PERFORMANCE AND GOVERNANCE
Managing risk
Effective risk management ensures Longhurst Group can operate successfully in all circumstances. Recognising and mitigating risks allows the Group to achieve its objectives and overcome any threats to success, posed by both internal and external environments.
Effective risk management ensures Longhurst Group can operate successfully in all circumstances. Recognising and mitigating risks allows the Group to achieve its objectives and overcome any threats to success, posed by both internal and external environments.
Risk management framework
The Group undertakes various multi-variant scenario tests, analysing the impact and effect on financial covenants and viability with mitigations developed to ensure we can recover from the impact of each scenario. We use the ‘three lines of assurance’ on controls within the risk system, which forms the basis of the controls assurance reporting mechanism to boards and committees. Our online risk management database provides real time access to risk reports and key areas of assurance. Our risk system enables relevant and focused board reporting in relation to strategic and operational risks. Managing risk is integral to good governance practice throughout the organisation, and is incorporated into our strategic and operational planning processes and our performance management.
Risk management is the responsibility of the Board, while different committees, such as our Audit and Risk or People, Remuneration and Nominations Committees, undertake a more detailed review of risks that may impact the Group’s strategy, operations, financial or legislative compliance. The strategic risk register is reviewed each quarter by the Group Board and the Audit and Risk Committee. The Keystone and Libra Boards, along with the Development and Asset Improvement and Finance and Treasury Committees, review the risks within their areas of responsibility. The annual programme of internal audits undertaken by KPMG is influenced by the Group’s operational and strategic risk registers and reported quarterly to the Audit and Risk Committee.
Risk management framework
Managing risk is integral to good governance practice throughout the organisation, and is incorporated into our strategic and operational planning processes and our performance management. Risk management is the responsibility of the Board, while different committees, such as our Audit and Risk or People, Remuneration and Nominations Committees, undertake a more detailed review of risks that may impact the Group’s strategy, operations, financial or legislative compliance. The strategic risk register is reviewed each quarter by the Group Board and the Audit and Risk Committee. The Keystone and Libra Boards, along with the Development and Asset Improvement and Finance and Treasury Committees, review the risks within their areas of responsibility. The annual programme of internal audits undertaken by KPMG is influenced by the Group’s operational and strategic risk registers and reported quarterly to the Audit and Risk Committee.
The Group undertakes various multi-variant scenario tests, analysing the impact and effect on financial covenants and viability with mitigations developed to ensure we can recover from the impact of each scenario. We use the ‘three lines of assurance’ on controls within the risk system, which forms the basis of the controls assurance reporting mechanism to boards and committees. Our online risk management database provides real time access to risk reports and key areas of assurance. Our risk system enables relevant and focused board reporting in relation to strategic and operational risks.
Risk appetite
As a not-for-profit business, we must act in ways that minimise the risk of serious financial or other failures. The Board’s decisions are informed by our regulator’s requirement that social housing assets shouldn’t be placed at undue risk. The Group is also required by government to operate in a competitive environment, to use substantial amounts of private finance to deliver new homes and to comply with many complex areas of law. We recognise that we’re not able to operate in a ‘risk free’ environment and that our framework of internal controls can only provide reasonable and not absolute assurance.
We’re aware that control weaknesses and compliance issues can still arise. The framework of key controls that we operate are designed to minimise and manage the impact of these risks materialising.
The Group Board and Executive Team regularly review and amend our risk appetite linked to the Group’s Improving Lives 2025 strategy and key areas of the business.
ABOVE We have increased dedicated resource within our Property Services and Complaints teams
Risk appetite
As a not-for-profit business, we must act in ways that minimise the risk of serious financial or other failures. The Board’s decisions are informed by our regulator’s requirement that social housing assets shouldn’t be placed at undue risk. The Group is also required by government to operate in a competitive environment, to use substantial amounts of private finance to deliver new homes and to comply with many complex areas of law. We recognise that we’re not able to operate in a ‘risk free’ environment and that our framework of internal controls can only provide reasonable and not absolute assurance. We’re aware that control weaknesses and compliance issues can still arise. The framework of key controls that we operate are designed to minimise and manage the impact of these risks materialising. The Group Board and Executive Team regularly review and amend our risk appetite linked to the Group’s Improving Lives 2025 strategy and key areas of the business.
Principal risks and uncertainties
Maintaining our homes in line with our desired high standards whilst meeting our target response times has continued to be a challenge over the last 12 months. The historic poor performance of our repairs service has resulted in higher complaint volumes, of which a number have been referred on to the Housing Ombudsman and have led to judgements against the Group. We’re doing all that we can to improve our performance in this area and have made significant improvements to systems and processes, whilst also increasing dedicated resource in our Property Services and Complaints teams. Financial performance has continued to come under pressure with costs impacted by the high inflation of recent years and further significant asset investment is planned to ensure all homes meet our sustainability and quality expectations.
Against the backdrop of the issues mentioned and the current economic environment, the business plan continues to be robustly flexed against many extreme multi-variant scenarios to ensure financial viability and that lenders’ covenants can be maintained. On site, the availability of skilled labour has continued to present a challenge that we’re working closely with contractors to address. We’re also mindful of the impact of the wider uncertain economic environment on our development programme and we’re taking a cautious approach on expected volumes and values for sale, to ensure that our programme can react to market conditions with the appropriate mix of tenures. The six risks outlined below currently represent the greatest potential impact to our business and the achievement of our business plan objectives.
Principle risks and uncertanties
Maintaining our homes in line with our desired high standards whilst meeting our target response times has continued to be a challenge over the last 12 months. The historic poor performance of our repairs service has resulted in higher complaint volumes, of which a number have been referred on to the Housing Ombudsman and have led to judgements against the Group. We’re doing all that we can to improve our performance in this area and have made significant improvements to systems and processes, whilst also increasing dedicated resource in our Property Services and Complaints teams. Financial performance has continued to come under pressure with costs impacted by the high inflation of recent years and further significant asset investment is planned to ensure all homes meet our sustainability and quality expectations.
Against the backdrop of the issues mentioned and the current economic environment, the business plan continues to be robustly flexed against many extreme multi-variant scenarios to ensure financial viability and that lenders’ covenants can be maintained. On site, the availability of skilled labour has continued to present a challenge that we’re working closely with contractors to address. We’re also mindful of the impact of the wider uncertain economic environment on our development programme and we’re taking a cautious approach on expected volumes and values for sale, to ensure that our programme can react to market conditions with the appropriate mix of tenures. The six risks outlined below currently represent the greatest potential impact to our business and the achievement of our business plan objectives.
Strategic risk register
In addition to the six principal risks highlighted above, the Group’s strategic risk register contains a further 13 risks. The total 19 strategic risks are plotted on the heat map and listed below, with the residual rating displayed following the mitigation measures we’ve taken.
Strategic risk register
In addition to the six principal risks highlighted above, the Group’s strategic risk register contains a further 13 risks. The total 19 strategic risks are plotted on the heat map and listed below, with the residual rating displayed following the mitigation measures we’ve taken.
A
Not maintaining safe and quality homes for our customers
Impact: 5/6 Probability: 3/6
B
Failure to deliver our development programme
Impact: 5/6 Probability: 3/6
C
Failing to improve complaints management or services to customers
Impact: 5/6 Probability: 3/6
D
Care and Support services do not meet CQC standards and safeguarding best practice
Impact: 4/6 Probability: 3/6
E
Cyberattacks and other external threats
Impact: 4/6 Probability: 3/6
F
Failure to deliver financial performance in line with the business plan
Impact: 4/6 Probability: 3/6
G
Failure of the Group to protect and enhance its reputation with all stakeholders
Impact: 4/6 Probability: 3/6
H
Ineffective board governance and leadership
Impact: 4/6 Probability: 3/6
I
Not preparing for supply chain failures leading to service failures and/or financial exposures
Impact: 4/6 Probability: 3/6
J
Government policy changes which adversely impact on our BP goals and reputation
Impact: 4/6 Probability: 3/6
K
Failure to deliver quality and caring services in line with regulator’s customer standards
Impact: 5/6 Probability: 3/6
L
Not having accurate, timely, relevant and assured data to enable good decision making
Impact: 4/6 Probability: 3/6
M
Group strategies do not facilitate compliance with legislation on EPC C and Net Zero milestones
Impact: 4/6 Probability: 3/6
N
Not retaining and recruiting key staff and failure to have succession planning in place
Impact: 4/6 Probability: 3/6
O
Not having effective financial management and achieving affordable funding
Impact: 5/6 Probability: 2/6
P
High levels of inflation impact on our financial performance and customers’ financial resilience
Impact: 5/6 Probability: 2/6
Q
Potential health and safety breaches
Impact: 4/6 Probability: 2/6
R
Failure to comply with legislation and regulatory requirements
Impact: 4/6 Probability: 2/6
S
Potential of fraud to adversely impact on Group activities
Impact: 3/6 Probability: 2/6