Commentary on Emerging Risks Survey: Part 2

First, I would like to add a #5 to the list of independent school emerging risks that I identified in my last post:

5. Succession Planning. It may not be priority #1 at this very moment, but it ought to be listed among the top five, without a doubt. Even when all is well at a school in these uncertain times, the board and the head ought to be mindful of what succession looks like, whether in case of emergency (i.e., the head becomes incapacitated) or in case of departure (i.e., at end of contract period or for some other reason).

Part 2 of the analysis of the Global Emerging Risks Survey

As the report states, "the scale and impact of the financial crisis has prompted many organizations to focus more intently on increasing their capacity to detect and analyze emerging risks."

Some highlights:

• 90% of respondents reported some degree of increase in their focus on emerging risk, while 10% stated that they had no change in risk capability
• 64% increased their risk reporting to a senior manager, 36% did not
• 64% redesigned their risk identification process, 36% did not
• 54% increased their risk reporting to their Board of Directors, 46% did not

The question is, who is driving these initiatives to improve emerging risk management? In this survey, it varied according to industry:

• 48% of all respondents (all industries) cited their CEOs and Boards of Directors as the primary drivers
• 38% of financial services respondents cited their Chief Risk Officers as the primary driver
• 33% of manufacturing sector respondents cited their CFOs as the primary driver

Who is responsible for identifying and managing risk within our independent schools? I would guess that it's one of the following (in order of most frequent):

• Head of School
• CFO/Director of Finance
• Board of Trustees

In an ideal situation, the Board would have a risk committee which included the Head of School and the CFO, but I am wondering what percentage of boards in the independent school community have such a committee? I would guess a maximum of 25% of boards pursue risk diligently. Perhaps risk management is integrated in the audit committee or the finance committee, but, if so, one wonders whether it is discussed with any regularity at those meetings?

Please comment on this post if you feel that you have a risk committee model worth sharing, or if you feel that my guess-assessment (less than or equal to 25% of boards) is fair.