The strategic direction of the organisation is set by our Governing Council.
RICS' senior governance body, Governing Council, met in Hong Kong on 26-27 November for its annual oversight meeting, to look at risks and to seek assurance as well as to hold the Annual General Meeting.
This report covers the main business considered at the meeting and how Council is working to fulfil its brief to set a leading strategy for our profession, ensuring we remain relevant and trusted by our clients, customers, governments and the wider public.
The Chairman of Asia Pacific Board, David Hand, MRICS, and the Managing Director of Asia Pacific Region provided an overview of the region. There are 20,000 professional members based in Asia Pac. Transformation and transparency in the region varies – generally the market is becoming more open to international standards, and there are challenges and opportunities in equal measure. Large cities offer the greatest opportunity to extend our reach. The China / US 'trade war' is influencing global macro-economics, seeing a rebalancing in global power and is already having an impact on economies in the region like Hong Kong and Singapore.
This is a large, varied market where diversity and standards differ. Therefore, a different approach for each market within the wider umbrella of Asia Pac is required. The demand for RICS qualifications continues to grow - the most recent Macdonald & Co salary survey reported that the average RICS qualified professional in the region commands an 18% higher salary than those who do not have an RICS qualification. The expansion in RICS' School of the Built Environment (SBE) with over 400 graduates this year continues to show solid growth – bringing new skills to the Indian market which are aligned with RICS credentials.
A major part of the Council meeting focussed on oversight, with reports on performance being provided by the responsible governance bodies and executives: Regulatory Board, Management Board, Knowledge Board, Audit Committee, Remuneration Committee and Finance Committee.
A report on risk management was given by the Audit Committee Chair, Amit Shah FCA. Over the last five years, RICS has made significant progress in terms of how it manages and mitigates risk. Through robust risk management, RICS can manage risk and identify opportunities. Governing Council has overall responsibility for setting RICS' core decisions and assurance is a key part in managing risk. Eight strategic risks have been identified, and these are being actively managed. The identified risks are:
Management Board has undertaken a deep dive of three of the eight risks and created a risk subgroup to scenario plan. Management Board has recommended that Grant Thornton be appointed to manage non-audited activity, with KPMG overseeing audited activity. This prudent approach separates the two key activities and demonstrates good governance. The final accounts and appointment of Grant Thornton were presented at the AGM on 27 November.
Governing Council considered the risk landscape and concluded that the current 8 strategic risks remain relevant. Governing Council conducted a deep-dive on three of the strategic risks:
Considering what further actions could be taken to further reduce the risk, Governing Council has started to consider the level of risk (its appetite) the organisation should take in pursuit of its strategy.
A summary of activity of the Nominations Committee was provided by Desmond Hudson, the Chair. In addition, in line with its Terms of Reference, the Chair explored with Governing Council how the effectiveness of the Council should be measured alongside assessing the effectiveness of Council members. Nominations Committee has a concluded view that putting in place performance measurement for members of Governing Council would be premature at this stage. The Committee will work with Governing Council on a package of measures which will include how Council manages its effectiveness; upholds public interest; ensures that the profession is provided value; takes external views into consideration; and ensures that the interests of members are reflected. It is recognised that a significant amount of work will need to be undertaken to calibrate these against performance KPIs.
It was reported by Chair, Paul Marcuse FRICS, and CEO Sean Tompkins, that there had been a strong performance this year in delivering the key objectives of standards adoption, thought leadership and improved elevation in managing risk. Commercial performance results are on par with last year, but behind business plan projections. The relocation to Birmingham and the 150th anniversary have been notable successes, but it has been a challenge this year to balance 'profit for purpose' in a period of transition and change. Areas of focus for Management Board have been: managing society's trust and confidence in the profession and Brexit planning in uncertain times. 2019 is shaping up to be an unprecedented year of change in the life of the Institution as well as the outside world. RICS' strategy in the UK needs to be revisited and shaped to meet the needs of that market. The Americas market remains challenging in the short term, but still attractive in the long term – it is a strategically important market for RICS. Commercial income growth in greater China and Europe was strong supporting the 'profit for purpose' model, however the UK, Americas, ASEAN, Middle East and Oceania markets did not achieve their potential and in some cases are behind plan.
The rate of growth of the profession remains the same as last year – however, encouragingly the apprentice pipeline is looking healthy. Standards and regulatory space are becoming more competitive – digitisation and disruption are now common place and we need to be equipped to manage these external factors on the business. There is significant opportunities available through our Thought Leadership programme and we are well placed to provide richness of thought and innovation. Stakeholder sentiment remains positive and professional pride in the profession remains strong at 89%.
The key outputs of the committee are to set policies on how we review, recruit, retain and reward RICS employees. All results are linked to the incentive plan and to the employee engagement plan. Strong satisfaction amongst staff for the Birmingham move was recorded. The HR Risk register and the UK Gender report were undertaken this year and the team is working to address the outputs from these work streams.
The Finance Committee reported that the Birmingham office move was completed on time and on budget. The successful sale of Surveyor Court was achieved. Financial performance remains in line with our reserves policy. The defined benefit plan triennial valuation is likely to show a small deficit, this is being addressed through a de-risking strategy with the trustees with an ultimate goal of achieving buy out.
We accredit 715 programmes globally. Between 1 August 2013 and 31 July 2018 16,708 members qualified with an accredited degree. On 1 January 2019 we will launch a new model of accreditation, which will strengthen our relationships with universities, reinforce our education standards, and support new entrants into the profession for example through degree apprenticeships. In all markets, all elections to our professional qualifications, regardless of assessed route or otherwise, must reach a clear and consistent standard. There must be sufficient confidence in the integrity of our qualification standards if we are to be trusted to set and enforce standards. Assessments are being organised and conducted in accordance with expected standards and processes. Our qualification standards process operates to a system with a sound design of internal controls; where any issues are identified that will affect the consistency of our qualification standards, including assessments, these are identified promptly and are addressed.
Over the last year, RICS has been undertaking a series of activities to ensure that our standards have greater market relevance. Leaders Forums and Steering Groups have been run to cover some of the key issues facing the profession. Topics covered include: Automated Valuation Models; (AVMs), economic crime (Anti-Money Laundering, bribery, corruption), Professional conduct/ethics and globalisation and technological change in the construction industry. In each case insight gathered at Leaders Forums is collated and analysed to better shape the development of standards. The Standards Steering Group coordinating, leading and report directly to the Standards and Regulation Board. The steering group is currently working with technology consultants to develop a digital community during 2019 to drive greater agility in insight gathering from the market.
This will drive member and wider stakeholder engagement in RICS standards programme. Governing Council asked for assurance on how we are setting standards in relation to the data and digital space. Data standards were covered – as well as how we are 'translating' our standards into format(s) conducive for adoption into software. Examples were given of organisations within, and who are new to the sector, who have adopted RICS data standards.
Stephen Haddrill, Chair of the Regulatory Board reported that the Board has overseen the work programme to develop RICS' enforcement operations, particularly focusing on strategic areas of global enforcement and decision-making consistency. Despite having seen an increase in the number and complexity of investigations and an increase in the number of cases scheduled for disciplinary panel hearings, the operational team has delivered on its business plan objectives. It was noted that the majority of RICS regulatory activities continued to focus on the assurance of professional standards, such as through regulatory reviews and audits. The Board's oversight included commissioning a review of regulatory decisions taken across the team globally to provide assurance in relation to consistency. In addition, the Board focused on areas of regulatory risk commissioning a number of deep-dive risk assurance reviews. The Board has recognised the importance of providing effective assurance for the use of emerging technologies within the profession.
The Board reported that, through its range of oversight activities, it has a good level of confidence in the effectiveness and enhanced professionalism of RICS regulation.
Following the Council meeting the outgoing President, John Hughes FRICS, opened the AGM which was attended by over 65 members of the profession, some remotely via technology. AGM business was concluded, with the laying of the financial statements for 31 July 2017 and the reappointment of the professional auditors. CEO Sean Tompkins gave an overview of organisational performance and outgoing President John Hughes provided a summary of his activities during the year.
At the end of the AGM, Chris Brooke FRICS was inaugurated as President for 2018-2019, with a warm welcome from the profession.
We asked the profession to vote for a modernised, future-facing governance fit for a 21st century professional body. The Electoral Reform Services (ERS) have scrutinised and certified the vote, the results of which were announced at the AGM on 27 November. Voter turnout was 11% with 86% voting in favour.
The breakdown of the vote in each region is as follows:
|Central, South, Eastern Asia||574||94.58%||5.42%|
|China & Hong Kong||749||93.63%||6.37%|
|UK & Ireland||7796||82.26%||17.74%|
**this figure does not include those votes cast at the AGM
Therefore, the proposals to change have been approved and this matter will now be referred to the Privy Council for formal approval.
This is a positive step forward for the organisation as it allows RICS to be appropriately structured to continue building a global professional body ready to equip the profession for the challenges and opportunities ahead. This will enable RICS to meet the changing expectations of stakeholders, clients and the wider public. Governing Council will now move forward to advance plans for the second phase of governance reforms and will ensure that the profession is kept informed as the plans advance. These reforms will require a further vote by the profession at some stage in 2019.
More detailed information will be available on rics.org/future shortly.
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Facilitate industry-leading discussions on the potential of the 21st century's people and places.
Executive Director, Brand and Thought Leadership
Gillian is responsible for RICS' reputation and profile. She leads on recognition and enforcement of RICS' standards in the key economic and financial centres of the world. Her remit includes policy, research and economic commentary; external communications and brand development; and regulatory policy and operations.