Risk management survey report

Business risk or risky business

RESPONSIBILITY RISK MANAGEMENT

TAXATI

BUSINESS RISK ENTERPRI

COMPLIANCE INDEPENDENT SCHOOLS MAN

2013 Independent Schools survey During this year’s ASBA conference Nexia ran a survey on risk management in the independent school sector. We received over 100 responses from Bursars across Australia and New Zealand and from schools of varying sizes.

The questions we asked in the survey were: n Do you have a senior executive staff member who has been

allocated responsibility for Enterprise Risk Management (as opposed to workplace safety)? n Have you implemented or are you currently implementing an

enterprise risk management strategy and program? n If yes, is your enterprise risk program designed in accordance

with the Australian Risk Standards ISO 31000? n If you do not have a dedicated risk management resource

or employee or are not currently implementing a risk management program, what are the main impediments? n What do you believe are the key benefits of implementing a

risk management program? How effective do you believe your organisation is at managing the following risks? n How satisfied are you with your current risk management

program or response to managing risk within your organisation? n What do you believe are the top 5 risks facing your

organisation at present? n What do you believe are the top 5 risks facing your

organisation over the next 5 years?

We are pleased to present this report to you and hope that the survey results represented in our findings will provide you with useful information on how schools are meeting the challenges facing risk management.

Independent member of Nexia International

2013 Independent Schools survey results

1

Do you have a senior executive staff member who has been allocated responsibility for Enterprise Risk Management (as opposed to workplace safety)?

4

Impediment

% age of respondents

Cost

49%

69%

Not our culture

5%

400-600

64%

Not seen as a key focus

22%

600-1000

60%

Don’t believe there is any value

0%

Greater than 1000

84%

Lack of internal skills

24%

Overall

72%

Too difficult to implement

11%

Organisation too bureaucratic

11%

Size

Yes

Less than 400

The independent school sector appears to be embracing risk management and are dedicating resources with 72% of respondents having a staff member who had been allocated responsibility for Enterprise Risk Management (‘ERM’). This is consistent with the general trend we are seeing in the sector as schools adopt a more corporate approach to managing the school and risk.

The results indicate that larger schools (by student numbers) were much more likely to have allocated responsibility than smaller schools. This was consistent with the results (as per question 4) which indicated that an ERM program was considered an expensive process and the main impediment to schools which have not yet implemented an ERM program.

2

If implemented or were implementing, is your enterprise risk program designed in accordance with the Australian Risk Standard ISO 31000?

Of the respondents who had implemented, or were implementing, an ERM program, 73% were using the ISO 31000 family of standards as the framework. The ISO 31000 standards provide principles and generic guidelines on risk management and are considered best practice in risk management.

3

Have you implemented or are you currently implementing an enterprise risk management strategy and program?

Without allocated ERM resource

8%

With allocated ERM resource

80%

All respondents

60%

The survey results indicate how important it is to allocate responsibility for ERM. Without a dedicated resource, or person responsible, only 8% of respondents had implemented or were implementing an ERM program.

2

If you do not have a dedicated risk management resource or employee or are not currently implementing a risk management program, what are the main impediments? (NOTE: can have multiple answers)

Other

Theme was lack of time.

The main impediment to implementing an ERM program was cost, with lack of internal skills considered second. Implementing an ERM program does not need to be an expensive exercise as it is scalable based on the size and complexity of the school. The resource/knowledge shortage can be minimised through seeking risk experts as part of the school’s governing board.

Each ERM program should be tailored to the schools and can begin by establishing objectives for ERM which can lead to an ERM framework and ERM policy.

5

What do you believe are the key benefits of implementing a risk management program? (NOTE: can have multiple answers)

Benefits

Not Implemented

Implemented

All/Both

Identifies weaknesses

81%

75%

77%

Explores opportunities

32%

45%

40%

Enforces accountability

46%

51%

49%

Protects the organisation

70%

75%

73%

Allocates resources to key appropriate focus areas

49%

45%

47%

Engages members of the organisation

19%

45%

35%

The results were similar between the respondents which had implemented (or are in the process of implementing) an ERM program versus those schools which hadn’t. The exceptions to this were: 1) Schools which have implemented an ERM program were more than twice as likely to indicate staff engagement as a benefit versus those respondents who have not yet implemented.

2) Schools which have implemented an ERM program viewed ERM more positively as a means of identifying opportunities for the school.

As schools work to gain a clearer understanding of the value of ERM, they need to look to quantify its costs and benefits. It should not be seen as a compliance exercise, but an integrated method of managing risks and seizing opportunities relating to the achievement of the school’s objectives. It involves a high level of engagement by employees throughout the school enabling individuals to think beyond their immediate areas of responsibilities. If done properly, it creates value for parents, students, employees and the community.

6

How effective do you believe your organisation is at managing the following risks?

8

Effective

Somewhat effective

Neutral

Student welfare

47%

51%

1%

1%

0%

98%

2%

Budgets

67%

30%

1%

1%

1%

97%

3%

Regulatory requirements

43%

48%

7%

2%

0%

91%

9%

Funding

52%

37%

9%

2%

0%

89%

Reputation

43%

46%

9%

2%

0%

Liquidity

46%

42%

10%

2%

Strategic direction

34%

54%

9%

Staff welfare

39%

46%

IT Security

34%

Staffing resources

Risk Area

Somewhat Ineffective ineffective

Mitigated Opportunity

What do you believe are the top 5 risks facing your organisation at present? And what do you believe are the top 5 risks facing your organisation over the next 5 years?

Presently

Over 5 years

Enrolment

15%

14%

Funding

13%

10%

11%

Staffing

13%

14%

89%

11%

Reputation

8%

4%

0%

88%

12%

IT / Technology

8%

7%

3%

0%

88%

12%

Affordability

8%

11%

14%

1%

0%

84%

16%

Asset Management

7%

6%

50%

9%

8%

0%

84%

16%

Solvency

6%

7%

27%

54%

16%

2%

0%

81%

19%

Safety

5%

4%

Operations

35%

46%

15%

2%

1%

81%

19%

Competition

3%

3%

Fraud & Corruption

41%

40%

17%

2%

0%

81%

19%

Economy

2%

4%

Privacy

30%

48%

20%

2%

0%

78%

22%

Other (one-off risks)

13%

15%

Stakeholders

31%

46%

21%

2%

0%

77%

23%

Asset management

19%

49%

20%

11%

0%

69%

31%

Respondents were generally strong in mitigating risks around Budget, Student Welfare, and Regulatory Requirements and saw more opportunities in managing risks around Asset Management, Stakeholders, and Privacy.

Looking at only those risks stated as being ‘effectively’ mitigated, Staffing Resources, IT Security, Strategic Direction and Operations were all areas identified for improved risk management.

7

Risk area

Grouping the responses by themes, enrolments, funding uncertainty and staffing concerns were the strongest responses in the survey in the short-term and continue as concerns over the next five years. Longer-term affordability was a trending theme with concerns raised over the increasing costs and ability to pass these on to parents.

How satisfied are you with your current risk management program or response to managing risk within your organisation?

Not implemented

Implemented

All/Both

Satisfied

16%

36%

28%

Somewhat satisfied

41%

40%

40%

Neutral

27%

18%

22%

Somewhat dissatisfied

11%

5%

8%

Not satisfied

5%

0%

2%

Summary

Schools that had implemented or were implementing an ERM program were satisfied with the program they had put in place.

Looking ahead, schools will focus on a number of different areas within their risk management initiatives.

Some schools will begin or advance their ERM program development efforts. Others may include additional risk types within their ERM program - particularly those where risk methodologies are not as developed and the risks themselves less understood.

The trend towards schools adopting a more corporate approach to risk is likely to continue and schools that take a leading role in this will be in a position to use risk management as a key competitive tool.

3

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Key contacts Australia Adelaide Jamie Dreckow t: 08 8139 1165 e: jdreckow@edwardsmarshall.com.au Brisbane Daniel Gill t: 07 3023 1300 e: dgill@pilotpartners.com.au Canberra Garry Murphy t: 02 6279 5400 e: garry.murphy@dnexia.com.au Melbourne George Dakis t: 03 9608 0106 e: gdakis@nexiamelbourne.com.au Newcastle Martin Matthews t: 02 4926 2699 e: mmatthews@forsythes.com.au Perth TJ Spooner t: 08 9463 2463 e: tj.spooner@nexiaperth.com.au Sydney Andrew Hoffmann t: 02 9251 4600 e: ahoffmann@nexiacourt.com.au New Zealand Auckland Kumar Aravinda t: 09 262 2595 e: karavinda@nexianz.co.nz Christchurch Graeme Marriott t: 03 379 0829 e: graeme@marriotts.co.nz