do not worry about chapter 8, its just ERM questions. Just answer the question like business management personnel would answer it don't worry about textbook.

This assignment involves the four housing associations reviewed in Chapter 8 Housing Association Case Study of ERM in a Changing Marketplace (Pages 119-142).

The association data in chapter 8 was created in 2013, from real cases. It may help to investigate the associations selected online for updated information.

You can find these same associations using an internet search engine (Google, Microsoft Edge, Bing, etc) and search each for additional information.

Select two housing associations covered in Chapter 8. For each of the two housing associations selected please answer the following questions.

1. In your assessment, what are the biggest risks facing each association Note that for profit activities such as building houses for sale can also be subject to risk.
2. Considering the list of products in the Background section (page 119-120), how do you rate their potential risks and returns for each association? The rating should consider how they stack up against the associations charitable aims, viability constraints, and associations operating environment.
3. In the light of the associations financial position and its charitable aims, how high should be the risk appetite of the association? Is one of the generic strategies listed in the Sector Issues section (pages 120-122) appropriate for the association, and if not, then what is the associations strategy?

Details

• Apply critical thinking.
• Include a minimum of one quality SPC online library source to support your ideas as well as your textbook.
• Do not copy the questions. Use short headings to identify the topic of the question.
• Formal writing and all APA formats are required. Answer the questions in no more than 3 pages not including title page, and reference page.
• Submit the document to the dropbox.

Chapter 8 textbook

The regulators view of the financial risks facing the sector is that: The model of social housing that has existed for approximately 25 years is changing. Boards of providers more than ever need to be aware of the risks and choices they face in order to meet their objectives. They also need to understand the interaction between the various risks and their overall portfolio impact. An approach to risk that considers issues in isolation is unlikely to be effective in the current operating environment. . . . The risks can be summarized as: Asset-related risks, including risks associated with: Development Diversification into other activities Exposure to the housing market Maintaining existing stock Liability-related risks, including risks associated with: Existing debt (gearing, loan covenant, and repricing issues) Mark-to-market exposure IFRS New forms of debt Income-related risks, including risks associated with: Affordable rent Welfare reform Supporting people Cost-related risks, including risks associated with: Pension issues Differential inflation rates The relative importance of each of these risks and their interaction with each other will depend on the precise business models and stock holding patterns of individual providers. SOME USEFUL METHODOLOGY The following are some notes on two risk techniques that have been found to be useful in the sector. Risk Appetite Determination The sector has had a number of cases where associations have taken on rather more risk than their risk capacity allowed. As part of the process of establishing the context for risk management in the sector, answering the following questions has been found to be helpful: Q1: How much risk do we think we are taking (risk perception)? Q2: How much risk are we actually taking (risk exposure)? What evidence have we got that the assessment is correct? If there are gaps, biases, or incorrect assessments in the risk map, our perception will be incorrect. Q3: How much risk do we usually like to take (risk propensity/culture)? If this is less than Q1, then we will feel uncomfortable. 124 Implementing Enterprise Risk Management Exhibit 8.1 Sample Probability Scale Probability Score Description Range 5 Very high More than 90% 4 High 31% to 90% 3 Medium 11% to 30% 2 Low 3% to 10% 1 Very low Less than 3% Q4: How much risk could we safely take (risk capacity)? This should be bigger than Q1, Q2, and Q3. It mainly depends on financial strength and covenants, but also a view of response speeds should things start to go wrong. Q5: How much risk do we think we should be taking (risk attitude)? We may feel we should be doing things but we dont currently have the capacity to do them. Q6: How much risk do we actually want to take (risk appetite)? This is perhaps a compromise! Q7: How do we set controls and limits across products and parts of the business, so that we can be confident that our total risk appetite is not exceeded (risk limits)? Risk Assessment Methodology There are technical difficulties in assessing the risks in housing associations, largely concerned with their mix of financial and social objectives. A successful approach to risk assessment for the sector has been developed, as described in Chapter 13 of Fraser and Simkins (2010) and summarized in Exhibits 8.1 and 8.2. It is difficult to assess a risk that has several types of impact, but the task is considerably simplified if you use a clear set of criteria3 such as those given in Exhibit 8.2. When using the scale in Exhibit 8.2 to assess a risk, one should decide which is the highest type of impact and make the assessment based on the assessed level of this type of impact. Thus if a risk has mainly staff impact, and many staff are significantly affected, then the risk would be recorded as impact score 4. Similarly, if another risk would result in major reputational damage, the score would be 4. However, if a risk has two or more types of impact at the same level, then the score would be one degree higher (i.e., a score of 5 in the example). FOUR ASSOCIATIONS The case considers the strategy choice, risk analysis, and risk appetite of four associations: 1. Large London association (London & Quadrant, 70,000 housing units) This is one of the largest associations with a very strong financial position. It is following an aggressive development policy with a mix of Exhibit 8.2 Sample Impact Scale Impact Score Description Strategic Financial % of Turnover Customers and Staff Reputational Legal/Regulatory 5 Very high Major impact on direction of business Above 10% Compulsory transfer of assets 4 High Major impact on important business objective 3.1% to 10% Significant impact on many customers or staff Major adverse publicity and external interest with damage to reputation and/or long-term impact Prosecution/regulatory supervision Significant resource to rectify 3 Medium Noticeable impact but business still on course 1.1% to 3% Noticeable impact Longer-term adverse publicity, locally contained Loss of regulatory approval 2 Low Minor importance 0.3% to 1% Minor or short-term problems Short-term local adverse publicity More serious breach but no long-term implications 1 Very low Less than 0.3% Impact both minor and short-term No adverse publicity Minor breach of legal/regulatory requirements 125 126 Implementing Enterprise Risk Management intermediate rent, market rent, and houses for sale in order to meet the expanding housing needs of London and the prosperous South East. It has invented a number of innovative financial instruments and renting regimes to make this high rate of expansion possible.