During the year English Rural has strengthened its approach to risk management so that it reflects the Business Strategy 2019-24 and risk environment.
This work has incorporated redrafting the Risk Management Framework. Included in this redrafting was the formation of a specific Audit & Risk Committee, a review of agreed risk appetite from the Board to guide risk culture and updated formatting of the Strategic Risk Register. The latter is now used dynamically by the senior executive and Board to understand and respond to risks.
The new Risk Management Framework accommodates structural changes to the Group, which now sees a more active role played by the development subsidiary ER Homes Ltd and the merger of NFVHA. English Rural’s approach to risk management reflects the ‘Three Lines of Defence' model.
This model works by dividing responsibilities and relationships to risk management across internal and external leads. Put simply, the first line of defence is the individual staff member and application of an agreed process; the second reporting, internal assurance, and control mechanisms, and the third external assurance from internal audit or comparable third-party. Each year a 30-year Financial Business Plan is prepared and then tested against a range of stress scenarios. These scenarios are determined by the Audit & Risk Committee, reflecting known risks and potential unknown risks. Agreed scenarios also reflect the Sector Risk Profile, which is prepared and published annually by the Regulator of Social Housing. The scenarios applied include a ‘perfect storm’ test designed to break the Financial Business Plan. Testing in this way enables the senior executive staff, Audit & Risk Committee and Board to see what change the materialisation of risks will effect. Importantly, it also enables agreement on what mitigation or corrective action English Rural can take in response given the timeframes shown. This year the testing process introduced an extra Covid-19 scenario.