Building resilience: 10 top tips
How to strengthen your governance and avoid regulatory difficulties
GOVERNANCE
Image: Istock
Greg Campbell
Partner, Campbell Tickell
James Tickell
Partner, Campbell Tickell
Issue 65 | April 2023
As the wider environment in which housing providers operate has become more challenging, the expectations placed on boards and executives have increased. The demands of housing regulation are not getting any easier either.
Range of challenges
It is not hard to identify the challenges: Brexit, COVID-19, Russia’s Ukraine war, fuel price rises and cost of living crisis, housing demand unsatisfied and increasing homelessness. These challenges affect a range of sectors. But for housing in particular, there is the legacy of regulation being scaled back by the government to focus on the governance and financial viability of housing providers. Then there is the turnaround in customer expectations following the Grenfell Tower disaster and the problems of poorly maintained homes, highlighted by the media and the Housing Ombudsman.
Regulatory issues
Much of this regulatory gap will be addressed by the Social Housing Regulation Bill, currently nearing completion of its progress through parliament. Even without that though, regulatory attention has identified problems of varying kinds with a sadly growing number of registered providers. The table illustrates this, based on regulatory judgements from the Regulator of Social Housing over the past eight years.
Particular issues will of course have contributed to the halving in the percentage of housing providers achieving G1/V1 grades. One obvious aspect would be the sense that, for those active in development and sales markets, ‘V2 is the new V1’ – due to the increased exposure to development risk and house price fluctuations. But the growth in the proportion of non-compliant housing providers is striking.
Source: Regulator of Social Housing website – Campbell Tickell analysis
10 top tips
How can providers ensure they negotiate the macro-environmental road bumps, while continuing to deliver what they are there to achieve, meeting residents’ and stakeholders’ reasonable expectations, and in the process staying on the right side of regulation?
Campbell Tickell works extensively in the areas of regulation and troubleshooting. We have supported a considerable number of housing providers on their improvement journeys. Here are our 10 top tips based on our experience.
01
Keep it simple
Unnecessary complexity of group and staff structures creates vulnerability. Streamline and simplify to stay safe, and create clear lines of decision-making and accountability.
02
Stay fresh, stay diverse
Longstanding board members and executives can become stale and complacent. Leaders who understand organisational history are important, but good boards exhibit diversity of thought and other characteristics, fresh thinking, positive challenge and regular injections of new skills.
03
Don’t believe your own propaganda
When problems arise, boards and executives often cling to inaccurate, even delusional, narratives of future success, long after events have revealed their deficiencies. When something has gone wrong, organisations must be honest with themselves, even if that is painful: understand the problem and you can start to address the changes needed.
04
Watch the canaries in the coal mine
Look out for the problem warning signs: complaints from tenants; whistleblowers; persistent negative performance trends; or fractiousness among the board. If arrears or complaints are up, or answers to straightforward questions not forthcoming, find out why. Tenants are the first to spot things going wrong on the frontline – listening to them always pays off.
03
Don’t believe your own propaganda
When problems arise, boards and executives often cling to inaccurate, even delusional, narratives of future success, long after events have revealed their deficiencies. When something has gone wrong, organisations must be honest with themselves, even if that is painful: understand the problem and you can start to address the changes needed.
04
Watch the canaries in the coal mine
Look out for the problem warning signs: complaints from tenants; whistleblowers; persistent negative performance trends; or fractiousness among the board. If arrears or complaints are up, or answers to straightforward questions not forthcoming, find out why. Tenants are the first to spot things going wrong on the frontline – listening to them always pays off.
05
Avoid risks you don’t understand
When organisations get into new activity, their leadership needs new skills and experience. It is not enough to place an item on the risk map: leaders must understand what it means and its potential effects. Put resilience ahead of over-ambitious development plans or over-stretched risk appetites.
06
Model the culture you want
Boards and leaders need to understand and own the culture they have created, and seek to change it when needed. Where problems are disregarded or dismissed, for example, this can lead to poor service delivery and lack of compliance. Where people do not feel they can speak up safely and be heard, it will take longer to identify problems and put them right.
“When something has gone wrong, organisations must be honest with themselves, even if that is painful: understand the problem and you can start to address the changes needed.”
07
Trust but verify
Between the scrutiny of boards and committees, comprehensive assurance is needed that the facts presented are accurate. Executives must accept challenge and questioning as an indicator of good governance, along with the support they also deserve. Dishonesty, corruption and fraud are rare in the social housing sector. But the price of this must be continuing vigilance.
08
Be relentless on data integrity
Many compliance failures spring from outdated and overlapping data sources, allowing properties (for instance) to slip off gas or electrical safety registers, or develop unremedied severe damp. Post-merger data integration can also cause problems. Some organisations’ failure to comply with the regulator’s Rent Standard (a growing number) can arise at least in part from not maintaining a definitive, up-to-date and accurate data set.
07
Trust but verify
Between the scrutiny of boards and committees, comprehensive assurance is needed that the facts presented are accurate. Executives must accept challenge and questioning as an indicator of good governance, along with the support they also deserve. Dishonesty, corruption and fraud are rare in the social housing sector. But the price of this must be continuing vigilance.
08
Be relentless on data integrity
Many compliance failures spring from outdated and overlapping data sources, allowing properties (for instance) to slip off gas or electrical safety registers, or develop unremedied severe damp. Post-merger data integration can also cause problems. Some organisations’ failure to comply with the regulator’s Rent Standard (a growing number) can arise at least in part from not maintaining a definitive, up-to-date and accurate data set.
09
Know your counterparties
Most housing providers outsource some activities, because they do not have the internal skills and resource or because that is central to their business model. Certain services will almost always be delivered by external specialists. Some organisations have, however, hit problems because they have engaged with unsuitable counterparties, whether investors, developers, housing managers or repairs contractors. Before engaging any third party, it is crucial to conduct proper due diligence, be clear on their financial and operational robustness, and understand the terms of business.
10
Remember: the buck stops with the board
Governance is the root of every regulatory problem case, whatever the presenting issues. When things go wrong, there are no excuses: if a board was misled, it should have had the systems, controls and assurance to prevent that. Good governance is the first, strongest line of defence. Good board members, meetings, papers and challenge all matter. Pay attention to codes, guidance and standing orders. Reflect and learn from any emerging problems, and make sure you jump the right way. Listen to the regulator and be honest with them – they may be your best (if critical) friend. Most problems can be resolved quickly if decisive action is taken.
