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Social housing

Uncertainty and change drives increasing focus on risk management for housing associations

New research from leading business and financial adviser Grant Thornton UK LLP has found that two thirds (60%) of the top 60 housing associations view welfare reform as their biggest risk.

The study, which is part of annual analysis of corporate governance in the social housing sector, found that volatility in the housing market and government policy ranked second and third respectively, compared to fourth and seventh in 2014, and were featured by approximately half of the top 60 associations.

The average number of risks mentioned in annual reports by each association was 8.4, an increase on 6.5 last year.

Jenny Brown, Head of Housing at Grant Thornton UK LLP, commented;  "With the amount of change and uncertainty in the housing sector, it is little wonder that risk management is a hot topic.  The sheer scale of change also means the sector is becoming less homogenous and more fragmented and, as a result, associations' risk profiles are becoming more diverse.

"This change has driven a need to make big decisions which could shape the future of associations, so boards must aim to be risk enabled, not risk averse. They have to get the level of risk appetite right for their organisation."

The report also found that 87% of the top 60 housing associations now remunerate board members, up from 82% last year.

Jenny Brown added; "In a climate of high risk, uncertainty and public and media scrutiny it is vital that associations are transparent about their remuneration policy and the decision making behind it."

The report also considers the governance challenges introduced by key external changes this past year - the forced rent reduction, the Office of National Statistics' (ONS) reclassification and the introduction of right to buy.

Jenny Brown concluded;  "The many government policy changes in the past year have given boards and executives much to consider.  As well as the internal pressures of determining where to direct their business and how best to deliver services to tenants, there are more external threats to safeguard against. The ultimate challenge for board members is to find the right balance between delivering enhanced and improved services for customers while ensuring survival in the face of external change."

This is Grant Thornton's third annual review of governance in the sector.  .