Article by Constance Neary and Alex Miller, United Educators
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.
