HQN blog: Stress testing the business when everything is now a priority – good luck with that

Stress testing used to be so easy. You’d work out what could bring the business down and plug that into a model. Then you’d decide what you would stop doing or could sell off to stay in the game. It’s not so simple now.

What can you actually stop doing? After Grenfell, you may well have to spend more on safety. And the Green Paper wants you to sort out ASB. Then the tenants will be asked if they’d recommend you to their friends and family. So, you’ve got to be doing well. On top of that, the inspectors could be back to check up on you. I’m not seeing a lot of leeway to cut costs. Are you?

On the other side of the equation, what can you sell? The way to get around the rent cut was to build and sell homes. How’s that going? The answer is ‘slowly’ in many places. Of course, you can stand behind the professional advice that said this was a good idea. That might keep the regulator at bay for a bit. But you’ll still need to find the missing cash.

So, the business plans are getting shot by both sides. Thank goodness for Brexit. Is this the catch-all excuse that can be used to blame someone else for your woes? We’ve seen a few associations try this on with the regulator. They got short shrift. You need to do better than this. What goods and services are you bringing in? And how will Brexit affect these? You will need a few facts and figures to support your case.

Will councils be stress testing soon? It does look like they will face a lot more regulation under the Green Paper. We can see where one of the big stresses will come from. The housing revenue account is supposed to be ring fenced for council housing only. Have council bosses dipped into this fund to pay for other services? It wouldn’t be a surprise if they were robbing Peter to pay Paul, as councils are short of cash. But no housing inspector worth their salt would let this happen.

How do we keep and spend the money that is due to housing without crashing the council? Who wants to referee that clash?

By Alistair McIntosh, HQN Chief Executive

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While we’re here, it seems remiss not to mention our Iron Grip service – the ideal way to get your board ready to meet the requirement to stress-test set out in the RSH Regulatory Code. Click here to access a nice PDF which explains everything simply and succinctly.