Study Looks at the State of ERM at Colleges and Universities
July 16, 2009
College and university leaders may be lagging behind industry in systematically evaluating risks, according to a recent report from the Association of Governing Boards (AGB) and United Educators (UE). "The State of Enterprise Risk Management at Colleges and Universities Today" reviews the results of a survey on attitudes, practices, and policies on strategic risk management. Resources, including worksheets designed to help boards and institutional leaders begin the process of systematic risk assessment, are also provided.
Five best practices are identified.
- Define risk broadly. Traditionally, institutions focused on financial risks covered by insurance. Current thinking defines "risk" as any impediment to accomplishing institutional goals. In a 2000 report, the National Association of College and Business Officers (NACUBO) discussed the "new language of risk" and identified five types of risk: strategic, financial, operational, compliance, and reputational.
- Recognize both the opportunities and downsides of risk. Many colleges focus only on the downsides of risk. In addition, they should weigh risks against potential rewards. All successful organizations take risks, and the most promising opportunities often involve heightened risk.
- Develop a culture of evaluating and identifying risk at multiple levels. Presidents and board members rarely see the first warnings of risk. Institutions need to identify and assess risks regularly at multiple levels so that the most critical ones filter up to top decision-makers.
- Look at the total cost of risk. Risk is not just about dollars and cents. Institutions must consider all the consequences of risk. For example, in a lawsuit over denial of tenure, there are litigation costs, but there are also non-monetary costs such as lost productivity, distraction from mission, and negative publicity.
- Boards and presidents should collaborate. They need to engage in candid discussions at the strategic level. By working together, presidents and boards can fulfill their shared responsibility for ensuring the success of the mission and stability of the institution.
A number of action steps also offer practical advice for college and university leaders, including requiring all top administrators to prioritize risk, and requiring annual written reports on each high-priority risk. Presidents and boards are advised to reassess priority risks annually and to "look for blind spots."
- NACUBO Statement on Endowment Inquiry
- NACUBO Urges One-Year Postponement of Changes to 1098-T Reporting Requirements
- GASB Addresses Asset Retirement Obligations and Seeks Field Testers
- 2016 Higher Education Accounting Forum
April 10-12, 2016
- 2016 CAO and CBO Collaborations
August 1-2, 2016
- 2016 Planning and Budgeting Forum
September 19-20, 2016
- WEBCAST: Legislative Lunchcast: A 30-Minute Washington Update from NACUBO
Monday, February 22, 2016 12:00pm ET
- WEBCAST: Responsibility Center Management: Two Different Perspectives
Thursday, March 17, 2016 1:00PM ET
- WEBCAST: Title IX: Key Issues Surrounding Institutional Compliance
Wednesday, April 20, 2016 1:00PM ET
- WEBCAST: The Clery Act: Strategic Planning to Mitigate Institutional Risk
Thursday, May 26, 2016 1:00PM ET
- ON-DEMAND: NACUBO Live! Results of the 2015 NACUBO-Commonfund Study of Endowments
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis