If the Community Scheme is to effectively manage the risks facing it, it has to create and entrench a risk management and good governance culture. Risk management is a process and not an event. An effective risk management program requires wide acceptance of the importance of a risk management culture by all stakeholders in the Community Scheme.
A risk and good governance culture has to start from the top i.e. with the Trustees or Directors and transcend every dimension, area and facet of the Community Scheme’s activities and operations. It must include all owners and residents, estate management, managing agents, developers, operators, employees and extend to the suppliers of services and contractors to the Community Scheme.
A risk culture requires the on-going identification and management of risks. This covers physical threats and includes engagement with contractors and suppliers. It must also incorporate financial control and expenditure management, it must form part of recruitment and the terms and conditions of employees, it must form part of job descriptions, be part of trustee/director/estate management/employee induction and training, encompass the conduct and house rules, form an integral part of the usage of IT systems and technology, requires a specific focus on safety and security and the minimising of risk in every operational process.
An inappropriate risk culture can result from certain individuals or office bearers acting negligently and ignoring their fiduciary responsibilities. As soon as inappropriate behaviour is condoned or accepted, or where parties conduct themselves in a way which is condoned or overlooked, notwithstanding laid down procedures, processes or rules, risks will manifest. These will inevitably result in damage to the Community Scheme’s reputation and financial losses.
A Community Scheme should have a risk policy as well as best risk practices and controls that cover all areas of its operations, but these also have to be practical, implementable, measurable and effective.
A good place to start is to use the CommPropRisk (CPR) risk tool to adopt an introspective approach to the Community Scheme and to do a self assessment of the risk profile, culture and risk attitude. This can be done for both Professionally Managed and Self-Managed properties. This involves asking objective questions about the Community Scheme itself, the Trustees/Directors/Office Bearers/Estate Management and Managing Agents, the level of Compliance, level of Financial Control/Governance and Oversight, the broader socio-economic environment, operational capabilities or limitations, general risk awareness and the behaviour of owners, tenants and employees. In this way you will be able to identify the risk culture and risk management prevailing in the Community Scheme.
A risk culture should be integrated into almost every aspect and area of the Community Scheme’s operational processes.
Risk appetite and the ability to absorb losses may vary from one Community Scheme to the next. As potential risk and losses are very hard to quantify, many Community Schemes will not have the capital base, reserves or funding to carry an unexpected loss and be able to continue as a going concern.
The CommPropRisk (CPR) tool provides a framework in which to focus the management of the risks facing Community Schemes by assessing risk in key areas namely: Property and Management Complexity, Financial Control, Levies/Debtors, Balance Sheet, Income Statement/ Expenditure, Governance and Oversight, Regulatory and Legal and Operational risk encompassing IT/Technology, People/HR, Strategic, Socio Economic, Crime/Fraud and Criminality, Reputation and Environmental and Physical Assets.
With technology forming an ever increasing part of operations, it is essential that you have robust Technology and IT controls and disciplines in the Community Scheme. Security and cyber-crime awareness need to form an integral part of the risk management focus and culture.
The risk assessment of each category and area will enable a managed and focused approach on the critical risks facing each Community Scheme i.e. their potential impact, prioritisation, mitigation, responsibility etc.
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