In September we and Trowers and Hamlins brought together a group of associations to share their experience. Some were pilots. One had been the subject of intensive regulation, a number were anticipating having In Depth Assessments in the coming months. They ranged from large to small, from urban to rural, from traditional to LSVT, and from complex to very straightforward. This is what they told us.
Firstly, it’s not a tick box exercise. It’s not about just having the right documents in place and easy to find. Though this is important. It is not just about having good processes in place. It is about how well the organisation knows its own business and how well it is governing and controlling its business; and who is in control of the business and managing risks.
The regulator therefore doesn’t treat it as a tick box exercise. Their approach, certainly with those at the roundtable, was not to second guess the decisions that boards made but to understand the strategy, the reasoning, the business cases and the stress testing. And the approach to risk. A regular question that might be asked was ‘what if?’ – e.g. you have a significant sales programme, what if the property cycle took a downturn or rental income dropped by 15%; and then to understand what the association had thought through both as its mitigation, and if necessary, its exit.
The teams that were sent in spent time beforehand reading the papers and documents to understand the business and the big decisions and the decision making process generally. Then the fun started, because they spent time with individual members of the board and separately with members of the executive to understand how and where the decisions were made, the risks considered, the progress monitored and the performance assured. And they triangulated the information they received and drew their conclusions.
Only one of the associations said that they actually enjoyed the process, but all said that it was a really good discipline preparing for it, getting the board to think about what they did and didn’t know and getting the executive to think about what the board was and wasn’t sighted on.
There was some feedback for the regulator about giving praise where they found good things, rather than just providing exception reporting feedback. All of the associations collaborated with the regulator as part of a learning and testing process and there was a question about how the regulator would be, if that collaboration wasn’t quite forthcoming.
However, for all of those that we’ve worked with and those who have been through it so far, the key learning is that if you have got a well run business with proper risk and assurance approaches in place, then the In Depth Assessment is business as usual. But if you are complacent that you have a well run business then, you are likely to fall at the first hurdle and it could be painful.
Thanks to the 12 associations who participated in the roundtable in September 2015.
For more information please contact: Steve Douglas, Partner on email@example.com | 07810 152 840