Governance and risk disclosure practices in UK higher education institutions in an era of austerity and reform

Ntim, Collins (2016) Governance and risk disclosure practices in UK higher education institutions in an era of austerity and reform. EFMD Higher Education Research Conference, Barcelona, Spain. 10 - 11 Oct 2016.

Abstract

The aim of this project was to examine risk and governance disclosure practices in UK higher education institutions (HEIs) in a period of increased austerity and reform. Specifically, the project sought to investigate the extent to which UK HEIs voluntarily disclose information relating to their internal governance mechanisms and risk management in their annual/audit committee reports with the objective of identifying, developing and disseminating ‘best practice’ within the sector. Content analysis method was employed in collecting and analysing three main types of data from HEIs' annual/audit committee reports. First, a comprehensive weighted (i.e., scored from 0 to 6) best practice risk disclosure index, containing 127 risk items with three main sub-sections, consisting of: (i) financial; (ii) operational; and (iii) strategic risks, was developed based mainly on the HEFCE (2001a, b, 2005) good practice guides for risk management in HEIs. Second, a comprehensive unweighted (i.e., scored from 0 to 1) good governance disclosure index containing 100 governance items with five sub-sections, consisting of: (i) governors and governing boards; (ii) processes and structures; (iii) performance evaluation, remuneration and rewards; (iv) auditing, accounting and accountability; and (v) dialogue with stakeholders and social responsibility, was developed based on the 2009 and 2014 CUC, 2008 CUC audit handbook, and 2013 CSC Scottish good governance codes. Third, a wide range of governance data relating to governing boards, governing board committees, senior management teams and financial data relating to UK HEIs were collected. The entire population of 164 UK publicly funded HEIs were longitudinally sampled from 2009 to 2014. The full data required was obtained for 117 (71%) HEIs and therefore, were included in the final sample. The main findings are as follows:

Overall, the level of transparency and disclosures relating to risk management practices by UK HEIs are relatively low (e.g., compared with similar sized for profit organisations), but the distribution varies widely, ranging from a minimum of 6.96% to a maximum of 31.76% with an average of 17.31%.

•Of the three main types of risk items examined, disclosures relating to financial risk were highest, compared with operational and strategic risk disclosures. Specifically, the average UK HEI disclosed 30.83% of the financial risk items compared with 12.66% operational risk items and 16.91% strategic risk items.

•Overall, and similar to the risk disclosures, the level of transparency and disclosures relating to governance practices by UK HEIs were relatively low (e.g., compared with similar sized for profit organisations), with the distribution equally varying widely, ranging from a minimum of 8.00% to a maximum of 75.00% with an average of 40.02%.

•Of the five main types of governance mechanisms investigated, disclosures relating to the governors and governing boards were the highest, whilst those relating to performance evaluation, remuneration and rewards were the lowest. Specifically, the average UK HEI disclosed 52.65%, 49.67%, 40.07%, 31.52%, and 24.98% of the governance structures examined relating to governors and governing boards, auditing, accounting and accountability, dialogue with stakeholders and social responsibility, processes and structures, and performance evaluation, remuneration and rewards, respectively.

•A positive finding is that a steady increasing pattern can be observed with respect to both disclosures relating to the risk items, and governance structures that were examined over time. For example, the average UK HEI’s level of good risk (governance) disclosures were 16.31% (37.37%), 16.63% (38.96%), 17.07% (39.66%), 17.47% (40.46%), 17.97% (41.14%) and 18.41% (42.51%), respectively, in 2009, 2010, 2011, 2012, 2013 and 2014, accounting for about 13 (14) percentage points increase over the six years investigated. These increasing patterns are also observable in the sub-indices. However, and on average, disclosures relating to governance mechanisms were higher than those relating to risk management practices.

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Contributors

Author: Collins Ntim

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