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06 What is Viability? / continued6.6 Importance of Governance to ViabilityRegulatory experience in other markets and jurisdictionsshows that there is a strong link between viabilityand governance, and with that a recognition that thecompetence and experience of Governing Boards andExecutives play a crucial role in ensuring good financialmanagement. Therefore, it is expected that Board andmanagement teams have the necessary expertise andskills appropriate to the level of business and financialcomplexity of the AHB. Risk assessment and riskmanagement is critical to good governance and it isimportant that the board is fully aware of the risks facingthe AHB, can anticipate risks and manage them. This is notabout having a ‘tick-box’ approach, but rather generatingmeaningful risk reports which identify the key risks faced,explain which risks are critical and how to mitigate them.It is also important that the Board have approved thecontrol measures in place to mitigate risk.It is also necessary that there are clear segregationof duties and reporting lines between the Board andexecutive management. The Board should take ultimateresponsibility for the AHBs strategic direction, its policiesand performance; while the executive managementimplement these policies on a day-to-day basis on anoperational level. The quality of the relationship betweenthe Board and management have an important impact onthe good functioning of an AHB. An AHB does not haveto adapt a specific form of governance or management,rather how it is governed should reflect good practice.In recognition of the importance of risk management,this Financial Standard has a requirement for Tier 2 andTier 3 AHBs to have an Audit and Risk Committee. Thisreplaces the requirement for a Finance Committee asset out in the original Code. It is expected that therebe sufficient competence on the Board to reviewfinancial affairs of the AHB. An Audit and Risk Committeeperforms a different function to a Finance Committeeand this focus on risk fulfils a vitally important function.The Audit and Risk Committee is an oversightcommittee, which on behalf of the Board, works toensure the effectiveness of the AHB’s internal controlsand risk management systems. This includes havingan active and evolving Risk Register. The Audit andRisk Committee provides assurances to the Boardthat it is meeting its legal and regulatory responsibilitiesand that it can rely on the information presented.The Regulator sees the Audit and Risk Committeeas a critical component of Tier 2 & 3 AHBs effectivemanagement and control.18Housing Agency Regulation Office