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Risk & Compliance: Jump-Starting Enterprise Risk Management

By Net Assets posted 01-31-2019 01:00 PM

  
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Risk Management |

Knowing the top risks other independent schools face can help your school avoid getting stuck in the early phases of a risk management program.

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.

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:

Top Risks

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:

Top Risks

Total Response Rate

Enrollment

66%

Operational Financial Pressures

34%

Sexual Misconduct

29%

Student Health and Safety

25%

Academic Standards

18%

Public Safety

14%

Employee Misconduct

13%

Funding

13%

Premises Safety

12%

Institutional Travel

12%


Survey respondents identified these example risks in each category:

Enrollment

  • Affordability of rising tuition
  • Changing perception of value to college admission
  • Competition in secondary school market
  • Decline in full-pay students
  • Student behavior and involuntary attrition

Operational Financial Pressures

  • Adequate cash reserves
  • Balancing priorities with tight budget
  • Costs of increased educational offerings
  • Endowment depletion
  • Sustainability of operations

Sexual Misconduct

  • Prior decades of alleged abuse
  • Sexual misconduct by employee
  •  Student-on-student sexual abuse
  • Student sexual harassment and social media

Student Health and Safety

  • Bullying/harassment/diversity and inclusion
  • Death of a student
  • Employee training on student safety
  • Failure to provide adequate care
  • Liability arising from student injury (physical, emotional)

Academic Standards

  • Decline in academic rigor or excellence impacting college placement
  • New programs to maintain educational quality
  • Quality of extracurricular and athletics programs

Public Safety

  • Active shooter
  • Building a safety culture
  • Lockdown procedures
  • Securing large campus
  • Security of students, staff and faculty

Employee Misconduct

  • Disgruntled or dismissed employees
  • Consistency of disciplinary decisions
  • Employee theft
  • Scandal involving teacher or coach
  • Unethical behavior

Funding

  • Change in political approach to school vouchers
  • Decline in alumni/parent giving
  • Donor capacity and fundraising strategies
  • Legislative funding
  • Success of annual fund

Premises Safety

  • Construction on campus
  • General liability risk exposure
  • Injury related to building maintenance
  • On campus accidents or emergencies
  • State roads that cross campus

Institutional Travel

  • Field trips and domestic travel
  • Foreign travel
  • Loss of international program
  • Off campus trips (internships, volunteer activities)

Getting Started

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.

Constance Neary, vice president for risk management, and Alex Miller, associate vice president of research & program development at United Educators, conduct research and training on the effective use of ERM in schools and help schools mitigate high-priority risks.

Download a PDF of this article.

#RiskManagement
#Planning

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