Managing Risk

When I first started seeing the phrase “enterprise risk management” pop up in higher education literature, my reaction was one of skepticism. It seemed to me yet another idea of limited value that someone had created a label for, to make it seem more important than it really was.  Although some of that skepticism remains, I find myself increasingly in sympathy with some of its basic tenets, particularly in relation to preparing for risks arising from operating conditions, natural disasters and poor planning.

 

Most leaders in higher education have an appreciation of operating risks associated with institutional policies related to liability claims, insurance coverage, investment asset allocations, human resources and student discipline. Then there are the operating risks that arise from the actions of individuals that comprise our campuses, some more massive than others, but equally challenging in terms of institutional health and reputation. No college president escapes the late night phone calls about accidental fires, auto accidents and post-party hospitalizations. 

 

What the tragedies at Virginia Tech and Penn State and the devastation as a result of hurricanes Katrina and Sandy have taught us is that we must be prepared for massive risks associated with natural disasters, and no one is immune. While Illinois Wesleyan University does not have to worry about ocean surges, we are at the center of a tornado alley and sit above a fault line. With all of these emergencies, an institution better have a thorough and practiced response plan. No two situations will be the same, but well-developed lines of communication and responsibility will be invaluable when the inevitable emergency arises.

 

There is a third dimension to this discussion that receives less attention but is equally important, namely, the analysis that goes into decisions about the future. Most institutions are currently engaged in some kind of strategic planning effort driven, in part, by the need to protect their financial viability and vitality for the foreseeable future. These efforts are no longer perfunctory exercises with limited consequences. Bad plans and bad execution of good ideas can put an institution at risk fairly quickly in the current environment. Besides examining what we hope will happen if a particular plan is adopted, we should also devote time to the consequences if the plan does not work.  

 

I still cannot quite get comfortable incorporating enterprise risk management into my daily vocabulary, but I have embraced the underlying principles.

 

Richard F. Wilson, president

Illinois Wesleyan University