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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.

As most academics will stress, strategy is not static but a constantly evolving thought process; strategic thinking (however intuitive) underpins everything we do as humans and organisations. This brief note aims to reduce the mystique surrounding strategic values and objectives and an approach to cascading them down an organisation, in the following short paragraphs: Strategic values guide investment and determine intangible asset value At some stage, an organisation must be explicit about its strategic objectives Only a small number of strategic objectives prevail at any one time Corporate strategic value objectives are not enough for different business stream managers Strategic values pervade an organisation, rather than being chosen Ensuring values cascade down an organisation is difficult and oft-ignored Strategic values guide investment and determine intangible asset value Investments and hence the assets (including Intellectual Property) that an organisation acquires are driven by its implicit or explicit strategic objectives at the time of the investment opportunity. However, the strategic value of those assets at any future time is driven by its then-current strategic values. For instance: A is single and buys a sports car using strategic values he held at that time One year later A is still single, and the car holds the same strategic value for him Two years later A is married with a small child – consequently, the strategic value of his sports car has fallen Similarly, a property asset’s strategic value is determined by how it matches the current strategic objectives/values of the organisation, rather than being determined from the objectives/values at the time of its purchase, or being purely intrinsic to the asset itself. In an asset centred business, constant tracking of the current values of its assets, both strategic and financial, is critical to success. At some stage, an organisation must be explicit about its strategic objectives Any organisation should be able to recognise the changing strategic objectives or values that it abides by from time to time. These should attempt to shape its business portfolio by constantly optimising investments and efforts towards them. Unfortunately, or fortunately, investments may derive from constantly assessed mission and strategic objectives, or they may be opportunistic and intuitively meet sublimated strategic logic. Either can build successful organisations, but the former is essential at some stage of an organisation’s maturity, to stabilise its future and reduce investment risk. Only a small number of strategic objectives prevail at any one time Corporate goals in social housing aim to grow services and business streams by optimising them in line with social objectives, regulatory objectives, business objectives and financial objectives. Ignoring financial objectives - where there are well-established tangible measures - others (social, regulatory, business) can be analysed to determine a small number of ranked corporate objectives or values at any given time – growth, decline, changing environments and management approach, among other things, determine how rapidly these objectives alter. In day to day operations, strategic drift is difficult to spot or monitor. During mergers and acquisitions, strategic fit comes to the forefront but even then, perceived strategic values carry more weight than the actual values being deployed in day to day operations at various levels. Corporate strategic value objectives are not enough for different business stream managers Each business stream inherits some of these umbrella corporate objectives but not all of them – some are imposed via financial budgets, some by senior management activity. The business stream itself is not concerned with optimising the organisation’s balanced business portfolio but with optimising its own investments to maximise the mission its business stream inherits, within its allocated budget. Strategic values pervade an organisation, rather than being chosen It is important that business stream investments be influenced appropriately by both strategic objectives (or values) and by financial resources; with organisations, in the case of strategic values, giving varied weights between social, regulatory and business objectives to business stream managers to ensure that corporate objectives and more detailed business stream goals cascade down the organisation. Consequently, whilst there is often common ground when analysing the strategic values that influence business stream investment between different organisations, there are usually differences in both the values and in their ranking. Ensuring values cascade down an organisation is difficult and oft-ignored The purpose of an organisation’s mission statement, strategic objectives and corporate management missives is to ensure that business stream managers (and operatives) manage their financial and effort investment to optimise the overall contribution of their business stream (or operation) in line with the organisation’s own optimisation of the corporate business portfolio. It is of some benefit to ensure that the values are occasionally made explicit and ranked to ensure they are interpreted correctly at all levels. However, this is rarely attempted or achieved – we should question why, and it is the abiding purpose of our asset value methodology.

Budgets versus zero-based forecasts Unfortunately, whilst budgets can control cashflows they are a poor basis for optimising stock value accretion. Any Finance Director setting asset management budgets within annual business plans or 5/10-year plans requires input from asset managers whose bias will be to ensure adequate departmental funding. So long as there is a knowledge gap between Finance and Asset Managers, investment acuity will always suffer from the barriers and distortions of collective bargaining for funding and bias born of learned behaviour. More granular modelling A constantly updated central forecasting model that is bought into by both Finance and Asset managers can fill this knowledge gap, particularly when the model projects costs and revenues at asset level, with sound agreed bases and assumptions. If the model is impartially built (to reflect historical costs and sound servicing and planned maintenance regimes based upon existing condition standards and current committed costs), it can be reconciled back to existing budgets and its long-term projections provide a better basis asset comparisons, and even investment option appraisals, because it reflects costs and revenues that well maintained stock directly create, without deferring costs for smoothing purposes and temporarily or even permanently impairing condition. Modern data mining tools Although massive administrative effort would be required to establish day to day cost and revenue allocation in an accounting system down to asset level with any accuracy, modern BI tools can mine electronic data and spreadsheet sources outside of the finance system to build sensible year zero and onward projections of net revenues at asset level. These can be reconciled to recent year TBs as a gross error check and calibration. Sources such as current rent roll, asset management planned & cyclical maintenance projections, plus recent years’ bad debts, voids and day to day maintenance records, can provide asset level costs and revenue bases that can be extrapolated with logical forecasting algorithms. Asset registers and various analysis categories from housing or asset management systems can be imported for reporting on the resulting projections and user defined inflation and discount factors applied. Adding social factors and other financial values into investment appraisals Within AspreyBI’s system, a sound methodology for addressing the impact of social and strategic factors of import on investments or divestments, and even identifying opportunity costs of competing investments in social and strategic terms as well as financial terms, completes the toolkit for an organisation wishing to properly manage the accretion of financial and strategic value in its underlying assets. Crucially, such a system bridges the gap between effective financial management and effective asset management and builds consensus across an organisation over asset values and investment prioritisation, not only within business streams but also at corporate portfolio level.

Continuing support for Asprey clients during lockdown and beyond Asprey is in the fortunate position of having an ongoing project workload and sales pipeline that does not require us to take advantage of the government's furlough scheme, and we do not require loan assistance.  During this coming recession, many businesses large and small will be less fortunate but, on this occasion, lives, as well as jobs and money, will be lost in its wake – a sobering thought.  Business activity regenerates, but history and experience tell us that business models after wars and recessions must change; not least, to serve customers with permanently or temporarily depleted workforces and finances, and different expectations. Asprey’s workload and a raft of new product releases promise a very busy 2020 but productivity increases due largely to travel reduction and a remote client service model will enable us to achieve more than we anticipated before lockdown.    Our experience with working across our three offices in recent years appears to have allowed our people to adapt quickly to remote working.  At Asprey we pride ourselves on ready access to our advice and people for customers, but site visits and travelling have limited this in the past.  Client video/audio conferences, staff meetings, product demonstrations, account management meetings, training and technical support have all been more effective than site visits.  Even within three weeks, remote client service has proved to be so successful that we are looking to continue it as a preferred business model going forward, from our Kings Lynn and Birmingham offices. Obviously, there are going to be occasions where on-site meetings are required but we would seek to make them the exception, because of benefits to our clients such as the following: More timeslots and improved availability of our people More concise and focussed client meetings and outcomes Service improved from fresh preparation and contemporaneous recording of conferences More alert attendees at meetings Arranging client attendees for a meeting is simpler, and meetings can be repeated readily for unavoidable absentees Instant access to other Asprey specialists during meetings Shorter, more frequent, less expensive, remote training courses for clients Materials can be passed to meeting attendees instantly Cost saving on travel expenses Reduced lifecycle cost of system ownership Even though we are still in new territory, we believe this list of benefits will continue to grow for our customers in the future and are confident in continuing with this model.  in addition to the benefits to customers mentioned above, we are especially pleased that remote working is helping us to reduce our own carbon footprint from travelling fewer miles. We are always looking at ways to reduce our environmental impact and, as travel is our main source of emissions, we are happy to see it reduced, alongside the following further benefits: Less physical and mental travel stresses improve people’s performance; Travelling time becomes productive time Meeting preparation, recording and topic resolution is more accurate without travel delays; Follow-up questions can be addressed more rapidly Improved quality of life for employees Increased and more immediate availability of staff for collaborative work and consolidation of corporate knowledge Eliminated the time cost of travel (that is always borne by Asprey or its staff, quite apart from expenses recharged) As a Microsoft house, we utilise Office and MS Teams, but we also use Zoom for demonstration and training purposes, where we apply additional security measures in line with manufacturer recommendations to ensure that we prevent unauthorised access to digital meetings.  We have also used Cisco, Skype and Google conferencing media over this short period. In view of the likely economic recession, unemployment, and their impact on our customers and their own customers long after lockdown ends, it is essential that we are able to improve our service, and we believe this new business model allows us to do so.  As a company, we believe that we can make our people and their knowledge more accessible by continuing with remote working as our business model.   The exciting product initiatives during the remainder of this year include a game-changing analytics portal and a Cloud version of our asset management systems “Asprey Assets” (which will be announced soon) all lend themselves to remote implementation, support and maintenance, as our Cloud based systems and hosting capabilities evolve. #workingfromhome #WFH #assetmanagement #remoteworking

None of us know the extent of the disruption that will be caused to travel and commerce as a result of virus containment measures.  The only certainty is that tenant demands and responsibility towards them will not decrease. As a partnering organisation to most of our clients, with a business and IT support role, we undertake and enjoy (for relationship-building purposes) a lot of on-site and face to face contact.  If this is curtailed (perhaps even if not), unlike many of our competitors, we will focus upon sustaining and improving smooth and rapid access to our people and our services for our customers. Asprey Remote Working For some time now, with three offices, we have successfully used video and audio interactive conferencing across Asprey.  Microsoft Teams is our standard medium, but we use other media, both for specific purposes and market awareness. Asprey Remote Support The majority of our clients have already have been involved in audio or video conference and remote support initiatives with our teams, as we have corporate goals to reduce our carbon footprint, improve personnel care and efficiency, to deliver services more rapidly, economically and effectively, by reducing travelling time and wasted effort. Not all our clients use Microsoft Teams themselves and there are some teething problems that can surface with Teams and our other comms products due to firewall and other client network protocols, but these are readily surmountable. Ensuring and Improving Ongoing Service Levels At Asprey we believe that it is possible to maintain and improve our levels of service to our customers using interactive audio and video conferencing plus remote diagnostic, training and support tools.  Savings in travelling time and effort makes our employees more productive and increases the hours that they are available to customers, as well as reducing carbon footprint and coronavirus restrictions. Our products have remote support capability, and will all have web-enabled versions by Q4 of this year. Immediate actions We aim to encourage all clients to adopt remote interaction as an alternative to on-site meetings.  We see real benefits for customers in streamlining their links to Asprey in this manner and, of course, it is likely to be forced upon us should the likely coronavirus restrictions materialise. #remoteworking #socialhousing #covid19 #assetmanagement

Home working has always been possible in many sectors.  It does not favour traditional sales activities but it brings many environmental and personal benefits.  Covid appears to have transformed attitudes towards home working. Office landlords and office focussed service businesses may suffer but the planet and many people’s quality of life can reap massive benefits, particularly once normal social contact is resumed. Home working is here to stay within many sectors, even though it may be impossible in others. Collectively, there needs to be recalibration of the overall economy where, rather like the demise of heavy industries over the last thirty years, that wiped out the economies of many towns, cities and even regions, the businesses no longer required to serve commuters and office concentrations will reduce substantially.  Patently this will be less damaging in human terms but more resistance will be seen from powerful lobby groups and their political allies.  Hence, the current revolution in home working may be diluted somewhat. With home working, there will need to be training and induction plans for those leaving education and even work accommodation for young people or those in otherwise unsuitable home circumstances.  Both of these are new challenges for employers. Apart from the massive economic, environmental and social benefits of eliminating non-productive travel from many sectors, remote and home working is unleashing job opportunities for those with mobility impairment, unleashing a new pool of talent into our economy and enhancing lifestyles immeasurably. Hopefully something good can come from this pandemic to weigh against its terrible toll.

Following inclusion on both Eastern Procurement and Northern Housing Consortium frameworks, Asprey’s innovative solutions are also available via GCloud12. The GCloud programme is a procurement framework designed to promote and encourage the adoption of cloud services in government bodies across the UK. As an approved supplier through the UK’s Digital Marketplace, we are able to provide cost-effective and compliant procurement routes for public sector customers for quick and efficient access to a wide range of Asprey Solutions.

We are delighted to announce the launch of our new and improved AMI solution, offering simple and effective, yet affordable business intelligence functions across our entire suite of products. As a core element of our continued innovation and development programme, AMI is now the gateway to all Asprey products. Offering simple to use visualisations and data analytics tools, with a wide range of ready to use Dashboards, you can provide immediate BI tools across your whole organisation. Transform operations: Tomorrow's information from today's systems Plug & play Business Intelligence across your organisation Immediate information from consolidated systems and data Visible performance analytics for proactive intervention Expedites decision-making and breaks down silos Features: Modern Central Switchboard - AMI offers a brand new central switchboard for user access to all of the operational modules your organisation uses from our suite.  This area also offers links to more information on our solutions as well as Asprey news and events. User Manager - Our new and improved user manager function is now integral to AMI and simplifies the set up and management of user security access to any of the Asprey modules. Business Intelligence - AMI provides a wealth of data analytics, business intelligence and reporting features.

Many products claim to assist with appraisal of acquisitions and new development opportunities. Many products consider project specific financial measures but without a central investment model, how can you assess the incremental value of such investments? Let alone the incremental NPV, IRR, Payback, Breakeven (for certain portfolios), Opportunity cost , Management efficiencies or Strategic impact? In the light of HCA pronouncements, new regulatory framework and increasing financial pressures on the sector, it is essential that any investment opportunity is both fully understood and takes account of alternative funds usage - this is where AspreyBI can help. Our central investment model can be used to assess the incremental value of proposed investments, be they in existing stock, acquisitions or new build, secure in the knowledge that opportunity cost is considered in each investment decision. Our model calculates and makes sense of individual asset net earnings and other values within stock portfolios. The net earnings value of each asset is calculated from a 30 year projection and rationalised against calculated strategic values and other available financial values - Asset additions of whatever type are evaluated in a similar standard manner to allow their impact to be properly rationalised. The cost and revenues projected for new investments are rationalised within the central model to identify their overall impact on the portfolio in financial and strategic terms. Sound investment demands that alternative uses of funds are properly considered. Without such a central investment model, ad-hoc investment appraisals will be increasingly difficult to justify retrospectively and will suggest poor custodianship.

A number of disparities exist in the sector between component accounting and asset management system understanding of components, largely because: Many arbitrary costs and install dates (largely unrelated to physical asset management records) were assumed when commissioning component accounting. Standard lives used for component accounting are not necessarily the lives used for asset management Historical component accounting costs are generally much lower than replacement component costs. The above factors combine to create unexpected residual depreciation costs when components are replaced other than at the end of their accounting lives. Obviously, it would be impractical to replace components at the end of their accounting lives because that is not how they wear out. Equally, it would be impractical to alter accounting lives to match them to unreliable component wearing out dates, not least because components age differently in different environments and may be replaced for different reasons. Need help making early provision for these fluctuations? Accepting continuing permanent differences, AspreyBI tools make it possible to predict otherwise unexpected charges on income & expenditure from apparent early replacement of components. How? By mining data from both component accounting and asset management related systems and reconciling them within our predictive model.

Thoughts on Asset Values Ian Ellis, Managing Consultant and Chairman Over 22 years with EY, advising on acquisitions, flotations, privatisations, business and share valuations and business investment generally, I experienced many reasons for investment; some of which were objective financial or strategic targets and some which were idiosyncratic whims of powerful proponents. My team’s role was always to identify the financial and strategic benefits of an investment decision and present them rationally. Every decision carries risk and involves a hypothesis of future events and circumstances, but lack of certainty does not excuse lack of sound appraisal. In the last 16 years, we have seen interesting ideas around investment and related asset valuation in our own social housing sector, with some debatable appraisal and value methodologies still apparent. My concern is with the rationalisation of financial, social and strategic values within investment appraisal and asset valuation. Every investment has desirable attributes that cannot be monetised; as well as a monetary cost and prospective monetary returns. It follows that any asset (resulting from past investments) has monetary and non-monetary values. Humans make sense of this in their day to day investment decisions – in a car purchase, for example - by ranking the value of the non-monetary attributes they desire (MPG, colour, speed, fashion, comfort, etc) and buying the vehicle that they can best afford from their attribute list. Compromises can be made around desirable attributes, but affordability is an absolute that should be adhered to (whims notwithstanding). Perpetually ignoring the absolute constraints of affordability in one’s day to day financial decision-making is the road to bankruptcy. A complex attribute v financial scoring system may, however, be a useful explanation for overspend to one’s spouse. Social Housing Financial and Strategic Drivers The sector’s history of combining monetary and non-monetary values, or scores, may carry over from tendering activity, where a tender is often afforded a score out of 100 for its price, to be combined with scores for other desirable attributes of the tender submission. It can be argued that this flies in the face of the argument that, to be successful, all organisations should buy the best they can afford. In a court of law, combined scoring of this nature would be a target for a prosecution barrister challenging the efficacy of a failed procurement. By scoring and weighting all non-monetary requirements, then ranking the scores before comparing against prices –‘to buy the best they can afford’ - discretion could be retained, and subjectivity would be reduced in the overall investment decision. The process of buying the best one can afford carries over to values. If assets are retained, disposed of or replaced without considering the absolute nature of one’s financial position and their impact on it, then sensible investment decisions that have gone into building that financial position can be undermined. In commercial corporate finance, the problem of reconciling financial and strategic values is overcome by considering them as two sets of variables, that interact to inform a sound decision; with some strategic imperatives driving an investment, others merely influencing it. If they do neither, then why are they considered at all? If a strategic or social objective can be monetised, it can be included in financial projections. Otherwise, it may be subjected to some form of ‘desirability’ ranking. MoSCoW rules (Must have, Should have, Could have, Would have) are useful starters. If a single non-monetary attribute score is required, then scores can be applied to each desired strategic attribute for an asset score. In identifying values driving or influencing an asset’s value, there are bounds to human rationality. It is claimed that an average human can hold 5-9 variables in working memory at any one time. If, say, 20 separate values are included in arriving at the non-monetary value of an asset, it becomes difficult for the average human to understand the relevance of a resultant single value score for that asset, or to understand the key drivers of that overall value - preventing consensus-building. It also stretches the concept that the asset’s value should only be based upon values that drive or influence financial investment decisions surrounding the asset. Herbert A Simon suggested that economic agents often use heuristics (rules of thumb) to make decisions, rather than a strict rigid rule of optimization, due to their inability to process and compute the expected utility of every alternative action. This remains true, hence the need to limit the degree of heuristics (ie artificial scoring of an otherwise sound value measure) applied to decisions. As financial constraints become tighter, affordability becomes a more important element of investments and maintaining or improving the financial value of an asset portfolio becomes imperative. As our sector moves from a subsidized regime into one that is fully commercial, eking out subsidies whilst complying with regulatory demands complicates financial decision-making but increases its importance. Non-monetary factors cannot be ignored in investments or portfolio improvement and not all strategic drivers for investment can be monetized, just as not all factors that contribute towards an organization’s goals can be monetized. However, the assessment of financial aspects of investments and portfolios can use rigorous and objective bases, demonstrating sound custodianship. Once evaluated, financial conclusions can be led or challenged by non-monetary considerations. The sector should reconsider the concept of a single value for an asset that combines financial scores with non-monetary attribute scores. Generally, such models combine NPV of net earnings with social values but in certain circumstances, asset market value may be more important than both and even net book values can sway, because of potential impact on published accounts or charges. Hence, even financial values cannot readily be combined -but they can be compared. Armed with a non-monetary value for an asset and its various financial values (NPV of net earnings, OMV-VP, EUV-SH, NBV, etc.), assets and groups of assets can be compared, and valid investment decisions made using tried and tested commercial appraisal techniques. For instance, the ubiquitous two or three-dimensional BCG Matrix or “Boston Box” can be adapted to: compare strategic values with earnings to identify best and worst performers and hence imperatives for improvement, disposal, etc.; compare earnings values with disposal values for poor strategic performers; categorize assets to identify investment-worthiness; and generally, make sense of more than one competing value. Analytics software applied to monetary and non-monetary values can suggest improvement strategies. Predictive analytics from finance and other systems can identify asset value improvement possibilities that traditional investment appraisals could not. A wealth of information, often outside of finance systems (that often lack granularity), can now be very easily harvested with modern business intelligence software, to aid organizations wishing to understand asset value drivers to improve their portfolios and investment decisions. Until valuation gimmicks and customary forecasting and valuation practices are challenged, the social housing sector will not equip itself for the very challenging financial future in front of it.