Become a Member
What is Trustee/Director or Office Bearer Risk?
Becoming a Trustee, Director or Office Bearer of a Body Corporate/Home Owners Association/Retirement Village/Shareblock brings with it very specific responsibilities and duties. In taking on such a role in a Body Corporate/Home Owners Association/Retirement Village or Shareblock it is important that you are fully acquainted with all aspects of the property, its financial position and the risks facing it.
Duties
It is the responsibility of Directors/Trustees/Office Bearers to ensure that the annual financial statements fairly present the state of affairs of the Body Corporate/Home Owners Association/Retirement Village/ Shareblock as at the end of the financial year and the results of its operations and cash flows for the period. The Directors/Trustees/Office bearers are required to acknowledge that they are ultimately responsible for the system of internal financial control and are required to place considerable importance on maintaining a strong control environment. It is also the Directors/Trustees/Office Bearers responsibilities to meet these requirements and set standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk.
These controls should be monitored throughout the Body Corporate/ Home Owners Association/ Retirement Village/Shareblock and all employees should be required to maintain the highest ethical standards in ensuring that business is conducted in a manner that in all reasonable circumstances is above reproach. These controls and responsibilities remain irrespective of whether the services of Managing Agents/Developers/Operators or Third Party service providers such as accountants, security companies and/or maintenance/operations managers are being used or availed of.
The focus of risk management is on identifying, assessing, managing and monitoring all known forms of risk across the Body Corporate/Home Owners Association/ Retirement Village/ Shareblock. While operating risk cannot be fully eliminated, the Body Corporate/Home Owners Association/Retirement Village/ Shareblock must endeavour to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The annual financial statements of a Body Corporate/Home Owners Association/Retirement Village/ Shareblock are normally prepared on the going concern basis (not as a gone concern).
For a Body Corporate/Home Owners Association/Retirement Village/Shareblock to be effectively managed, it has to create and entrench a culture of risk management and good governance.
A complex and property that is well run requires disciplines and controls that start at the entrance gate and which extend from the enforcement of house/conduct rules, solid and committed Trustees/Directors/ Office Bearers, good communication and interaction with owners/tenants/lessees, tight financial control and budgetary disciplines, professional supplier/service provider engagement, employment of quality people, having well run operational and maintenance programs, effective use of IT systems and technology and having a strong focus on the safety and security of residents.
Risk Culture
By developing a proactive risk culture, will enable Trustees/Directors/Office Bearers to develop a strategic approach to potential future risk. While a risk culture will not eliminate all the risks facing a Body Corporate/Home Owners Association/Retirement Village/Shareblock it will:
- Help Identify the bigger risks facing the Body Corporate/Home Owners Association/Retirement Village/Shareblock
- Enable an assessment of the potential impact of these risks
- Enable the management of these risks by proactive programs, so that the impact is greatly reduced.
- Ensure better timed and informed decision making
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With technology forming an ever increasing part of broader operations, it is essential to have robust IT controls and disciplines in place, and that IT security and cyber-crime need to form a core strategic focus and an integral part of your risk management focus and culture.
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Risk management is a process and not an event. An effective risk management program requires wide acceptance by Trustees/Directors/Office Bearers/Owners/Shareholders, tenants and the employees of Managing Agents/Developers/Operators around the importance of a risk management culture. A risk culture should be integrated into almost every aspect of the operations of the Body Corporate/Home Owners Association/Retirement Village/ Shareblock.
Risk appetite and the ability to absorb losses will vary from one Body Corporate/Home Owners Association/Retirement Village/ Shareblock to another. As potential risk and losses are very hard to quantify, many Body Corporate/Home Owners Association/Retirement Village/ Shareblocks will not have the capital base or funding to carry a loss and continue as a going concern and will need to mitigate as many risks as possible.