G15 proposes ‘living wills’ for RPs to aid contingency-planning in event of ‘catastrophic failure’
The G15 group of London’s largest landlords has published a ‘living will’ procedure guide to aid registered providers (RPs) in the event of “catastrophic failure”.
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The aim of the publication is to help ensure a smooth continuation of operations for residents if the worst happened by ensuring “a managed and orderly route to rescue” and to reduce the chances of an RP getting into financial difficulty in the first place.
If an RP were to suffer a catastrophic shock and become unable to continue to provide services, there would be “major implications both for our residents and our creditors”, the G15 said.
In addition, the sector needs to manage the reputational risk of such events, it said.
The procedure has been developed by the G15 Finance Directors sub-group in co-ordination with the Regulator of Social Housing (RSH) and is intended to be a “guiding set of principles” for other RPs.
Historically, RPs that have needed rescuing have been saved by larger, well-run organisations with the resources and capacity to help.
The publication is intended to provide a ‘guiding set of principles’ to help RPs draft their own living will, but is “not intended to be prescriptive”, the G15 said.
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Peter Benz, executive director of finance at Network Homes, spoke about the procedure at the National Housing Federation’s Housing Finance Conference 2022 in Liverpool on Wednesday (16 March). Mr Benz said there are two parts to the procedure: understanding the structural organisation of the provider, and how a catastrophic failure would be managed.
He said: “We’ve gone at Network through that process. We compiled our own first version of the of the living will, and it’s essentially structured in two parts.
“[The first part is] the board’s intentions of why the organisation looks the way that it does. And we’ve certainly found going through this, [because] we’ve got a very simple structure, [we thought] these questions were going to be very easy to answer. [They] are actually more difficult to get to the ‘why’ than you would imagine.
“And then there’s a second part that tries to sort of address how you would manage [a] catastrophic failure should that present itself.
“It really goes with the assumption that if catastrophic failure were to occur at Network, I would not be the person answering those questions. You would expect a new senior management team to come in and have to look at this document.
“So it goes right to the heart of ensuring that services to residents could continue to be delivered, and showing that there’s sufficient liquidity and funding in the organisation that goes significantly beyond what’s in the asset and liabilities register by setting out in detail what funding arrangements you have in place.”
The G15 has said that the procedure is not intended to replace the assets and liabilities register but can augment it, offering greater clarity around an organisation’s structure.
Jonathan Walters, deputy chief executive at the Regulator of Social Housing, said: “We welcome this publication from the G15.
“As registered providers have got more complex, it is important that they manage their risks to ensure that their social housing is protected even if the organisation itself experiences difficulty.
“The work on living wills builds on our regulatory requirements around asset and liability records and this will be useful reading for many in the sector.”
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