Loading in 2 Seconds...
Loading in 2 Seconds...
Strategic Risk Management in Universities Harry Rosenthal University of New South Wales
What Is Risk? • Risk – the chance of something happening that will have an impact upon objectives. • Measured in terms of : • likelihood • consequence
Era of Disasters • Floods, Drought, Storms, • Terrorism, Wars, Asteroids • Cost of Disasters Increasing. • WTC is between $70 to $120 Billion • First WTC bombing – 350 businesses were evacuated from building – 150 of them subsequently went out of business. • Australia: On average, 1 business in 10 will experience a serious disruption that may force them out of their facility. • Reasons will range from power failure to sabotage.
Era of Disasters? • Life Expectancy Has Increased by at Least 2/3 in 100 Years • (In Aust: 78 for boys and 83 for girls – higher than Canada, Britain, New Zealand and the US) • Many Diseases Have Become Less Hazardous • Democracy Has Spread (2001 -58.6% of world population) • Wars in Western World –Less Likely • Perception of Risk: How Risky Is It Out There? • What Do We Need to Do About It? • Limited Resources
Era of Disasters? - Education • Aussie teens can read, count and understand scientific concepts better than the teens of the US, Sweden, France and Italy • 15 year olds perform in top one third of 41 OECD and other countries in maths, and science scores. • Australian household wealth is increasing • Number of children aged 1- 14 who die as a result of injuries has halved since the 1980’s (230 fatalities a year – most transport and drowning). • Proportion of school leavers going straight in to higher education rose from one in four in 1984 to four in 10 in 2004. • Youth unemployment is halved since 1984.
Cost of Getting It Wrong • Regardless of Ambient Risk – Cost of failure is high. • Increased Values • Concentration of Values • Competitive/Unforgiving Environment • Modern Expectations
Outside the University World View • Perception of Threat • In a recent survey of 1,400 CEO’s globally PwC found: • Greatest threats to business were: • Competition • Global terrorism • Over-regulation • Currency fluctuations • Loss of talent • In Australia, competition was #1 but regulation was #2 (ASX,APRA,ASIC,CLERP9) • Only 40% of Aussie CEO’s felt global terrorist operations was a threat.
Classes of University Risk Operational Risk - Risks of day to day operations Compliance Risks Staff Safety - WC University Business Unit Finance Related Risks Legal Risks Security Risks Industrial Risks Building/Facilities Risks
Classes of University Risk Operational Risk Treatment Methods Guards Operational Plans Safety Plans University Business Unit Budgets Lawyers SOPs Internal Audit
Classes of University Risk Strategic Risks - Goals and Objectives of Organisation Predictability of Revenue Risks Catastrophic Losses Student Numbers University Business Unit Funding Models Legal Models of Operation Emerging Risks Legislative/Political Risks
Classes of University Risk Strategic Risks - Treatment Methods Strategic Risk Management Programs Business Continuity Plans University Business Unit Student Forecasting Models Funding Models Marketing Plans Emerging Risk Profiling Legislative/Political Participation
Classes of University Risk Strategic Risks Operational Risks University Business Unit Property Reputation Issues Liability Business Continuity Issues Personnel • Environmental Issues • Legal • Political • Industry Net Income
Corporate Approach • Understands the strategic goals and objectives of the organisation. • Understands the pre-loss and post loss impact of risk. • Understands limits of insurance and its effect on risk. • Understands the Total Cost of Risk
Pre- Loss Objectives • Profitability • Growth (acquisition/internal) • Stability of Earnings (service, client retention) • Good Corporate Citizen • Brand Protection • Efficient Operations Relevance to University???????
Post – Loss Objectives • Survival • Continuity of operations • Profitability – shareholders expectations • Stability of earnings • Growth • Brand protection Relevance to University???????
Limits of Insurance Insurable Risks Uninsurable Risks
Total Cost of Risk Loss Control Costs Insurance Costs Legal Costs RM Staff Below Excess Costs Objective of Risk Management – Reduction of Total Cost of Risk
Outside the University World View • 50% CEOs surveyed said they were more aggressive about risk management than last year. • Financial services industry has embraced RM to a greater degree than most other industries. • Nearly 90% of financial services CEOs responded to PwC survey that they’ve implemented Enterprise Risk Management Principles. • 65% of Asia-Pacific firms have formal enterprise wide risk monitoring vs. 45% in the US. • US firms are stronger on issues surrounding compliance as the dominate view is that Enterprise Risk Management is a tool to assist with regulatory compliance.
Enterprise Concept of Risk • 6 Basic Processes of Enterprise Risk Management • Formal enterprise wide risk identification • Risk assessment • Agreed upon patterns of response • Risk control activities • Risk monitoring activities • Regulatory compliance activities
Components of a University Strategic Risk Management Program • Risk Management Policy Statement • Documented • One A4 page • VC Signs • Senior management commitment • Promulgated across the organisation • Outlines strategies and plans for risk management
Components of a University Strategic Risk Management Program • Risk Management Governing Board-Committee • Senior management participation • Accountable to Executive for management of risk • Monitors risk management process • Monitors emerging risks
Components of a University Strategic Risk Management Program • Risk Management Plan/Guidelines/Program • Designed to take in to account relevant stakeholders (clients to Ministers) • Follows risk management standards • Eg. AS/NZ4360 • Clearly outlines a risk management process • Has an assurance program
Components of a University Strategic Risk Management Program • Risk Management Tools • Risk identification tools • Risk analysis and assessment tools • Risk treatment guidelines • Templates
Risks - Identification (AS/NZS 4360:1999 Approach)
Components of a University Strategic Risk Management Program • Risk Register • List of risks of the organisation • Assessment & analysis of indemnified risks • Treatments for identified risks • Staff/Personnel responsible for monitoring risk and treatments.
Components of a University Strategic Risk Management Program • Business Continuity Planning • Business Impact Analysis • Business Continuity Plan (BCP) • Testing of BCP
Guiding Principles • Tie RM Program to Existing Activity • Strategic Planning • OH&S • Keep It Simple & Evolve Over Time • Remember the WIFM • Report (Up and Down) • Cultural Approach – Not Compliance
Advantagesof Risk Management To an Organization * Protect assets * Reduce deterrence effects - Take advantage of opportunities - Good night sleep factor - More attractive to global markets * Resource allocation * Reduces the cost of risk - Self insured vs. Insurance
Advantages of Risk Management Benefits for a Nation * Competition for limited resource - Human - Financial - Technological * Environmental impact - Short term - Long term * Better use of resources - Reduce fear of experimentation - R&D - Thinking outside the box