National Housing Maintenance Forum

Facing up to the future

How well prepared are RSL ’s to ride out the challenges of some very rough times ahead.

Over the last few months, the impact of the quickly deteriorating economic situation has become increasingly clear to all – including the social housing sector, and the pressures to deliver resident services at the levels planned and expected of them, but now increasingly unlikely, are numerous and unprecedented in recent history.

The economic downturn has been more than sufficiently covered in the media and there should be no doubt about the causes and impacts of it. However, the extent of the resulting challenges are considerable and clearly placing great pressure on finances; but not just finances - also on organisations’ ability to respond. How are RSL’s are dealing with a fast changing risk profile; are their underlying key business systems and processes capable of responding; and, does management have the capability and capacity to deal with the new agenda being created?

So, in this dynamic fast changing business environment how are RSL’s dealing with, for example, perhaps the most obvious risks arising from:

* Significant pressures on net spend targets - arrears going up as residents can’t pay
* Impacts of reducing costs on a largely fixed cost base
* Increased demands on community services
* Added pressures on supply of social housing as a safety net for repossessions
* Key Supplier failure e.g. in property maintenance
* Contractor failure in construction projects
* Shared Ownership - cant sell as clients can’t get a mortgage as banks not lending
* Development funding risk – sales volume and selling prices down significantly
* Financial control – the risk of fraud increases exponentially in a downturn
* Compliance failure – reductions in labour spend impacting standards on e.g. health & safety

First of all let’s look at how many RSL’s are organised to deal with risk and compliance. Managing risk has been a paper exercise for too many RSL’s in the past. In stable times, perhaps it was felt to be a bureaucratic or regulated requirement that had to be complied with, albeit for a number, it was ‘tick the boxes’. Now, the ‘real’ purpose of risk management should be clear and the key processes – identification of, and validation of the analysis of likelihood and impact of future events;

understanding the underlying causes of risk, testing the validity of assumptions, making choices in risk response options; and the importance of integrity and prudence in decision making....all good risk management practices at any time, become essential components of a solid process for coping with events. Unfortunately, those RSL’s which don’t have a good track record in these areas will struggle. These are not practices which can be switched on and off at will and whilst expertise can be brought in to help short term, a major cultural shift is required to better embed risk management as a key business enabler in many organisations. Organisations which have invested in good systems and processes, both financial and operational, will come to recognise the wisdom of their investment. Time to take stock!

History shows that, to the extent current circumstances are comparable, or to the extent that there are still people around who experienced it, in times of crises the organisation’s focus changes as does the consequent balance in workload between systems and staff groups ; data needs become more frequent in order to manage more frequent changes in activity, especially those where small movements have now become more critical. The real test for many RSL’s will be the adaptability of systems and the ability of staff to respond to the increasing pace of change.
In addition to systems, this will place a lot of pressure on management itself. Recent press reports point to a number of RSL’s reorganising – for many that’s short hand for restructuring, down-sizing etc including at senior executive level. Clearly, the difficult financial situation will have an impact on costs and, as staffing is a significant part of an RSL’s budget, and senior executives are the most expensive staff, there is logic here. However , in previous downturns this same logic resulted in too many senior people going, and in quick succession resulting in a loss of expertise, knowledge, and experience – all which will be required more to help navigate the organisation through the most difficult period its faced for 20 years, and for many in their short history. Inevitably there will need to be top to bottom cuts but great care is required in determining where, and by how much. There is a reason that the last person off of a boat is the captain.

This specialist service is delivered through Frankham Risk Management Services (FRMS) and CAMSoft, both dedicated business units of the Frankham Consultancy Group. For further information on any of the issues raised in the article please do not hesitate to contact us:

Frank Hailstones
Frankham Risk Management Services
020 8309 7777 (quote CAMSoft )