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

Ntim, Collins (2018) Governance and risk disclosure practices in UK higher education institutions in an era of austerity and reform (Getting to Grips) London. Leadership Foundation for Higher Education 40pp.

Record type: Monograph (Project Report)

Abstract

Executive Summary

Globally, the higher education sector is experiencing rapid changes, including increasing competition, ‘commercialisation’, ‘managerialism’ and regulation. These changes have brought to the fore issues of sound governance and risk management in HEIs. However, there is a clear dearth of a serious systematic and longitudinal research examining the extent to which senior managers of UK HEIs engage with, and disclose, existing good practice recommendations relating to risk management and governance in their annual reports.
The current project, therefore, examined risk management and governance disclosure practices in UK HEIs in a period of increased budget cuts and reforms. Specifically, three main sub-objectives emerged as follows, to:

(i)develop and investigate the level of compliance with, and disclosure of, good recommendations contained in the HE risk management guidance codes relating to best risk management practices in UK HEIs.

(ii)develop and investigate the level of compliance with, and disclosure of, good recommendations contained in the HE good governance codes relating to best governance practices in UK HEIs.

(iii)explore other governance and financial characteristics of UK HEIs.

The content analysis method was employed in collecting and analysing governance, risk and financial data from HEIs' annual/audit committee reports for sample of 117 (71%) UK HEIs over the 2009-2014 period. The main findings are as follows:

(i)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%.

(ii)Of the three main types of risk items examined, disclosures relating to ‘financial risk’ were highest, compared with ‘operational’ and ‘strategic risk’ disclosures.

(iii)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%.

(iv)Of the five main types of governance mechanisms investigated, disclosures relating to ‘governors and governing boards’ were the highest, whilst those relating to ‘performance, evaluation, remuneration and rewards’ were the lowest.

(v) A steady increasing pattern can be observed with respect to both governance and risk disclosures that were examined over-time. However, and on average, disclosures relating to governance mechanisms were higher than those relating to risk management practices.

(vi)On comparison, the findings suggest that, on average, Pre-1992 UK HEIs made more good risk disclosures compared with their Post-1992 counterparts.

(vii)There is a discernible evidence of improving quality of governance, such as governing board independence, although others, such as governing board gender (ethnic) diversity representation, are observably low.

(viii)There are positive financial developments, such as increases in endowment funds and teaching/research income, but worrying evidence of increases in others like debt and pension costs.

On the basis of the above findings, the following summary recommendations are offered for the identified stakeholders.

Recommendation 1: Given the low levels of disclosures relating to best risk management and governance practices contained in the recommended codes, stronger monitoring and enforcement by regulatory bodies, such as HEFCE (OFS), its devolved counterparts (DFE/HEFCW/SFC) and sector-wide governance bodies, such as the CUC will be a step in the right direction.

Recommendation 2: The CUC acting in collaboration with other governance and regulatory bodies, such as the DFE, HEFCE (OFS), HEFCW, SFC and LFHE, to develop a simple and user-friendly sector wide best practice disclosure guidance relating to risk management and governance in UK HEIs.

Recommendation 3: A document outlining the level of compliance with, and disclosure of, best risk management and governance practices to an HEI’s various stakeholders and general public to be included in the annual institutional accountability returns to the DFE, HEFCE/OFS, HEFCW, and SFC.

Recommendation 4: Given the relatively low representation of women, and especially Black, Asian and Minority Ethnic (BAME) groups on governing boards, HEIs to make conscious and explicit effort to recruit experienced and qualified members from that group of society.

Recommendation 5: Given the worrying signs of increasing levels of financial stress, especially relating to debt and pension costs, sector-wide financial and regulatory bodies, such as DFE, HEFCE (OFS), HEFCW, SFC and BUFDG to commission an in-depth study specifically focusing on assessing the extent of financial stress and risk with a view to recommending proactive and best practice solutions.