A special report on risk management appeared in the November 9 (2010) issue of the Financial Times. Author Paul J. Davies argued that leadership should entertain "the unthinkable" in terms of risks (also known as "black swans"), given just how many risks have risen to the surface in the past two years.
His point is that "individual companies [...] have been struck by--or just escaped--a series of 'unthinkable' events that ought to make [leaders] everywhere reassess the realm of the plausible."
What are independent schools doing in regard to black swans?
- are we performing due diligence on the vendors we use?
- are we keeping only the best faculty and staff, at a time when tuition dollars matter the most?
- do we have good capital ratios? For example, how are our reserves, hard dollars (tuition revenue), and endowment dollars (corpus size as well as percentage draw available)?
- do we have downside protection against families who may refuse to pay outstanding tuition bills?
- are we asking ourselves, "What is the most crucial piece of infrastructure that we could not operate without in the event of a large black swan?"
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