Risk Register Survey 2024

Concerns within this category, flagged by 30% of landlords, include the failure of a supplier or contractor, supply chain disruption and procurement. Separately, counterparty risk (the probability that the other party in a contract will not fulfil its part of the deal or default) is identified by 4%. Supply chains and “dependency on third parties and counterparties” to deliver its strategic objectives was an “escalating” risk for Karbon Homes. The 32,000-home landlord had to respond to the failures of contractors Go-Centric, a call centre provider, and Tolent Construction.

Here are some steps landlords are taking to mitigate risk involving their supply chain, contractors and procurement:

• Background checks: Cross Keys Homes carries out due diligence on key suppliers before a contract is signed.
• Contract management: Settle has a nominated contract manager for third-party contracts and provides training for these staff, while Wheatley uses a contract management system to flag risks such as higher prices.
• Performance tracking: Clarion uses key indicators to monitor service delivery and performance.
• Financial checks: Stonewater uses checks by business data provider Dun & Bradstreet “to ensure early visibility of any financial challenges” its contractors may be facing.
• Regular engagement: Metropolitan Thames Valley talks regularly with site teams and senior figures at contractors/developers, while clerks of works, development managers and health and safety inspectors make regular site visits.
• Diversification: Platform spreads work across different contractors so it is not dependent on only one.
• Service delivery: Home Group has adopted “new models” of delivery for its repairs and maintenance services and brought some of these services in-house.
• Inflation tracking: Bromford closely monitors inflation and works with suppliers to manage costs.
• Stock monitoring: Incommunities expects its suppliers “to maintain agreed levels of supplies to avoid disruption”.
• Industry collaboration: Network Homes is working with other G15 members on the issue of supply chain fragility.
• Conflict assessment: Futures Housing reviewed whether it had contracts with suppliers sourcing services and goods from Russia, and whether there was a risk to any supplies or materials that came through Ukraine.
• Currency checks: Futures has been assessing its supply chain to establish exposure to exchange rate movements.

Hyde Group sets a level of risk appetite, which guides its decision-making and strategy.

The housing association has risk appetite statements across 12 key areas that establish its capacity for taking and absorbing risk and provide principles for decision-making. Its board manages risks and reviews its risk appetite every year.

The 12 categories are show on the diagram, above:

1. Regulatory and health and safety

2. Fraud, bribery, theft and corruption

3. Core service delivery

4. Data, privacy and information security

5. Business continuity and resilience

6. Funding and liquidity

7. Legal

8. Development, investment and asset management

9. Outsourcing

10. Change and  transformation

11. Reputation

12. People

The proportion of landlords flagging financial shock, viability, health, management and/or resilience as a strategic risk has risen 10 percentage points year on year to 54%. This is perhaps unsurprising against a backdrop of global economic uncertainty: 59% of organisations cite external economic conditions, including inflation, rising costs, the cost of living and global events, as a key risk. The figure was 47% in 2021-22.

“The volatility of the economy has been unprecedented with inflation and interest rates rising rapidly,” notes LiveWest, which increased the status of its financial resilience risk year on year. “We carried out extensive business plan stress-testing, which included single and multi-variant scenarios of inflation, rent, interest rate and a housing market slowdown to ensure our continued viability and ability to meet our strategic objectives.”

There is growing concern among landlords across a number of different finance-related risks. Almost a fifth (18%) of associations flag lending agreements and covenants as a strategic risk, compared to 14% last year.

4%
Rent arrears at Bromford in 2022-23, an increase from 2% the previous year after a cyber incident

5.5k
Rochdale Boroughwide properties that were checked for damp and mould over three-month period

£15.9m
Yorkshire Housing’s capital investment in existing stock in 2022-23, up from £7.5m

£17m
Cost of cyberattack in June 2022 to Clarion

A total of 17% of landlords reference damp and mould as a strategic risk heading, while more mention it in relation to other risks and hazards elsewhere in their reports. In February 2023, the government announced ‘Awaab’s Law’ in the wake of the death of two-year-old Awaab Ishak in 2020 due to prolonged exposure to mould in his family’s flat, managed by Rochdale Boroughwide Housing. This will place new requirements on social landlords to address damp and mould within specified timeframes.

Rochdale Boroughwide Housing’s report says it started taking a “proactive approach” to identifying and treating damp and mould as a result of a “significant increase” in linked repairs in 2022-23 following Awaab’s death and the coroner’s report. The 12,000-home landlord established a damp and mould taskforce, which reports weekly to the executive team about progress with inspections and repairs.

The organisation provided repairs operatives and other staff who visit homes with online training in identifying mould, and required them to carry out “a damp and mould visual check” on every property visit. The landlord performed checks on 5,500 homes within the first three months, which prompted requests for technical inspections in 2,246 homes. It commissioned a 100% stock survey to provide a “complete picture” of the condition of the organisation’s homes by the end of 2023.

According to Rochdale Boroughwide Housing, early indications are that the treatments it applies in affected homes “eliminates the mould… we have only had 3% of cases reporting mould return – all of these are then inspected to identify any root cause”. It has commissioned a 100% stock survey to provide a “complete picture” of the condition of the organisation’s homes by the end of 2023.

Yorkshire Housing says the “sector had a wake-up call”. Tackling damp and mould was both a strategic risk and a priority for the 20,000-home landlord in 2022-23, with the organisation increasing its capital investment in its existing stock from £7.5m to £15.9m year on year.

Preventative strategies Midland Heart is developing include: the prioritisation of investment in energy efficiency on homes with damp and mould; “targeted educational programmes on heating and ventilation”; and programmes during the summer months to “check and clear rainwater gutters and test extractor fans”.

“The environment we operate in remains challenging. The sad event in Rochdale that led to the death of Awaab Ishak put the sector under the spotlight and we are working hard to maintain the trust of our stakeholders,” says Onward Homes. The 35,000-home landlord is among the 19% of organisations that name a strategic risk relating to reputation. Contributing factors highlighted by associations include negative media coverage, customer dissatisfaction, the quality of homes and strategic decisions. The area of customer service/satisfaction/expectation/experience is of growing concern in the sector: 48% of organisations flag it as a key risk, compared to 37% 12 months ago.

So what controls are landlords adopting to mitigate the risk to their reputation? Here are 10 examples:

• Complaint-handling: Housing association Settle logs and manages all complaints it receives centrally, and has a specialist team that follows up on disrepair and damp and mould cases, which are reported separately.
• Case load: PA Housing has introduced a new “escalation team” that deals with priority customer service cases.
• Performance reviews: Magna Housing has regular performance reviews with key partners, including the provider of its out-of-hours emergency call centre and the contractors it uses for warden alarms.
• Customer engagement: Acis Group mitigates against “poor customer/stakeholder perception” with a “customer-first” approach, and encourages “customer involvement and feedback”.
• Social media: Link Group’s communications team monitors social media on a regular basis to identify “defamatory comments” made by members of staff, former employees or the public that could cause deterioration of reputation.
• Explaining decisions: GreenSquareAccord sets out in corporate communications the “rationale for any changes in strategic direction”.
• Communications strategy: Beyond Housing, which provides media awareness training, has a crisis communications plan aligned to the organisation’s major incident response plan.
• Positive news: Aster takes proactive steps to communicate the positive impact the organisation has made, “celebrating the difference safe and secure homes make” to its residents and highlighting the work of the Aster Foundation.
• Monitoring opinion: Network Homes uses market research company Voluntas to conduct customer surveys and holds tenant consultations prior to starting major works.
• Recording risks: Karbon Homes keeps a “reputational risk log”.

1. Health and safety: The group suffers a major incident impacting the health, safety, or well-being of multiple customers, colleagues or contractors where the harm to the stakeholder is severe or the sanction faced is material.

2. Customer experience: A major failure to meet customer expectations, either permanent or temporary, leading to a significant reduction in customer satisfaction, reputation loss, regulatory censure and/or financial loss.

3. Technology data and security: The data management, governance, or technology is unable to meet the information needs or cyber security and/or privacy requirements of the business, leading to financial loss, poor decision-making, inefficiency, compliance failures, data breach, system loss/failures, penalties and/or reputational damage.

4. Legal and regulatory: The group could fail to comply with its legal/regulatory requirements, including the delivery of value for money and compliance with anti-bribery, anti-money laundering and modern slavery regulations, safeguarding, the Welfare Reform and Work Act 2016 and rent regulations. There could also be a loss of assets and/or reputational damage due to fraud, bribery or theft.

5. Strategy and governance: The group has an ineffective strategy and/or governance leading to a lack of control or direction, impacting our ability to deliver the business plan and social impact objectives. Operational performance is compromised due to merger/acquisition failure, or in pursuing new business.

6. People: The group is unable to deliver the business plan or provide satisfactory service to customers due to a failure in employment practices, key person dependency, or an inability to retain, recruit or develop people in sufficient numbers, or with sufficient quality and skills.

7. Business performance: Business performance impacts the group’s ability to deliver the business plan, or deliver more affordable homes, due to unplanned cost increases, revenue reductions, insufficient liquidity, development or planning-related issues, or supply or counterparty failures.

8. Political, environment and macro-economy: Changes in government policy and practice, or economic disruption to the UK or worldwide economy impact negatively on the products and services the group offers and/or the achievement of performance targets in the group business plan.

9. Sustainability and uneconomic assets: The group is unable to adequately respond to climate change, decarbonisation requirements, uneconomic assets or environmental risk factors, impacting on our ability to achieve strategic goals, customer safety, and/or regulatory compliance.

10. Business disruption: The group suffers a major incident, impacting the continuity of the business and delivery of customer services. Significant disruption or prolonged business restrictions impacts the business plan.

The risk of a cyberattack compromising IT systems and data security has overtaken health and safety as the most commonly flagged concern, according to Inside Housing’s research. It was a strategic risk for 77% of landlords in 2022-23, a rise of 10 percentage points. 56,200-home Home Group notes an increase in the frequency of attempted cyberattacks, while in its report, Clarion says: “Cyber security threats have continued to evolve over the last year and remain a major challenge.”

Clarion experienced a cyberattack in June 2022 that had “significant and prolonged impacts on access to systems”, and reduced its service to customers for three-and-a-half months. This contributed to the failure of the UK’s largest association to achieve its target for complaints. The £17m cost linked to the incident impacted its surplus, while its rent collection rate dropped from 99.96% to 96.7% due to the attack affecting its processes. Afterwards, Clarion “accelerated” plans to introduce new technology, swapping its contact centre “telephony”, which was affected by the attack, for a cloud-based system. The 125,000-home landlord acknowledges the risk of a cyber security breach is “not a threat which stands still” so is investing in activities to reduce residual risks and strengthen resilience.

Bromford was hit by a cyber incident in summer 2022, rendering its systems “inaccessible”, causing the 46,000-home association’s arrears to increase from 2% to 4% during 2022-23, and a rise in empty homes. Bromford appointed a new head of data governance and information security. Inside Housing found that the linked issue of data quality, integrity, protection and/or governance is a strategic risk for 44% of organisations.

Network Homes flagged cyber security in its latest report, completed before its merger with Sovereign, after it was not included the year before. The report does not state a reason for this. The 62,190-home landlord also undertook a cyber security business continuity test.

Inside Housing Chief Executive Salary Survey 2023
Inside Housing’s annual survey reveals the pay of more than 150 housing association chief executives. Katharine Swindells reports

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