TAKING A STAND Business Plan

Transcription

1 TAKING A STAND Business Plan -22

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3 Welcome to Connect s Business Plan -22 Index 1 Taking a Stand 1 2 Our Values 2 3 Strategy Financial Plan Key Strategic Risks 26 6 Risk Management Strategy 27

4 Taking a Stand VALUES VISION PURPOSE STRATEGY We create solutions We give respect to people We include the whole community We love making a difference Our passion is for a fairer society, where people s homes, health and happiness matter We invest our energy, skills and resources to: Create truly affordable homes Support people to enjoy healthy fulfilled lives Build safe, neighbourly places to live Invest in tackling social and economic inequality Invest in good homes Invest in health and wellbeing FOUNDATIONS FOR SUCCESS We will do this by... 1 Ensuring every employee contributes to our overall purpose 2 Working in partnership with others to make a positive impact 3 Delivering excellent internal and external communication 4 5 Supporting ambition, innovation and creativity Seeking out and achieving value for money and value for the community 6 Keeping our values at the heart of everything we do 7 Making technology work for customers and the business NEW

5 Values Connect gives respect to people We will/i will Actively listen and give full attention to the people I am with Be open, honest, straight-forward and genuine Take personal responsibility for doing what we promise and so build trust Connect creates solutions We will/i will Look to and plan for the future, seeking to improve the way we serve our customers and do our jobs Keep learning with enthusiasm See challenges as opportunities to find new solutions Connect includes the whole community We will/i will Consistently treat people with fairness Offer people equal consideration, valuing the different contributions they make Work co-operatively with people who share our values Connect loves making a difference We will/i will Go the extra mile to help my customers and colleagues Treat people with warmth and friendliness Make Connect an enjoyable place to work with energy and enthusiasm

6 Strategy Invest in tackling social and economic inequality Maximise the potential of our community bases in East Leeds and North Kirklees Build relationships and support people so they can create for themselves the lives and neighbourhoods they want Deliver economic and digital inclusion programmes, expand apprenticeships to 10% of our workforce and promote the Living Wage Invest in good homes Focus on housing, its environment and its management Make our housing a positive choice Anticipate future needs and preferences Ensure affordable whole house costs Optimise asset value and return Create truly affordable new homes in our neighbourhoods especially in East Leeds and North Kirklees Add new homes with support for people in the community where needed Invest in health and wellbeing Expand our support services creatively and cost effectively, with individual solutions and quality at the heart of our services Find new ways to tackle mental ill-health, loneliness and isolation Build excellent foundations for business success Deliver a coherent approach to communications and customer care across the association to enhance customer and employee satisfaction Ensure every employee contributes to our overall purpose via the development of a transformational people strategy Maximise the ability of all of our customers to influence the development of Connect via a new Involvement Strategy Make technology work for customers and the business

7 Financial Plan -22 Introduction Overall levels of surpluses over the next 30-year life of the draft Business Plan are substantially higher compared to the 2016 Business Plan 142.4m ( 69.5m), incorporating the updates noted below. Key points Income Projections Total income has increased from 607m to 756m over the 30 year life of the Business Plan reflecting the following: Rental Income Decrease of1% p.a. in rents from 2016/17 until /20. Rent formula of CPI+1% p.a. applied thereafter. In line with the updated assumptions regarding the negative impact of Welfare Reform, Void rent loss forecasts are lower than past estimates of 1.8m, and now stand at 1.5m over the next 5 years of the Business Plan. Surplus on Property Sales The Business Plan assumes a modest programme of disposals, with the surpluses of 176k p.a. envisaged for years 2. Plus a further 1.2m surplus from shared ownership sales in 3-6. Expenditure Projections Total costs are projected to increase by 70m over the 30-year life of the Business Plan ( 583m now compared to 513m) reflecting various increases/decreases over a number of headings. Salaries The overall salary bill has increased by 25m over the life of the Business Plan, rising from 229m to 254m, reflecting the addition of the Engage contract and CPI+0.75% increases. Engage Contract This current budgeted surplus impact of this contract is very low and for the purposes of this Business Plan is therefore currently assumed to continue over the life of the Plan. 4

8 Office Overheads Overheads have increased by 17m over the life of the Business Plan, rising from 60m to 77m, reflecting CPI+0.75% increases plus Engage. Major Repairs The Plan includes an additional 2.4m of Major Repairs Revenue spend over the 30-year life of the Plan ( 58.7m compared to 56.3m). The Plan is able to fully accommodate 100% of current planned capital expenditure over the next 30 years; however these figures are subject to an on-going validation exercise. Development activity The Business Plan has been updated to reflect 22.5m of approved or anticipated development activity. The following schemes are noted as committed in the Business Plan: 10 units Boggart Hill, phase 2 ( 1.5m spend) 14 units Empty Properties AHP2 ( 1.2m spend) 8 s106 units Owl Lane ( 0.5m spend) 23 s106 units Lindley Moor-Farriers Croft ( 1.1m spend) 2 s106 units Lindley Moor-Crosland Meadows ( 0.1m spend) 22 s106 units Lindley Moor-Crosfield Park( 1.1m spend) 6 S106 units Park View, Cleckheaton ( 0.4m spend) 5 shared ownership units Owl Lane ( 0.4m spend) 3 shared ownership units Lindley Moor-Harron ( 0.3m spend) 3 shared ownership units Lindley Moor-Persimmon ( 0.3m spend) 2 shared ownership units Lindley Moor-Taylor Wimpey ( 0.2m spend) The Business Plan also includes the following schemes: 5 SOAHP 12 Outright sale units -22 HCA funded 26 Supported Housing units

9 Interest Payable Interest payable is approximately 5.5m lower at 35.7m ( 41.2m) with short term rates reduced in line with current market forecasts supplied by Capita Treasury Solutions. Long term LIBOR rates remain unchanged at 4.5% from year 7. Value for Money The HCA s latest cost per unit data confirms the Association s costs as mid-upper quartile compared to the Sector and this is in line with the most recent Housemark report. The Association has a significantly higher level of Supported Housing and Housing for Older People, which the HCA recognise can result in higher than average costs. Additionally the Association has a higher level of Other Social Housing costs reflecting priority areas of investment for the Association. All that said however, the Association s Management and Maintenance costs are significantly higher than the Sector median and Management recognise the importance of reducing these costs over time by setting the Efficiency targets over and above the Budget from 2018/19 which will also support additional Development in the future. The above targets will be progressed as part of the Association s VFM drive in /18, with further analysis and reporting of the Cost Per Unit and Sector scorecard to be reported at the May Board meeting. Balance Sheet Peak debt is 44.8m compared to 47.4m in the 2016 Business Plan, and peaks in -18 in line with the additional Development activity. Based on current committed/likely development activity debts are forecast to be repaid in 2036/37 compared to 2042/43. 6

10 Loan covenants The proposed Business Plan satisfies all existing loan covenants, although further discussions are required to finalise arrangements with regard to the new FRS accounting requirements. Cashflow Proposed drawdowns will be part funded from existing 10m Lloyds-Bank of Scotland facility, with new facilities required by year 5 (2020/21). Following discussion at the board seminar cash balances assumed now to be a minimum of 1m ( 0.5m). Business Plan assumptions 2 projections (-18) have been updated in detail in all major budget areas such as Rents, Maintenance, Services, Development activity, Salaries and Treasury. Page 14 shows the underlying assumptions used for the -18 Business Plan, with a summary of the main changes. Sensitivity Analysis and Stress Testing Page 19 demonstrates the sensitivity of surplus levels, meeting the tightest loan covenant (EBITDA- MRI), and repaying the association s loans to changes in key risks such as Welfare Reform and other key assumptions areas such as Development activity, inflation, interest rates, rental income, and voids. The Table at the bottom of Page 24 shows the impact of each individual sensitivity, with Rents, Voids and Bad Debts showing the biggest overall adverse impacts. 7

11 Looking at the Summary of Possible Financial Mitigations it is clear that some scenarios would be more manageable than others and that a further extension of the minus 1% rent cuts would present by far the greatest challenge. Potential mitigation in most instances where headroom is limited would typically include some / all of the following: Reducing discretionary spend; Re-profiling Major Repairs spend; Delaying or stopping Development; Restructuring teams and operations; Closing down any loss-making activities Selling assets. Following approval of the Budget and Business Plan, Management Team will review options for future cost savings that might be used in the event that some of the scenarios materialise. It is planned that all such proposals (and their impacts) will form the basis of a discussion at the next Board seminar. Development capacity - Graph 9 demonstrates the capacity of the Association to develop up to a further 90 units p.a. in addition to those included in the attached Business Plan. Stress Testing - Graphs 11 to 13 are a repeat of the perfect storm scenario considered by the Board in February, based on the 2016 Business Plan, and shows a more manageable picture, with savings of 400k pa required (compared to a 6-year reduction in Revenue spend of 500k and 800k for Major Repairs). Members views on further stress testing, linked to the Key Strategic Risks, are requested to assist with work planned for the June seminar. This additional work will also be used to consider Triggers for implementing mitigation plans as recently highlighted by the HCA (Inside Housing p16 March ). Risk assessment The Business Plan has been prepared on a challenging but prudent basis, factoring in the latest expectations on the adverse impact of Welfare Reform. Longer term projections are driven by the Business Plan assumptions made on key areas of risk, and given the high level of uncertainty, in particular relating to Welfare Reform, revenue and capital funding. The following list represents just some of the key longer term risks where changes in assumptions can make a material difference to the Business Plan projections: Future rent formula CPI+1% or CPI-flat. The impact of Welfare reform (Void rent loss and maintenance spend, arrears and bad debt provision, staffing levels etc); Supported People funding; Asset Management projections (Maintenance, Major Repairs, Development, funding requirements etc); Operational performance (arrears and void levels etc); Staff costs (reward structures, pension provision etc); Review of Treasury assumptions on-going given current market conditions and the refinancing exercise. 8

12 Income and expenditure account for the period ending 31 March 46 INCOME & EXPENDITURE ACCOUNT (Statement of Comprehensive Income) FOR THE PERIOD ENDED 31 March 2046 TURNOVER Gross Rental Income Rent Receivable 12,828,741 12,907,770 12,947,363 13,016,579 13,444,858 13,883,926 14,416,943 14,883,895 15,281,950 15,733,819 18,202,709 21,118,828 24,370,210 28,201,822 32,638,513 Service Charge Income 899, , , , , , , , , ,675 1,125,431 1,288,926 1,476,173 1,690,621 1,936,223 Gross Rental Income 13,727,741 13,692,985 13,756,135 13,849,614 14,302,884 14,765,548 15,322,809 15,814,673 16,238,324 16,716,493 19,328,140 22,407,754 25,846,382 29,892,443 34,574,736 Less Voids 169, , , , , , , , , , , , , , ,297 Net Rental Income 13,558,678 13,543,582 13,384,814 13,497,629 13,968,596 14,435,783 14,978,190 15,458,922 15,872,894 16,340,190 18,892,423 21,901,984 25,262,193 29,215,990 33,791,440 Other Revenue Grants 1,312,200 2,201,160 2,250,686 2,301,327 2,353,106 2,400,169 2,448,172 2,497,135 2,547,078 2,598,020 2,868,424 3,166,971 3,496,592 3,860,520 4,262,327 Other Income 63,100 38,120 39,264 40,442 41,655 42,801 43,978 45,187 46,430 47,706 54,637 62,574 71,664 82,075 93,999 Total Turnover From Social Housing Lettings 14,933,978 15,782,863 15,674,764 15,839,397 16,363,358 16,878,752 17,470,339 18,001,245 18,466,401 18,985,916 21,815,484 25,131,530 28,830,449 33,158,586 38,147,765 OSH Turnover 194, ,000 1,245,667 1,893,333 1,080,000 1,080,000 NSHL Turnover 440, , , , , , , , , , , , , , ,604 Grant Amortisation 1,332,233 1,329,982 1,333,261 1,326,817 1,326,817 1,328,789 1,306,983 1,247,983 1,286,983 1,258, , , , , ,983 Total Turnover 16,900,212 17,714,204 18,689,645 19,505,309 19,225,966 19,752,448 19,251,528 19,732,918 20,246,748 20,748,131 23,359,074 26,585,949 30,256,715 34,547,344 39,589,352 OPERATING EXPENDITURE Operating Costs Social Housing Management Costs (see Analysis below) (6,232,711) (7,636,555) (7,867,350) (8,116,332) (8,274,391) (8,444,201) (8,664,181) (8,881,937) (9,063,024) (9,270,634) (10,606,185) (12,135,161) (13,885,600) (15,889,589) (18,183,863) Service Costs (773,000) (739,029) (761,200) (784,036) (807,557) (829,765) (852,584) (876,030) (900,121) (924,874) (1,059,233) (1,213,112) (1,389,345) (1,591,179) (1,822,335) Care And Support Costs Routine Maintenance (1,215,000) (1,146,022) (1,102,748) (1,076,830) (1,062,961) (1,016,965) (1,047,302) (1,079,554) (1,123,008) (1,153,890) (1,321,520) (1,513,501) (1,733,373) (1,985,186) (2,273,580) Planned Maintenance (1,167,000) (711,955) (733,313) (755,313) (777,972) (799,366) (821,349) (843,936) (867,144) (890,991) (1,020,428) (1,168,669) (1,338,445) (1,532,886) (1,755,573) Major Repairs (130,000) (106,860) (110,066) (113,368) (172,908) (120,265) (127,333) (198,005) (142,739) (147,056) (171,516) (196,432) (224,969) (257,650) (295,080) Bad Debts (134,069) (103,776) (191,404) (193,755) (172,307) (159,129) (158,513) (156,587) (153,546) (152,779) (161,202) (187,178) (216,243) (250,458) (290,090) Direct HM Expenditure (65,000) (116,005) (119,485) (123,069) (126,762) (130,247) (133,829) (137,510) (141,291) (145,177) (166,267) (190,421) (218,084) (249,766) (286,050) Depreciation of Housing Properties (3,138,067) (3,188,607) (3,458,499) (3,517,502) (3,535,282) (3,614,437) (3,600,992) (3,579,149) (3,644,962) (3,679,507) (3,682,791) (3,904,059) (4,183,717) (4,340,240) (4,700,692) Operating Costs Social Housing (12,854,847) (13,748,808) (14,344,066) (14,680,205) (14,930,140) (15,114,375) (15,406,084) (15,752,707) (16,035,834) (16,364,908) (18,189,142) (20,508,534) (23,189,776) (26,096,954) (29,607,265) Other Activities Expenditure NSHL Expenditure (300,030) Exceptional Items - 'Pension Remeasurement' (100,000) (100,000) OSH Cost Of Sales (128,000) (116,000) (800,756) (1,426,844) (1,080,000) (1,080,000) Other Activities Expenditure Total (228,000) (516,030) (800,756) (1,426,844) (1,080,000) (1,080,000) Operating Expenditure Total 13,082,847 14,264,838 15,144,822 16,107,049 16,010,140 16,194,375 15,406,084 15,752,707 16,035,834 16,364,908 18,189,142 20,508,534 23,189,776 26,096,954 29,607,265 Other income Operating Surplus/(deficit) 3,817,365 3,449,366 3,544,823 3,398,260 3,215,826 3,558,073 3,845,444 3,980,211 4,210,914 4,383,223 5,169,932 6,077,415 7,066,939 8,450,390 9,982,087 Gain/(loss) on disposal of fixed asset 204, ,840 Interest Receivable 8,939 7,128 5,000 15,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 30, ,395 1,673,799 3,079,039 Interest and financing costs (1,997,854) (1,948,151) (2,084,149) (2,211,069) (2,335,264) (2,389,914) (2,321,247) (2,402,593) (2,310,312) (2,206,601) (1,602,838) (521,392) (101,965) Surplus before tax 2,032,450 1,684,184 1,465,675 1,202, ,562 1,193,160 1,549,197 1,602,618 1,925,602 2,201,622 3,592,094 5,586,882 7,601,369 10,124,188 13,061,126 9

13 Balance sheet for the period ending 31 March 46 BALANCE SHEET (Statement of Financial Position) FOR THE PERIOD ENDED 31 March Fixed Assets Intangible assets and goodwill Tangible fixed assets 118,766, ,472, ,054, ,320, ,868, ,511, ,148, ,949, ,828, ,788, ,431, ,308, ,605, ,929, ,648,475 Investments FA 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 4,943,000 Investments in joint ventures Investments in associates Fixed Assets Total 123,709, ,415, ,997, ,263, ,811, ,454, ,091, ,892, ,771, ,731, ,374, ,251, ,548, ,872, ,648,475 Current Assets Stock 265, , , , , , , , , , , , , , ,000 Trade and other debtors 1,422,832 1,452,590 1,814,581 1,882,633 1,908,692 1,900,429 1,915,681 1,924,022 1,920,855 1,919,424 2,159,762 2,445,586 2,762,640 3,122,301 3,527,677 Investments CA Cash and cash equivalents 2,729,968 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 2,162,068 29,015,262 72,318, ,958,731 Current Assets Total 4,418,200 3,238,790 3,276,425 2,997,633 3,023,692 3,015,429 3,030,681 3,039,022 3,035,855 3,034,424 3,274,762 4,722,654 31,892,902 75,555, ,601,409 Less - Creditors - amounts falling due within one year (2,563,000) (2,614,260) (2,673,081) (2,733,225) (2,794,723) (2,850,617) (2,907,630) (2,965,782) (3,025,098) (3,085,600) (3,406,751) (3,761,329) (4,152,811) (4,585,039) (5,062,253) Net current assets/liabilities 1,855, , , , , , ,051 73,240 10,757 (51,176) (131,990) 961,325 27,740,091 70,970, ,539,155 Assets less current liabilities Total 125,564, ,039, ,601, ,527, ,040, ,619, ,214, ,965, ,782, ,680, ,242, ,212, ,288, ,842, ,187,630 Creditors - amounts falling due after more than one year (102,626,322) (104,416,934) (103,513,001) (101,237,344) (100,844,572) (100,230,202) (97,276,506) (94,424,217) (91,316,011) (88,011,761) (71,258,925) (47,726,496) (38,034,307) (33,195,501) (30,092,585) Provisions for liabilities Pension provisions (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) (2,967,000) Other provisions (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) (685,000) Net assets Total 19,286,450 20,970,633 22,436,308 23,638,499 24,544,061 25,737,220 27,286,418 28,889,036 30,814,638 33,016,260 48,331,314 71,834, ,602, ,995, ,443,045 Reserves Income and expenditure reserve 13,526,450 15,210,633 16,676,308 17,878,499 18,784,061 19,977,220 21,526,418 23,129,036 25,054,638 27,256,260 42,571,314 66,074,195 99,842, ,235, ,683,045 Cash Flow Hedge Reserve Revaluation Reserve Total 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 1,150,000 Restricted [and/or endowment] reserve 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 4,610,000 Total reserves 19,286,450 20,970,633 22,436,308 23,638,499 24,544,061 25,737,220 27,286,418 28,889,036 30,814,638 33,016,260 48,331,314 71,834, ,602, ,995, ,443,045 10

14 Cash flow for the period ending 31 March 46 CASH FLOW FOR THE PERIOD ENDED 31 March Total Receipts 15,353,077 16,250,689 16,802,988 17,916,686 17,700,784 18,272,793 17,770,780 18,320,007 18,809,387 19,337,799 22,157,080 25,496,125 29,227,064 33,580,493 38,598,266 Total Payments (5,071,210) (5,506,462) (4,969,985) (5,622,581) (5,741,205) (5,715,216) (4,769,235) (4,971,438) (5,061,644) (5,201,675) (5,962,928) (6,831,934) (7,827,470) (8,967,947) (10,274,455) Cash Paid To Employees (4,507,000) (5,517,521) (5,683,047) (5,853,538) (6,029,144) (6,194,945) (6,365,306) (6,540,352) (6,720,212) (6,905,018) (7,908,133) (9,056,974) (10,372,711) (11,879,589) (13,605,377) Cash flow from Operating Activities 5,774,867 5,226,707 6,149,957 6,440,567 5,930,434 6,362,632 6,636,238 6,808,216 7,027,531 7,231,106 8,286,018 9,607,217 11,026,883 12,732,957 14,718,434 Provisions for tax Surplus for the year 5,774,867 5,226,707 6,149,957 6,440,567 5,930,434 6,362,632 6,636,238 6,808,216 7,027,531 7,231,106 8,286,018 9,607,217 11,026,883 12,732,957 14,718,434 Adjustment for investing or financing activities Proceeds from sale of tangible assets Government grants utilised in the year Interest payable Interest received Corporation Tax Total Adjustments for invest or financing activities Net cash generated from operating activities 5,774,867 5,226,707 6,149,957 6,440,567 5,930,434 6,362,632 6,636,238 6,808,216 7,027,531 7,231,106 8,286,018 9,607,217 11,026,883 12,732,957 14,718,434 Cash flow from investing activities Purchase of tangible fixed assets (5,511,540) (8,592,085) (4,500,137) (3,295,657) (4,554,214) (4,712,137) (2,693,279) (2,826,317) (2,920,996) (3,004,239) (4,104,728) (4,140,934) (4,145,533) (4,486,702) (187,972) Proceeds from sale of tangible fixed assets 544, ,840 Grants received 683, , , , ,000 1,060,000 Interest Received 8,939 7,128 5,000 15,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 30, ,395 1,673,799 3,079,039 Total Cash flow from investing activities (4,275,601) (7,514,117) (4,295,137) (2,920,657) (4,169,214) (3,627,137) (2,668,279) (2,801,317) (2,895,996) (2,979,239) (4,079,728) (4,110,076) (3,509,138) (2,812,904) 2,891,068 Cash flow from financing activities Interest paid (1,948,298) (1,898,595) (2,034,593) (2,161,514) (2,285,709) (2,386,358) (2,317,692) (2,399,037) (2,306,756) (2,203,045) (1,599,283) (517,836) (98,410) Interest element of finance lease rental payment New secured loans 5,000,000 2,854,838 1,788,917 1,643,120 2,301,279 8,842,314 1,908,258 2,066,594 1,778,670 1,661,045 1,217, ,468 Repayment of borrowings (3,635,000) (398,800) (1,609,144) (3,001,516) (1,776,791) (9,191,450) (3,558,526) (3,674,455) (3,603,448) (3,709,867) (3,824,114) (4,011,705) (714,000) Capital element of finance lease rental payments Withdrawal from deposits Total Cash flow from financing activities (583,298) 557,443 (1,854,820) (3,519,910) (1,761,220) (2,735,494) (3,967,960) (4,006,899) (4,131,534) (4,251,867) (4,206,290) (4,335,073) (812,410) Cash & cash equivalents at the beginning of year 1,814,000 2,729,968 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 22,309,926 62,398, ,349,229 Net Change in Cash & cash equivalents 915,968 (1,729,968) ,162,068 6,705,336 9,920,053 17,609,502 Cash & cash equivalents at the end of year 2,729,968 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 2,162,068 29,015,262 72,318, ,958,731 11

15 Financial covenants summary FINANCIAL COVENANTS SUMMARY No. s of first Breached Breach in years Gearing - THFC Total Borrowings ,167 45,623 45,803 44,444 44,969 44,620 42,969 41,362 39,537 37,488 26,243 7,172 Total Net Worth = Reserves + SHG ,400 80,987 82,764 84,400 85,752 88,405 89,930 91,552 93,545 95, , ,486 Ratio % 0% 55% 56% 55% 53% 52% 50% 48% 45% 42% 39% 24% 5% Target: less than % 0% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% 65% Ok / Fail #VALUE! None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok 2. Gearing - RBS / HBoS Total Borrowings ,167 45,623 45,803 44,444 44,969 44,620 42,969 41,362 39,537 37,488 26,243 7,172 Housing Properties At Cost , , , , , , , , , , , ,937 Ratio % 0% 27% 27% 26% 25% 25% 24% 23% 22% 20% 19% 12% 3% Target: less than % 0% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% Ok / Fail #VALUE! None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok 3. Interest Cover - THFC Operating Surplus ,095 3,787 3,556 3,372 3,202 3,557 3,821 4,000 4,278 4,426 5,065 5,869 Add: Depreciation Of Housing Properties ,732 1,697 2,114 2,217 2,222 2,286 2,318 2,311 2,291 2,378 2,800 3,271 Adjusted Operating Surplus ,827 5,484 5,670 5,589 5,424 5,844 6,139 6,311 6,569 6,804 7,865 9,140 Interest Payable ,998 1,948 2,084 2,211 2,335 2,390 2,321 2,403 2,310 2,207 1, Add: Capitalised Interest Adjusted Interest Payable (B) ,998 1,948 2,084 2,211 2,335 2,390 2,321 2,403 2,310 2,207 1, Ratio % 0% 292% 281% 272% 253% 232% 245% 264% 263% 284% 308% 491% 1753% Target: more than % 0% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% Ok / Fail #VALUE! None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok 4. Interest Cover - RBS / HBoS Operating Surplus ,095 3,787 3,556 3,372 3,202 3,557 3,821 4,000 4,278 4,426 5,065 5,869 Add: Depreciation Of Housing Properties ,732 1,697 2,114 2,217 2,222 2,286 2,318 2,311 2,291 2,378 2,800 3,271 Adjusted Operating Surplus (A) ,827 5,484 5,670 5,589 5,424 5,844 6,139 6,311 6,569 6,804 7,865 9,140 Interest Payable ,998 1,948 2,084 2,211 2,335 2,390 2,321 2,403 2,310 2,207 1, Less: Interest Receivable (9) (7) (5) (15) (25) (25) (25) (25) (25) (25) (25) (31) Net Interest Payable (B) ,989 1,941 2,079 2,196 2,310 2,365 2,296 2,378 2,285 2,182 1, Ratio % 0% 293% 283% 273% 254% 235% 247% 267% 265% 287% 312% 498% 1863% Target: more than % 0% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% Ok / Fail #VALUE! None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok 5. Interest Cover - Yorkshire Bank Operating Surplus ,095 3,787 3,556 3,372 3,202 3,557 3,821 4,000 4,278 4,426 5,065 5,869 Add: Depreciation Of Housing Properties ,732 1,697 2,114 2,217 2,222 2,286 2,318 2,311 2,291 2,378 2,800 3,271 Add: Interest Receivable Adjusted Operating Surplus (A) ,836 5,491 5,675 5,604 5,449 5,869 6,164 6,336 6,594 6,829 7,890 9,171 Interest Payable ,998 1,948 2,084 2,211 2,335 2,390 2,321 2,403 2,310 2,207 1, Add: Capitalised Interest Adjusted Interest Payable (B) ,998 1,948 2,084 2,211 2,335 2,390 2,321 2,403 2,310 2,207 1, Ratio % 0% 292% 282% 272% 253% 233% 246% 266% 264% 285% 309% 492% 1759% Target: more than % 0% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% Ok / Fail #VALUE! None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok 12

16 Financial covenants summary (cont) FINANCIAL COVENANTS SUMMARY No. s of first Breached Breach in years EBITDA - MRI Operating Surplus 000 2,944 3,817 3,449 3,545 3,398 3,216 3,558 3,845 3,980 4,211 4,383 5,170 6,077 Add: Gain / (Loss) on sale of assets Less: Grant amortisation 000 (2) (1,332) (1,330) (1,333) (1,327) (1,327) (1,329) (1,307) (1,248) (1,287) (1,259) (988) (841) Add: Depreciation Of Housing Properties 000 1,808 3,138 3,189 3,458 3,518 3,535 3,614 3,601 3,579 3,645 3,680 3,683 3,904 Less: Capitalised Maintenance Costs 000 (854) (1,300) (1,541) (1,575) (1,622) (1,671) (1,719) (2,311) (2,434) (2,519) (2,592) (3,637) (3,611) Adjusted Operating Surplus (A) 000 4,064 4,527 3,943 4,095 3,967 3,754 4,124 3,828 3,877 4,050 4,212 4,228 5,530 Interest Payable 000 2,055 1,998 1,948 2,084 2,211 2,335 2,390 2,321 2,403 2,310 2,207 1, Add: Capitalised Interest Adjusted Interest Payable (B) 000 2,055 1,998 1,948 2,084 2,211 2,335 2,390 2,321 2,403 2,310 2,207 1, Ratio % 198% 227% 202% 196% 179% 161% 173% 165% 161% 175% 191% 264% 1061% Target: more than % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Ok / Fail #VALUE! None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok EBITDA - MRI Operating Surplus ,210 10,811 10,392 10,159 10,172 10,619 11,383 12,036 12,574 15,079 17,555 Add: Gain / (Loss) on sale of assets Less: Grant amortisation 000 (2,664) (3,995) (3,990) (3,987) (3,983) (3,963) (3,884) (3,842) (3,794) (3,162) (2,609) Add: Depreciation Of Housing Properties 000 8,135 9,785 10,165 10,511 10,667 10,750 10,794 10,825 10,904 11,015 11,594 Less: Capitalised Maintenance Costs 000 (3,695) (4,416) (4,738) (4,868) (5,012) (5,701) (6,464) (7,264) (7,545) (10,622) (10,545) Adjusted Operating Surplus (A) ,534 12,565 12,005 11,816 11,845 11,706 11,829 11,755 12,139 12,311 15,997 Interest Payable 000 6,001 6,030 6,243 6,630 6,936 7,046 7,114 7,034 6,920 5,207 2,336 Add: Capitalised Interest Adjusted Interest Payable (B) 000 6,001 6,030 6,243 6,630 6,936 7,046 7,114 7,034 6,920 5,207 2,336 Ratio % 209% 208% 192% 178% 171% 166% 166% 167% 175% 236% 685% Target: more than % 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% 110% Ok / Fail #VALUE! None Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok Ok 13

17 -22 Business Plan Assumptions This paper details the updated assumptions proposed for the -22 Connect Housing Business Plan and for years 3 to 31. Business Plan Assumptions are regularly reviewed with the last full update in March 2016 but an assessment of the impact of the SOAHP Bid in Autumn 2016 was carried out. This update for the -22 Business Plan is the usual one at this time of year that derives from Connect Housing s annual Budget review. The main changes in assumptions from those used in the Connect Housing Business Plan are: Minor short term changes to CPI in years 2-5 Changes to Real rates in future years for changes in inflation on costs Voids & Bad Debts rates reflect the Budget in year 2 but long term rates for General Needs & Sheltered are substantially lower The impact of Welfare Reforms has been incorporated into base figures & detailed forward projections for Voids, Bad Debts & Arrears Extra 122 units of Development across all tenure types with Spend up by 12.2m, SHG up by 1.5m & Sales proceeds up by 4.33m Small increase in Disposals Increase in Major Repairs spend with the total 30-year spend per unit up by 4.2% Reduction in LIBOR rates in years 2-6 Extra 0.79m in years 1-3 re IT upgrades. No other changes in Other fixed assets and Depreciation assumptions Cost Savings some have been incorporated into the.18 Budget but much reduced further savings are included from as follows (at.18 prices) with a note in brackets of how these have changed from the March 2016 Plan: Routine Maintenance - 75k in , 150k in.20, 225k in & 300k pa for all years from.22 ( 400k pa for all years from ); Major Repairs Nil ( 1.4m until.20 and a further 250k pa from.26); Staffing Nil ( 30k pa for all years from ); Overheads 25k in , 50k in.20, 75k in & 100k pa for all years from.22 ( 50k for all years from ); and Unidentified Nil ( 100k for all years from.20) 14

18 Assumptions s Connect 1 CPI then Real increases between the years: a CPI used as the base for all increases (years 2-5 have changed from the Plan of 1.5%, 2%, 2% & 2% respectively but the long term rate is unchanged) % 2.25% 2.0% b Rent (real rate above CPI) - General Needs, Supported & HOP Act -1.0% 1.0% - Shared Ownership - Managed Units, Student & Commercial % Nil c Other Real Rates: Management costs (changed from the Plan of 1.0% pa) % d Earnings (changed from the Plan of 1.0% pa) % e Routine and cyclical maintenance costs & Major Repairs costs (changed from the Plan of 0.5% pa) % f Development costs - all cash flows entered at current year prices 2-5 see note g Supporting People Grant 2-31 Nil h Other income and expenditure (changed from the Plan of 1.0% pa) % i Property values unit sales values kept at current year prices 2-5 See note 2 Voids, Bad Debts & Arrears changes due to Welfare Reforms are included in the base levels a Voids - General needs, Sheltered (long term down from 1.95% pa in the March 2016 Plan) % av 1.53% 1.09% - Supported Housing (long term no change from the March 2016 Plan) % 5.30% - Shared Ownership, Managed Units (no change from the March 2016 Plan) 2-31 Nil 15

19 Assumptions s Connect b Bad debts - General needs, Sheltered (long term down from 1.4% pa in the March 2016 Plan) % av 1.28% av 0.91% 0.66% - Supported Housing (long term no change from the March 2016 Plan) % 1.83% 1.61% 1.40% - Shared Ownership, Managed Units (no change from the March 2016 Plan) 2-31 Nil c Arrears level - net of bad debt provision & as a percentage of gross rent receivable (no change from the March 2016 Plan) 2-31 av 4.10% d Welfare Reforms no extra costs in future years (unchanged from the March 2016 Plan). 3 Developments completing current schemes & committed schemes a Capital spend m b SHG receivable m c d e New units GN 122, SH 42, SO 57 & 12 units of Outright Sales Proceeds SO 1st tranche 3.67m & Outright Sale Capitalisation of Development Team salaries m 63% 4 Disposals a General needs & Supported housing disposals Sales proceeds of 1m & 24.5k surplus pu (14 sales in March 2016 Plan with Sales proceeds of 840k & 24k surplus pu) Nil b Shared ownership staircasing sales 2-31 Nil 16

20 Assumptions s Connect 5 Major Repairs a Total spend per unit including Fees, Contingency & VAT but excluding Inflation (up by 4.2%) ,314 b Capitalisation rates takes account of Component Accounting 2-31 Ave 95% 6 Funding (all years 2-6 are down from the March 2016 Plan but the long term rate is unchanged) a LIBOR - excluding margin (March 2016 LIBOR assumptions shown in brackets) % (1.5%) 2.0% (2.5%) 2.75% (3.5%) 3.5% (4.5%) 4.0% (4.5%) 4.5% (4.5%) b Margin on future Long Term Variable debt (Total interest rate = LIBOR + margin) - BoS 25m Facility - RBS 15m Facility % 1.5% c Fixed rate funding current proportion of all funding 1 67% d Fixed interest rates range %-11.5% e Investment rate on surplus funds % 1.5% 2.5% f Minimum cash balance m 7 Other Fixed Assets (an extra 0.79m from the March 2016 Plan in years 1-3 re IT upgrades) a Spend - in real terms excl inflation - IT & Fixtures & fittings m 270k pa - offices (Dewsbury 0.4m & Roundhay Road 0.15m) m b Disposals 1-31 Nil 17

21 Assumptions s Connect 8 Depreciation (no change from the March 2016 Plan) a Housing properties - brought forward assets (reflecting Component Accounting) % - new development & capitalised major repairs % b Offices % c Fixtures and Fittings % d Computer equipment % 18

22 Cumulative stress testing & development capacity for the period ending 31 March EBITDA-MRI Surplus Debt 250% 230% 210% Stress Test 1 - Inflation Stress Test 1 - Inflation Stress Test 1 - Inflation Ratio % 190% 170% 150% 130% 110% 90% 70% 50% CPI 1% pa higher for 4 years from (Rents same to.20) Target: greater than 110% Surplus - m CPI 1% pa higher for 4 years from (Rents same to.20) Debt - m CPI 1% pa higher for 4 years from (Rents same to.20) POSSIBLE MITIGATION STRATEGY - Nothing material needed 250% 230% 210% Stress Test 2 - Rents Stress Test 2 - Rents Stress Test 2 - Rents Ratio % 190% 170% 150% 130% 110% Surplus - m Debt - m % 70% 50% Absolute -1.0% pa for a further 4 years from Target: greater than 110% Absolute -1.0% pa for a further 4 years from Absolute -1.0% pa for a further 4 years from POSSIBLE MITIGATION STRATEGY - Reduce Costs by 625k pa for all years from

23 3- EBITDA-MRI Surplus Debt 250% 230% 210% Stress Test 3 - Voids & Bad Debts Stress Test 3 - Voids & Bad Debts Stress Test 3 - Voids & Bad Debts Ratio % 190% 170% 150% 130% 110% 90% 70% 50% Voids & Bad Debts each +3% pa for 4 years from Target: greater than 110% Surplus - m Voids & Bad Debts each +3% pa for 4 years from Debt - m Voids & Bad Debts each +3% pa for 4 years from POSSIBLE MITIGATION STRATEGY - Nothing material needed 250% 230% 210% Stress Test 4 - Interest Stress Test 4 - Interest Stress Test 4 - Interest Ratio % 190% 170% 150% 130% 110% 90% 70% 50% Variable Interest Rate +3% pa for 4 years from Target: greater than 110% Surplus - m Variable Interest Rate +3% pa for 4 years from Debt - m Variable Interest Rate +3% pa for 4 years from POSSIBLE MITIGATION STRATEGY - Nothing needed 20

24 3- EBITDA-MRI Surplus Debt 250% 230% 210% Stress Test 5 - Management Costs Stress Test 5 - Management Costs Stress Test 5 - Management Costs Ratio % 190% 170% 150% 130% 110% 90% 70% 50% Management Costs +5% ( 395k pa) for 4 years from Target: greater than 110% Surplus - m Management Costs +5% ( 395k pa) for 4 years from Debt - m Management Costs +5% ( 395k pa) for 4 years from POSSIBLE MITIGATION STRATEGY - Nothing needed 250% 230% 210% Stress Test 6 - Maintenance Costs Stress Test 6 - Maintenance Costs Stress Test 6 - Maintenance Costs Ratio % 190% 170% 150% 130% 110% 90% Surplus - m Debt - m % % DTD/CYC Repair Costs +10% ( 185k pa) for 4 years from Target: greater than 110% 0.0 DTD/CYC Repair Costs +10% ( 185k pa) for 4 years from DTD/CYC Repair Costs +10% ( 185k pa) for 4 years from POSSIBLE MITIGATION STRATEGY - Nothing needed 21

25 3- EBITDA-MRI Surplus Debt 250% 230% 210% Stress Test 7 - New Units Stress Test 7 - New Units Stress Test 7 - New Units Ratio % 190% 170% 150% 130% 110% 90% 70% 50% +25 GN Developed Units pa for 4 years from.20 Target: greater than 110% Surplus - m GN Developed Units pa for 4 years from.20 Debt - m GN Developed Units pa for 4 years from.20 POSSIBLE MITIGATION STRATEGY - Nothing needed Ratio % 450% 430% 410% 390% 370% 350% 330% 310% 290% 270% 250% 230% 210% 190% 170% 150% 130% 110% 90% 70% 50% Stress Test 8 - RTB Include RTB's at 100 sales pa for 4 years from Target: greater than 110% Surplus - m Stress Test 8 - RTB Include RTB's at 100 sales pa for 4 years from Debt - m Stress Test 8 - RTB Include RTB's at 100 sales pa for 4 years from POSSIBLE MITIGATION STRATEGY - Nothing needed 22

26 3- EBITDA-MRI Surplus Debt 250% 230% 210% Stress Test 9 - Rents Stress Test 9 - Rents Stress Test 9 - Rents Ratio % 190% 170% 150% 130% 110% Surplus - m Debt - m % 70% % CPI only from Target: greater than 110% 0.0 CPI only from CPI only from POSSIBLE MITIGATION STRATEGY - Nothing needed Ratio % 300% 250% 280% 230% 260% 240% 210% 220% 190% 200% 180% 170% 160% 150% 140% 120% 130% 100% 110% 80% 60% 90% 40% 70% 20% 50% 1 Stress Test Stress 10 - Development Test 10 - Development Capacity Capacity Base Base Plan Plan = = Business Plan Plan v3.1 v3.1 MT MT Mar Mar units units pa pa (1% (1% of of stock) stock) for for all all years years from from units units pa pa (3% (3% of of stock) for for all all years from from.20 Target: greater than 110% Surplus - m Stress Stress Test Test 10 - Development 10 - Development Capacity Capacity Base 30 units Plan pa = Business (1% of stock) Plan for all years v3 from Board GN Developed Units pa for 5 years from units pa (3% of stock) for all years from GN Developed Units pa for 5 years from Debt - m Stress Test Development Capacity Base Base Plan Plan = Business Business Plan Plan v3 v3.1 Board MT Mar GN units Developed pa (1% of Units stock) pa for for all 5 years years from from GN units Developed pa (3% of Units stock) pa for for all 5 years from POSSIBLE MITIGATION STRATEGY - Nothing needed 23

27 Summary from Reduction in Surplus (+ve) ie Cost Savings needed or Extra Surplus generated (-ve) Stress Area of BP Test Tested Rents Voids & BD Mangt Costs Rents Interest Maint Costs CPI Dev Capacity New Units RTB

28 240% Stress Test 11 - Voids & Bad Debts 240% Stress Test 12 - Voids, Bad Debts & Interest 240% Stress Test 13 - Voids, Bad Debts, Interest & Rents 220% 220% 220% 200% 200% 200% 180% 180% 180% 3- EBITDA-MRI Ratio % 160% 140% 120% 100% 80% 60% Step 1 - Voids +2% pa & Bad Debts +1% pa for 4 years from Target: greater than 110% Step 1 + Mitigation - Nothing needed Ratio % 160% 140% 120% 100% 80% 60% Step 1 - as above re Voids & Bad Debts + Step 2 - Variable Interest Rate +3% pa for 4 years from Target: greater than 110% Steps Mitigation - Nothing material needed Ratio % 160% 140% 120% 100% 80% 60% Steps 1-2 as above re Voids, Bad Debts & Interest Rates + Step 3 - Absolute -1.0% pa for a further 1 year in then CPI only Target: greater than 110% Steps Mitigation - Reduce Costs by 400k pa from Stress Test 11 - Voids & Bad Debts 3.0 Stress Test 12 - Voids, Bad Debts & Interest 3.0 Stress Test 13 - Voids, Bad Debts, Interest & Rents SURPLUS m Step 1 - Voids +2% pa & Bad Debts +1% pa for 4 years from Step 1 + Mitigation - Nothing needed m Step 1 - as above re Voids & Bad Debts + Step 2 - Variable Interest Rate +3% pa for 4 years from Steps Mitigation - Nothing material needed 2026 m Steps 1-2 as above re Voids, Bad Debts & Interest Rates + Step 3 - Absolute -1.0% pa for a further 1 year in then CPI only Steps Mitigation - Reduce Costs by 400k pa from Stress Test 11 - Voids & Bad Debts 60 Stress Test 12 - Voids, Bad Debts & Interest 60 Stress Test 13 - Voids, Bad Debts, Interest & Rents DEBT m m m Step 1 - Voids +2% pa & Bad Debts +1% pa for 4 years from Step 1 + Mitigation - Nothing needed Step 1 - as above re Voids & Bad Debts + Step 2 - Variable Interest Rate +3% pa for 4 years from Steps Mitigation - Nothing material needed Steps 1-2 as above re Voids, Bad Debts & Interest Rates + Step 3 - Absolute -1.0% pa for a further 1 year in then CPI only Steps Mitigation - Reduce Costs by 400k pa from

29 Key Strategic Risks 1. Financial health (specifically VFM, Efficiency and Welfare Reform) 1.1 The impacts of Welfare Reform mean that Connect is unable to generate sufficient income from property letting to sustain core activities, whilst at the same time continuing to fulfil Connect s social objectives 1.2 Treasury, Loan Covenant and Cash flow management is insufficiently robust to meet business, lender and regulator requirements 1.3 VFM objective to redirect resources through efficiency savings to investment in high quality front line services, improving the stock and delivering new developments fails to achieve planned results 1.4 Fraudulent activity results in significant financial (and reputational) loss to Connect 1.5 Pension liabilities continue to escalate outside Connect s control, to a level that is no longer sustainable 1.6 Impact of Right to Buy results in net loss of assets and revenue to the extent that Connect can no longer continue to provide a quality affordable service 2. Service delivery & customer satisfaction (specifically Digitisation) 2.1 Digitisation strategy fails to deliver the service choice and efficiencies that enable resources to be focussed on those customers in greatest need 2.2 Loss of contract income, particularly in Supported Housing, reducing capacity to provide tenancy support, and impacting on delivery of key Business Plan objectives 3. Regulation, legislation, governance and reputation 3.1 Breaching regulatory requirements, causing increased risk of Regulatory scrutiny 3.2 Governance and scrutiny frameworks are insufficiently robust to support business operations effectively 3.3 Impact of H&S failure (safeguarding / Lone working / Gas / Fire / Electric / Asbestos / Legionella) in terms of personal injury, regulatory status, reputational damage, cost and diversion from core business 3.4 Impact of data protection breach in terms regulatory status, reputational damage, cost and diversion from core business 4. Asset management (specifically the Housing Market) 4.1 Inadequate internal and external resources are available with sufficient capacity and at acceptable cost to maintain the Association s stock to an acceptable level that will sustain demand in line with Connect s strategic objectives. 4.2 Failing to identify and deal with stock in light of changes in the Housing Market that represents significant challenges in the future operating environment, resulting in a diversion of resources. 5. Business management (specifically the economy) 5.1 Strategic planning inadequate to prepare Connect effectively for the economic challenges (including BREXIT) ahead 5.2 Leadership at all levels within the organisation fails to deliver the culture required to survive and thrive 5.3 Organisation behaviours fail to reflect Connect s values, particularly in relation to promoting and delivering equality and inclusion 5.4 Key partnerships and stakeholder relationships managed ineffectively causing loss of trust and future business opportunities 5.5 Crisis management fails to secure effective business continu 26

30 Risk Management Strategy 1. Purpose of Strategy The purpose of this document is to outline an overall approach to risk management that addresses the risks faced by Connect Housing in the achievement of its stated aims, and which will facilitate the effective recognition and management of such risks. 2. Definition of Risk Risk is defined as something happening that may have an impact on the achievement of our objectives. It includes risk as an opportunity as well as a threat. 3. The Association s Risk Appetite The Association s Risk Management Strategy is not one of risk avoidance, rather it aims to identify and manage an acceptable level of risk. The Board of Management will review and approve annually the level of risk it is willing to retain in each strategic area i.e. the approved Risk Appetite. Where the level of risk identified is considered to be outside the approved Risk Appetite, then the Board will consider as a matter of urgency what further steps are required to mitigate this level of risk. 4. How Risks Are Identified Risks are identified by reference to the Association s stated objectives, and will normally use the current or proposed Business Plan as a basis for this exercise. On an annual basis the Association s Board of Management and Audit & Risk Management Committee will consider and approve the Key Strategic Risks that threaten or impact on the Association s vision objectives. 5. Risk Mapping and Identification of Risk The Association will undertake an annual Risk Mapping exercise based on the current or future Business Plan and any strategic risks identified at Team/Directorate level. Reference will also be made to the HCA s Sector Risk Profile annual update. All staff have a responsibility to assist in the identification and management of risk. Identified Key Strategic Risks will be allocated to a member of the Management Team (or collectively if appropriate) and will also be used to inform the Consolidated (and Directorate) Risk Map. Risks determined as non-directorate specific will be allocated to the Corporate Risk Map and managed by the Chief Executive. 6. Prioritising Risk Risks will be prioritised in terms of likelihood of occurrence and expected impact on the Association. Key Strategic Risks will be scored with regards frequency/impact/colour coding and will be subject to a moderation review by Management Team prior to review by the Audit & Risk Management Committee and the Board of Management. See below for guidance on scoring probability, impact and suggested action. 27

31 7. Identification of Controls Controls to manage identified risks will be agreed by relevant managers and included in the Consolidated Risk Map. 8. Monitoring Risk Risk management should be embedded within the daily operation of the Association, and will be monitored on a regular basis (monthly) at Management Team level, in addition to Quarterly Progress updates, and at least quarterly at Directorate and/or team/review meetings. A Risk Register will record all material risks/incidents that have crystallised, including any action taken and lessons learned. 9. Reporting Requirements Executive summaries should be produced for all Directorate/Corporate Risk Maps which summarise significant changes to the risk profile since the previous reports, including new risks, archived risks and movements in risk assessments, to aid understanding of the changes in risk profile. The final Consolidated Risk Map will be approved annually by the Audit Committee, and monitored/ updated by Management Team as required in the intervening period. Material changes to the Consolidated Risk Map will be brought to the attention of the Audit & Risk Management Committee and/or Board of Management as deemed necessary. The Audit & Risk Management Committee will confirm to the Board of Management their annual review of the Consolidated Risk Map and Key Strategic Risks, detailing any risks, which are ranked high likelihood and/or impact. The Board of Management will review the annual Risk Management report from the Audit & Risk Management Committee and approve the level of risk that it is willing to retain in each strategic area. 28

32 RISK MAP DEFINITIONS / (Scores) LIKELIHOOD High (3) Medium (2) Low (1) Everyday event/almost certain to happen Faily common event/even chance of happening Not a common event/slight chance of happening IMPACT High (3) Medium (2) Low (1) Oh no! Would threaten business objectives/impact on annual surplus 100k+ Oh dear Could threaten business objectives/impact on annual surplus 25k - 100k Oh well Would not threaten business objective/impact on annual surprlus less than 25k Scoring Key Probability Impact low probability/ low impact Acceptable level of risk annual review of controls medium probability/ low impact Acceptable level of risk annual review of controls high probability/ low impact Acceptable level of risk quarterly review of controls medium probability/ medium impact Unacceptable level of risk monthly monitoring of controls high probability/ medium impact Unacceptable level of risk constant monitoring, further control measures needed high probability/ high impact Unacceptable level of risk immediate action required 29

33 Contact us If you would like more information about any aspect of the Business Plan, please contact any of the Management Team and we will be happy to discuss this with you. Helen Lennon Chief Executive Martyn Broadest Director of Home Sean Flynn Director of Finance & Resources Christine Fox Director of Neighbourly Places 30

34 Getting in touch OFFICES 205 Roundhay Road Leeds LS8 4HS 21 Bond Street Dewsbury WF13 1AX Monday, Tuesday, Thursday: 9am 5.30pm Wednesday: 10.30am 5.30pm Friday: 9am 5pm Our passion is for a fairer society, where people s homes, health and happiness matter. Connect Housing Association Limited is a charitable housing organisation registered under the Co-operative and Community Benefit Societies Act 2014 (No. IP17445R) and with the Housing and Communities Agency (No. L2285). Registered Office: 205 Roundhay Road, Leeds, LS8 4HS.