Governance priorities for the year ahead

We’re a few months into a new financial year and so perhaps you have been reflecting on your priorities for the year. Or, most likely – you’re so busy that you haven’t had the headspace to do this yet.

Never fear: we’ve done the thinking for you.

1. Consider the interplay of governance and consumer regulation

Your attention is more than likely on the (relatively) new world of consumer regulation and what it means for good governance in 2024.

It has always been the board’s responsibility to ensure compliance with the consumer standards and the updated regulating the standards guidance re-confirms this. However, focus has inevitably shifted in this direction as a result of the Regulator of Social Housing’s new ‘proactive’ role and standards, and because of the significant risks arising from customer safety, quality of homes, service delivery and complaints handling, to name but a few. 

This can make the parameters of the board’s role feel more opaque and begs the question of how to ensure that the board maintains strategic focus. Some ideas include:

• Skills: skills requirements may have changed as a result of a new strategy and priorities. There will also be training needs to ensure the board understands the regulatory changes and is equipped to perform its role.
• Focus board time: the board should understand what compliance gaps there are and actively engage in reviewing and monitoring key risks, rather than getting into the weeds of compliance in every area. Report structures and intelligent use and interpretation of data is key here.
• Assurance: focus on giving the board appropriate assurance – what does an appropriate level of assurance look like in each area? This will depend on the nature of the risk to your organisation.
• Feedback: ensure that there is a clear link between feedback from residents (and staff and other stakeholders) and decision making. Again, this should be evident in reports – and if no feedback has been obtained, it should be explained why it was not felt appropriate.
• Big picture: the importance of culture is evident from the wording describing the C1 regulatory grading: “The landlord has demonstrated that it identifies when issues occur and puts plans in place to remedy and minimise recurrence.” How is this demonstrated at board level, and what assurance is the board obtaining around culture across the organisation?

2. Don’t forget the fundamentals 

Getting the basics right is arguably more important than ever, as the breadth of challenges pulls resources in different directions.

Establishing regular reviews of core governance pillars will ensure you don’t lose sight of key areas, including:

• Charitable vires: for charitable registered providers, diversification into non-traditional business streams has always required careful monitoring and, in current times, this is even more pertinent. Non-social housing activity risks must be commensurate to the rewards, and the activity should make a clear contribution to your core purpose. In line with the expectations of the new consumer standards, consider involving your customer/resident committees in evaluating these activities.
• Conflicts of interest: board and committee members who sit across governance and group structures must remain vigilant about perceived and/or actual conflicts of interest. Governance teams should regularly remind members of this responsibility to ensure transparency and integrity in decision-making.
• Ensure structures align with changing strategic priorities: many organisations have chosen to simplify their activities in response to stretched resources and a desire to ‘focus in’ on core activity. This is likely to have an impact on your corporate, governance and funding structures. For example, if you have scaled back on your outright sale activity, what does this mean for your trading subsidiary? Does it still need the same board structure and do your committee terms of reference/delegations need to change? This may simply be a quick sense check rather than a huge task. However, the longer it is left, the more likely that corporate history will be lost and/or you find yourself with entities with small pockets of activity with no clear rationale.
• Development risk: the housing crisis persists, and affordable housing is more critical than ever. However, high inflation and financial pressures have significantly impacted contractors, leading to several high-profile failures. In this environment, contractors may seek out additional financial support or security (such as parent company guarantees) or attempt to negotiate stricter contractual terms. Ensure to work closely with your development teams in relation to the governance implications of this. If you have joint ventures then remember to regularly review the risks and rewards to ensure the original purpose is still being achieved, in line with the National Housing Federation Code of Governance 2020 (the NHF Code).
• Financial management: it goes without saying that the overall financial health of subsidiaries and the broader group needs to be monitored carefully. Trading subsidiaries can face tight financial conditions, impacting the parent organisation’s core purpose and increasing risk. Ensure reporting remains robust and that your board has the right skills to oversee these risks.  
• EDI: improvements in equality, diversity, and inclusion (EDI) across the sector remain a critical focus. Beyond moral and ethical imperatives, EDI is integral to good governance. The NHF Code requires boards to regularly consider and define the culture and behaviours that will best enable the organisation to deliver its mission and values.

3. Build and safeguard team capacity

Governance is relevant to everything your organisation does and so there is ever-increasing pressure on the ‘to do list’ of teams. This also comes at a time when it is incredibly difficult to recruit and there is increasing pressure on budgets.

Some quick wins here include:

• Maintaining your networks both internally and externally – they can be your ‘eyes and ears’. Internally, this can make sure that your colleagues involve you at the appropriate time in projects and agree future support requirements. Externally, this can help you to track key changes in the sector as well as gather intelligence and views on those ‘grey areas’ we governance enthusiasts love!
• Seek out tools/efficiencies to save time – talk to your networks about what’s out there – this could be a product, service or system that others are using. Utilise the knowledge of your advisers who may be able to steer you as to training needs or provide support to more junior members of your team.
• Learning from other sectors – the housing sector can be criticised for being too insular at times, and other sectors can offer an alternative perspective. For example, the private sector is adept at taking a strategic approach to ownership, structure and service provision.
• Flexible resource –  consider use of more adaptable skill sets such as project managers, who may be able to work across teams within your organisation depending on need.

4. Keep an eye on the ‘governance of the future’

If the last four years has taught us anything, it’s to expect the unexpected. That being said, here are our thoughts as to what will impact the governance of the future in 2024:

• General Election: there is uncertainty over what reforms are coming down the track and whether these will be taken forward in their current form (Awaab’s Law; competency and conduct requirements, etc) depending on the results of the election. Manifesto promises are likely to have an impact on strategy in terms of focus on development and regeneration, and a future rent settlement.
• Economic Crime and Corporate Transparency: reforms are wide-ranging and will impact the way in which you maintain corporate registers and the resource needed to manage this. You should be preparing for this now. Monitor the changes through our monthly Company Secretary Snapshot publication.
• UK Corporate Governance Code changes: the updated code has now been published and whilst not the predominant choice for organisations in the housing sector, it offers insight into the direction of travel for best practice. You can read more here.
• Sustainability: environmental, social and governance (ESG) should continue to be a priority. Governance teams should also watch out for developments in corporate reporting here.
• ‘New’ partnership structures: the increasing drive to develop is leading many organisations to consider partnerships with investors in the form of new for-profit registered providers. These can be considered a form of joint venture - ensure to familiarise yourself with the model and actively engage in these discussions at an early stage if your organisation is considering this.
• Senior Independent Directors (SIDs): our SID Network continues to grow with over 40 SIDs now operating in the sector. Ensure you are using the role to best effect – and if you don’t have a SID, then you may want to consider this further in terms of the benefits it can bring to the board.