Stress-testing-presentation with detailed info

Stress-testing-presentation

1. Board Excellence Programme 16 February 2023 Introduction to stress testing Mick Warner

2. Tests the resilience of a business plan to breaking point Needs to be owned by the Board As we have seen, it is a regulatory requirement The scenarios may or may not turn out to be correct – they are a means to get to the breaking point Mitigating actions are key Overview

3. A definition Stress tests are used to evaluate whether existing financial (e.g. capital & liquidity) and operational (e.g. staff and IT systems) resources are sufficient to withstand an economic downturn or unexpected event

4. Identify the headroom in the business plan Map out and quantify the risks Identify mitigating actions A three-step process

5. Cash Loan covenants Key financial ratios/golden rules Security Identify the headroom in the business plan

6. Strategic risks Operational risks – existing stock and service delivery Operational risks – development Finance and treasury management Map out and quantify the risks

7. Strategic risks Macroeconomic and financial environment Delivering against expectations Diversification Access to labour and skills Counterparty risks

8. Operational risks – existing stock and service delivery 1 Existing stock quality Delivering services to tenants Health and safety Costs and inflation Rent setting

9. Operational risks – existing stock and service delivery 2 Rental income and arrears Data security Data integrity Supported housing

10. Operational risks – development Low-cost home ownership and market sales Construction process risks

11. Finance and treasury management Existing debt New debt Alternative funding models Pensions Fraud

12. Quantify the scale of recovery required Identify potential actions and quantify them Consider how soon mitigating actions can be implemented Quantify any additional costs as a result Assess the impact on services and customers Assess the impact on the organisation’s reputation Identify mitigating actions

13. Thoughts? Questions? Comments?