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Strategic Risk Management in Universities - ATEM


									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
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
•   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

Perception of Threat
In a recent survey of 1,400 CEO’s globally PwC found:

Greatest threats to business were:
    •Global terrorism
    •Currency fluctuations
    •Loss of talent
        In Australia, competition was #1 but regulation was #2
    Only 40% of Aussie CEO’s felt global terrorist operations was a
        Classes of University Risk

      Operational Risk - Risks of day to day operations

                                        Compliance Risks
Staff Safety - WC

                                             Finance Related
   Legal Risks
        Security Risks                  Industrial Risks

                 Building/Facilities Risks
        Classes of University Risk

         Operational Risk Treatment Methods

  Operational Plans               Guards

Safety Plans



                 Internal Audit
        Classes of University Risk

  Strategic Risks - Goals and Objectives of Organisation

                                         Predictability of
 Catastrophic Losses                     Revenue Risks

Student Numbers
                                           Funding Models

   Models of
   Operation                          Emerging Risks

                  Legislative/Political Risks
        Classes of University Risk

       Strategic Risks - Treatment Methods

                                          Strategic Risk
 Business Continuity                      Management
 Plans                                    Programs
Student Forecasting                        Funding Models

      Marketing                       Emerging Risk
      Plans                           Profiling
         Classes of University Risk

Operational Risks            Strategic Risks

 Property                   Reputation Issues

    Liability               Business Continuity
            Net Income          •Legal
    Corporate Approach
• Understands the strategic goals
  and objectives of the
• Understands the pre-loss and post
  loss impact of risk.
• Understands limits of insurance
  and its effect on risk.
• Understands the Total Cost of
 Pre- Loss Objectives

  • Profitability
  • Growth
  • 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
• Stability of earnings
• Growth
• Brand protection
      Relevance to University???????
            Limits of Insurance 

Insurable                          Uninsurable
 Risks                                Risks
           Total Cost of Risk
Loss Control Costs             Insurance
Legal Costs

RM Staff


     Objective of Risk Management –
      Reduction of Total Cost of Risk
    Outside the University World

•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
 Enterprise Concept of Risk

6 Basic Processes of Enterprise
   Risk Management
• Formal enterprise wide risk
• 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
Components of a University Strategic 
    Risk Management Program
 Risk Management Governing Board-
 • 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
         Advantages of 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

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