Once a year, all Agency clients get what their boards tell us is our most important report, which is now enjoying a make-over. When you receive it, you’ll see a refreshed Risk Report that is tighter, more visual and easier to read. Although it has a different look, you will find there the same valuable insights as before.
The Risk Report tells your co-op very directly what its prospects are. (The report also comes with a letter suggesting how to reduce any risks.) Agency staff consider your co-op’s property condition and analyze the data you send us in your Annual Information Return. Using our information system, they produce a risk assessment of your co-op’s future. All this information is rolled up into one or two words that describe your co-op’s level of risk: Low, Moderate, Above Average or High.
A High risk rating can mean that a co‑op is in trouble as a business. It may be leaving units empty, not taking care of the property or failing to collect money due from its residents. These problems can lead to a co-op that can’t make its mortgage payments. In other cases, a co-op with a high risk rating was in trouble in the past, but received financial help and is now doing well. However, it is carrying a heavy load of debt.
A co-op at Low risk may be benefitting from many years of careful management. Some Low-risk co-ops have consistently taken good care of their buildings, increased their housing charges and put money aside for the future. Others were pleasingly designed and well-constructed in neighbourhoods that are seen as desirable. With so much in their favour, co-ops like these may earn a Low risk score, even if their management and governance have not always followed the best models.
A co-op’s risk trend could be Strengthening, Stable or Weakening and is based on a review of its overall operating performance over several years. While a risk rating is slow to change, a co-op can enjoy a sense of progress when it makes decisions that move its risk trend from Weakening to Strengthening.
The Risk Report also presents the three main contributors to your risk rating and explains what each one means. Liquidity is about how much money you have access to now, after all your years in operation. Net Income is about whether you earned enough in the past year to pay your bills and put money aside for the future. The third score is your co-op’s Physical Condition. It includes everything from curb appeal to the result of a visual inspection and any other information the Agency may have. Each score is colour coded and could range from Excellent (green) to Poor (red), with two levels in between.
Finally, your risk report sets out any other concerns that affect your risk assessment, such as too little insurance or an unfavourable opinion from your auditor about your financial statements.
We hope your next Risk Report will show a risk of Low, trending Stable, but even if it doesn’t, your relationship manager is there for you, and so are the Co-operative Housing Federation of Canada (CHF Canada) and the local federations. With help, even a struggling co-op can improve its risk level over time. Hundreds have done it.