The value of good governance should never be underestimated – it has the power to enhance the reputation, prosperity and success of an organisation but more importantly to severely damage that same organisation if not effectively managed. It is not something which can be achieved overnight or to which you can pay lip service. Good governance takes a considered, consistent and carefully managed strategy, often necessitating the regular input of independent experts to ensure the required standards are achieved and maintained.
Nowhere is the need to achieve good governance more pressing than within the UK housing industry, where a raft of regulatory and commercial pressures are challenging housing associations large and small to up their game, or face the very real risk of being swallowed up by a better performing organisation.
From a regulatory perspective, the leading priority for all housing associations is to demonstrate ongoing compliance with the Homes and Communities Agency (HCAs) Regulatory Standards https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/463693/20150925_Regulating_The_Standards.pdf and their chosen Code of Governance, which more often than not is the National Housing Federations (NHF) Code.
The Code has been designed to assess all aspects of an organisations governance and outlines the very clear standards required in everything from the functions of a board to the conduct of board and committee business, audit & risk and the role and remuneration of a Chief Executive.
Governance, like financial conduct, is graded by the HCA on a simple four tier scale ranging from the highest level, G1 to the lowest, G4. The pressures facing housing associations to both meet and maintain the required standards (G1/G2) are very real, with the likelihood of intervention from and much closer monitoring by the HCA if you are graded as G2 and falling into non-compliance at G3/G4 brings with it much greater threat with G3 organisations seeing the HCA much more actively involved with the organisation, and G4 leading to active intervention or enforcement action
It is therefore vital that all associations and their boards fully understand every element of the standards required and their chosen code and the resultant expectations on the governance of their organisation, undertake regular reviews to ensure compliance against all criteria is being maintained and take a proactive approach, which highlights any potential issues alongside an action plan to resolve them to the regulator.
Meanwhile, from a commercial perspective, a host of factors, specifically the social housing rent reduction and right to buy have placed even further pressure on housing associations, with a number struggling to remain viable and merger becoming a more likely necessity.
The importance of establishing good governance practices to help facilitate a potential merger cannot be underestimated. A voluntary Merger Code has been developed by the NHF, which aims to help associations establish good internal governance procedures that allow them to consider potential mergers in an appropriate way.
Pressures have also been felt from the government on boards to become more forward thinking and commercial in their approach and to take full responsibility for the actions of their associations. As a result, we have witnessed many associations reconsider their operating models in their entirety over the last couple of years, often looking to models from outside of the sector to help guide their future strategy.
But perhaps the largest challenge facing associations is finding the right balance between ensuring their survival in the face of such significant external change whilst still delivering enhanced services levels for their customers. Unfortunately, there is not a ‘one size fits all’ solution, with a bespoke approach required based on the size, performance and current structure of each individual organisation.
At EMA, we understand the complexity of these issues, whether commercial or regulatory, and have a skilled team with a wealth of experience in governance on hand to help steer your organisation along the right path. We provide a full spectrum of governance support services, offering everything from auditing current governance practices to assisting with strategy and policy development, Board member recruitment and selection, executive training, succession planning and full governance restructures.