RESOURCE MANAGEMENT
A DELICATE
BALANCING ACT…
HOW SHOULD A HOMEOWNERS
ASSOCIATION OPTIMALLY COMPOSE
THE BALANCE SHEET POSITION TO
MINIMISE LEVY INCREASES?
HOAS ARE ON THE HORNS OF A
DILEMMA: The HOA must demonstrate that they have risks in a much swifter manner, and to
the ability to carry out a ‘fire drill’ for the deal with impending crises at an early
recovery from severe shocks under a stress stage. There’s no doubt that eye-watering
HOW TO MAKE SURE THAT THEY
WILL BE ABLE TO LIVE UP TO ALL
THE NEW, STRICTER REGULATIONS
ON CAPITAL RESERVES WHILE
STILL MINIMISING THE LONG-
TERM LEVIES AND ANSWERING
THE CALL FROM INVESTORS FOR
NEW AMENITIES AND LIFESTYLE
UPGRADES. test and provide robust analysis of risks legislation and new capital reserve reporting
pertinent to potential barriers of survival. requirements have acted as a catalyst for
Over the years I have observed that the action. Post-property market crash trust
same pain points remain: needs to be rebuilt, so the residential
“Which balance sheet (BS) positions do we
have to expand, and which do we have
to reduce?”
“How much capital should we hold to be
prepared for unforeseen events?”
“Over a five-year period, how can we
optimally compose our balance sheet in
sector is facing more intensive and intrusive
• • How to demonstrate that unprecedented
remedial actions can be viable in extreme
conditions and can be implemented even
in a very short time frame.
• • How to transform the risk appetite
and management framework to include
a sufficient range of material and credible
options.
• • How to address a wider range of crisis
scenarios including both distinctive and
industry-wide stresses.
• • How to streamline the complexity of risk
monitoring, indicators and triggers to
enable targeted intervention even during
re-regulation as legislators seek to protect
those who have placed their trust in what
is in essence a consolidated wealth survival
model in a volatile economic environment.
The regulatory environment has shifted
toward dynamic and continuous monitoring
of risk. The HOA must demonstrate that
they have mitigation actions in the event
of the parameters being recalibrated under
stress, so they must have a dynamic view
of capital reserves and liquidity.
Regulators and property developers need
to avoid another boom-and-bust cycle
order to minimise the burden on residents rapid deterioration of industry conditions. in terms of their monthly cash flow while • • How to identify the effects on capital post-crash rules or laws are designed to
meeting all obligations of the HOA and also reserves but ensure the investments made stop it before it happens on a micro scale
providing for the unforeseen?” don’t solve short-term lifestyle goals in these business models we call HOAs.
and cause problems down the line with The interface between these initiatives
This is why HOA business models around the HOA cash flow or reserves for the is the need for a prudent and efficient
the world are under pressure, now more ongoing upkeep of those investments. management model of the balance sheet.
more quickly in order to deal with the HOAs are forced to prepare for their Post-residential crisis, the onus is on boards
volatility and speed of developments in the unthinkable demise, so they need to create to challenge and ensure that they have
global markets. agile structures that enable them to quantify robust answers to the following questions:
and are now trying to ensure that new
than ever, to evolve and be able to respond
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