Risk Management |
Article by Constance Neary and Alex Miller, United Educators
From the January/February 2019 Net Assets magazine
You’re sitting in your office, catching your breath after a challenging board meeting. Discussions touched on a whirlwind of topics, from enrollment difficulties and student mental health issues to inappropriate employee-student interactions and study abroad safety. The head stops by to express her appreciation for your hard work, and then comments that two new board members, both with significant corporate experience, are pushing for increased focus on risk management in light of these concerns. The board members suggested that the head establish an enterprise risk management (ERM) program. The head asks you to lead the effort, starting within 90 days and sharing a full progress report by the next board meeting.
A Senior Leaders Seminar on “Enterprise Risk Management: A Strategic Approach to Mitigating Uncertainty” will precede the 2019 NBOA Annual Meeting in San Diego. The workshop will include interactive exercises to help participants analyze their schools’ strategic plans.
In our work as risk management consultants and insurance providers, we see this scenario all too often. We’ve found that when many schools launch an ERM program, they jump in without sufficient planning, spend an extensive amount of time identifying risks and then struggle to address those risks. The result is a frustrated effort that fails to deliver needed results.
ERM is a process by which a school identifies and evaluates its most pressing risks, and then develops plans to mitigate or leverage those risks based on its circumstances and resources. Here’s a quick explanation of the process, which should be sustainable and repeatable:
Which risks should an institution new to ERM include on its list? Looking at risks that concern other independent schools is a good place to start.
From May 2017 through August 2018, UE asked risk management administrators at nearly 300 independent schools to identify their school’s top strategic, financial, liability and reputational risks. Respondents most typically were business officers and, to a lesser extent, human resources directors or dedicated risk managers. Eighty-one percent responded, with the following results:
Total Response Rate
Operational Financial Pressures
Student Health and Safety
Survey respondents identified these example risks in each category:
Given that resources are scarce at nearly every independent school, successful ERM programs start small and expand over time. Using an incremental approach can keep the process manageable and align with available resources. The most important (and sometimes most challenging) step to advancing ERM is getting started.
Using the top risk survey as a “jump start” for populating your school’s initial risk register will move your process forward quickly into risk evaluation. This means assessing the likelihood that the risk will occur and, if it does, the impact it will have on your school. Upon completing the risk evaluation, your risk committee can decide which risks to address first and work on mitigation plans.
We regularly explain to independent schools that simply providing a list of risks and sample plans has limited value. The true value of the ERM process resides in the discussions, discoveries and decisions that result. The most meaningful risk register and mitigation plans are homegrown. To develop the strongest program, leadership should learn more about each stage of the ERM process, responsibilities and roles of personnel involved in risk management, and resources needed to move forward. They can then decide on a structure that supports the initial ERM effort and evolves over time to meet future needs.
Download a PDF of this article.#RiskManagement#Planning
Enterprise Risk Management Assessment Tool (NBOA Library)
ERM: Everybody Is a Risk Manager (Net Assets July/August 2015)
No Strangers to Danger: ERM for Every School (Net Assets July/August 2018)
A Delicate Balance: Should You Hire a Risk Management Officer? (Net Assets July/August 2016)
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