the situation. The regulator can also publish Regulatory Judgements outlining governance and financial issues, apply to the High Court for remedy orders or bring proceedings against an association.

Five areas for strategic consideration

With the spotlight still on housing associations two years later, boards are focussing on improving the efficiency of their risk management processes and internal control frameworks.

H&S

Unsurprisingly, top of the list is Health and Safety. It’s crucially important that there is a robust risk management programme in place with regular reporting mechanisms back to the board. Health and safety policies should be reviewed regularly along with procedures which show compliance to statutory regulations. A rolling audit programme should be in place looking at different areas of the business, preferably by specialists. For example, Gas Safe for gas and ELECSA for electrical safety.

Day-to-day responsibility for health and safety is usually delegated to the management team in an association. However, the board remains ultimately responsible for it and must be able to evidence this. They must also be able to show that their health and safety strategy is fit for purpose.

Reputational risk

The reputational damage caused by an incident such as Grenfell will often have a more significant impact on social organisations such as housing associations. They are commonly held to higher standards and transparency around their activities allows for greater public scrutiny. Therefore, to avoid damage to their reputation, when creating their risk framework housing associations must look beyond the standard risks like fraud or health and safety. If they have an inadequate procurement process which doesn't properly take into account the social value agenda, they can find themselves open to criticism. For example, awarding a contract to someone who didn’t pay their staff the living wage.

Value for money

Housing associations must show they can deliver value for money when fulfilling housing services. Boards should have a value for money strategy for the whole business, which is fit for purpose and contains targets to help them achieve strategic objectives. If they don't get this right, then the risk is they deliver substandard and sometimes dangerous services to tenants. Tenants who don't have the option to 'shop around', i.e. move house and find a better place to live.

Having a substantial value for money strategy in place can bring added benefits for associations. A well-run, lean operation will offer better quality, sustainable services to its tenants and provide more homes for those who need them.

Data and safety monitoring

Boards must ensure the data they collect and hold is accurate and up to date, so they comply will health and safety requirements. They must also comply with the Welfare Reform and Work Act and make sure their regulatory returns are of good quality. Stronger data protection regulations (GDPR) were introduced in 2018, and housing associations must understand the requirements and the implications of non-compliance.

The reality is that social housing providers deal with a vast amount of data from different sources. It's accessed on multiple devices by many people, and these touchpoints present a risk that must be managed effectively. This data also offers an opportunity to improve decision making. For example, it can provide information on what homes or services are in the greatest demand and guide investment decisions in those areas.

Supplier management

Boards who have a robust supplier relationship management process in place will understand and control risk across their supply chain. For example, identifying high-risk suppliers where non-performance of a service will impact day-to-day operations, affecting tenants and damaging the reputation of the housing provider. Managing suppliers effectively will ensure services are being performed as agreed in the initial contract. This helps boards to identify poor performance and take remedial measures.

Supplier management is an essential part of a housing association's value for money strategy. Implemented correctly, it can impact positively on an organisation's bottom line, bringing cost savings and increased negotiating power, on top of being a useful risk management tool.

Each housing association or development company will have different risks to manage, but they are all under increased scrutiny in the aftermath of Grenfell. The impact of this is that they must ensure their organisations understand the risks they face and have the controls in place to deal with them or face being downgraded. If you'd like information about how procurement software can help with risk management in your business, contact us now.

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