There is always a reason to spend money but there is a fundamental truth that effective spend (bar necessities) should always be based upon prioritising investment options.
A social landlord (“RSL”) must not only allocate budget to business streams but also select which business stream investments best serve its financial, strategic and social objectives.
Corporate investment plans, based upon growth, compliance and preferred strategic direction, obviously dominate RSLs, with business streams charged with meeting determined targets and budgets. Planning cycles and opportunity scanning play a big part in these determinations, with related strategic decisions utilising a high level of business experience and subjectivity.
Once budgets are in the hands of business streams subjectivity can prevail, there can be objective identification and prioritisation of investment options.
Traditionally external surveyors have been employed to ascertain efficient means of deploying budgets, especially in new build and general needs business streams, with broad brush projections used to build the business cases. At least this passes the subjectivity burden to the wider experience of experts.
Successful RSLs are finding that a central corporate and business stream model (reconciled to finance department records) projecting asset level costs and revenues brings another dimension to identifying investment options. When such models include a means of identifying the strategic/social value of each asset and its peers, plus a tried and tested method of assessing its combined financial and strategic value to the organisation, a more subjective approach to identifying opportunity costs and evidencing sound investment options becomes possible. In addition, these models drive a shared understanding of asset values to breakdown silo mentality around asset value across an organisation, leading to better-coordinated efforts towards common goals.
Without such a model, individual preferences, historical precedent, collective bargaining for budgets and spend approvals often determine how business stream investments are made.
All organisations hold electronic data beyond their primary accounting systems and this data on rents, voids, repairs, planned maintenance, etc is often at asset level, whereas accounts data is rarely processed beyond business stream or scheme level. With modern data mining tools, it is relatively easy to harvest such data and transform high level forecasts into asset level projections, particularly when experienced asset management specialists build the algorithms and reconciliations.
Our AspireBI asset value and option appraisal software is widely used in the UK and provides an updateable financial model of an organisation’s business streams, with maintainable agreed strategic values for each asset, to provide Board level satisfaction and business level aid to ensuring investments and divestments optimise benefits to the organisation.
SYNOPSIS
There are many ways for a Registered Social Landlord to spend money and many calls on their funds. We all have knowledge and experience that frames our spending preferences borne of past projects with little forensic examination of success.
Bringing together the financial and strategic/social variables that should be involved in any RSL investment, as well as the range of options available within short, medium and long-term windows, demands more than a subjective view, however, experienced the viewer.
In today’s world of Big Data and tried and tested investment methodologies, a substantial degree of objectivity can now be brought to any investment option appraisal.
Asprey’s AspireBI asset value and option appraisal model allows any RSL to demonstrate an objective approach to investment options and to drive continuous improvement in investment decision making.
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