What are the top risks in higher education today? How can an enterprise approach to risk management help a university take effective action to avoid risks as well as prepare for worse case scenarios to lessen the damage of events that are out of their control? By taking an “enterprise” approach to risk management, universities can be more proactive and prepared; avoiding, accepting, mitigating, sharing, or exploiting risk where possible, or responding to higher education issues and challenges more effectively when they arise.
Breaking down siloes
Many colleges and universities are re-thinking how they look at risk. Whereas risk management has historically been confined to specific domains (compliance, internal audit, safety, insurance) and often managed in siloes, higher education institutions today are realizing their risk portfolio is inherently interconnected. Greater visibility helps but is often not enough. Colleges and universities are finding they need the infrastructure—governance, data, processes, and culture—to be prepared for the threats (and opportunities) that will determine whether they can survive or thrive.
Higher education institutions do not need to have all the answers to all the risks they face, but they can be more aware of the increasingly wide spectrum of threats affecting them and thus more proactive. Institutions should also consider developing an "enterprise" approach to risk management, as opposed to siloed plans that exist within specific divisions or units to deal with risks specific to their function or mission.
Five higher education risk categories
Looking at recent examples of brand and financially-damaging events, five broad categories emerge: Business model risks, reputation risks, operating model risks, enrollment supply risks, and compliance risks. These risks begin to show why the higher education sector has been steadily investing in the people, systems, and capabilities to survive in the new normal of perpetual discomfort.
Business model risks
Business model risks challenge an institution's ability to generate adequate revenue and, in some cases, to even exist. The factors below impact the sustainability and relevance of college and university business models in an environment where new approaches to education delivery, revenue generation, and enrollment are evolving rapidly. Institutions that do not plan for these factors may find themselves outpaced by more agile competitors.
In the 24/7 news cycle where negative headlines score highly, higher education institutions have frequently become the target. Schools can lose alumni and business relationships, brand favorability, etc. Institutions with reputational awareness and control over their increasingly vast presence in the media can reduce the risk of damaging a reputation they have spent years building.
Operating model risks
Operating model risks stem from inadequate processes, people, and systems that affect an institution's ability to function efficiently and effectively. Operational agility is critical to staying competitive, flexible, and relevant as strategies and business models shift. As shown below, college and university operating models involve a range of activities such as how to deliver academic programs, conduct research, make decisions, manage relationships with vendors, sustain enrollment, or maintain accreditation status.
Enrollment supply risks
In the absence of robust, consistent student enrollment, tuition-dependent institutions cannot sustain their financial health and fund operations. Gaps between estimates and actual student enrollment limit a school's ability to forecast faculty turnover, resource use, and infrastructure needs to support the student population. Recent trends have pointed to declining student populations (between 2026 and 2031 the number of high school graduates is expected to drop by nine percent)1, as well as shifting demographics.
Higher education leadership and governance bodies are expected to remain compliant with a growing array of state, local, federal, and private regulations. Failure to meet compliance standards can lead to consequences ranging from loss of funding, loss of accreditation, or, in extreme cases, to lawsuits and/or criminal charges against leadership.
Embracing the new normal
As higher education continues to rapidly evolve, new risks will emerge, known risks will take new forms, and crises will inevitably unfold. Universities should accept that they will not have all the answers. Knowing they have taken steps to be more resilient in the face of risk, Boards, presidents, and the rest of the university community can be more confident as they embrace a challenging future.
To read more, visit: https://www2.deloitte.com/us/en/pages/public-sector/articles/higher-education-issues-and-enterprise-risk-management.html