For a school board, risk can be viewed as anything that impedes, or has the potential of impeding the school achieving its strategic goals. Ensuring that risk is managed effectively is one of the key fiduciary duties of a school board as it seeks to direct and protect the school.
Realistically, there is no way that a school board can establish enough policies and procedures to eliminate every possibility of every risk. It is thus an important task for the board to identify and prioritise possible risks. Board members can never (and should never) have an intimate knowledge of every operational aspect of the school. Therefore risk identification should be undertaken by a broad, diverse range of people who possess a variety of perspectives. Those involved in this process should include board members, senior management, faculty who are in charge of critical areas, operational staff, and even part-time staff, contractors and volunteers.
It is not the board’s responsibility to manage risk on a day-to-day basis. The board’s duty is to establish policies that reduce risks and ensure that risks which have been identified are actively monitored by the appropriate personnel in accordance with the policies. The board should then expect regular reports from the Head on the actions taken by faculty and staff to reduce and manage risks, especially in vulnerable spheres such as policies, campus safety and security, publications and everyday practices.
Reputational risk is of growing significance with the rise of social media and instant messaging. Other risks can arise from such diverse sources as deceptive advertising, trustee negligence, poor management of a crisis, missed enrolments targets, forced closure of the campus due to a hazard event, capital availability, actions of competitor schools, leadership change, performance shortfalls, loss of records, among many others. A particular area of risk for the board may arise with the sudden or unexpected absence of the Chair or the Head, and it is important that the board has a clear written protocol in place to cover such an unpredicted event.
The response of some school boards to risk management is to over-burden senior management with crippling check-lists and internal controls to measure, monitor and reduce risk. Risk registers that are monitored regularly certainly have their place in the array of risk management tools. In such situations, the intensity of board scrutiny of the school’s practices should be inversely related to the quality of internal controls that are in place. As an alternative or supplementary approach, some enterprises overseas have appointed CROs (Chief Risk Officers) to oversee and manage risks on behalf of the board and the senior management.
At the very least, managing risk requires that the board undertakes periodic reviews of its own exposure to risk, that it regularly reviews all the school’s insurance policies, that it operates in a legal and balanced way that deviates neither into undue risk aversion nor recklessness, and that it monitors the implementation of risk management policies and procedures by the senior management.
School boards traditionally view risk management as a necessary but less-than-welcome duty that is required to safeguard the school from litigation. A smaller number of more enlightened boards embrace risk as a hidden opportunity for the school to gain a strategic advantage. If this view is adopted, then it become desirable to identify as many risks as possible, as every risk provides the potential of bringing a new strategic opportunity.
-Dr Stephen Codrington