Is your school as prepared as it should be to counter emerging and unforeseen risks? asks Adam Lickorish, associate director at audit, tax and consulting firm RSM

The need for organisations to be nimble and responsive to changes and shocks in the market has never been more necessary, and independent schools are no different. Undertaking horizon scanning exercises and understanding the emerging risk landscape is a fundamental aspect of good risk management.

If emerging risks are understood, it will add value to the risk-based decision-making of the governing body. The proactive understanding and assessment of the emerging risk landscape can provide a governing body with a sound basis through which to make informed choices.

Why do governing bodies want to understand emerging risk?

• To avoid embarrassment and reputation damage if they didn’t foresee something that may have a detrimental effect.
• To avoid unnecessary and unbudgeted rectification costs.
• To strengthen resilience of the school.
• To exploit opportunities that may present themselves and ensure their full benefits are maximised and not missed.

Failure to engage with any of these issues could detrimentally affect the achievement of a school’s strategic objectives in the form of loss or lost opportunity.

What is emerging risk?

An emerging risk might be defined as: “A new or unforeseen level of uncertainty driven by external events – the risk may still be forming, and it may not be clear as to the implications for the business, be these negative or positive.”

Understand your emerging risk

Does your governing body really take time to do this? Organisations that do this well make time for this; they use it as part of their board development and strategy setting and review. They undertake the exercise on a regular basis (at least every six months) and might take advantage of external facilitation to add a new dynamic and impetus to the discussion.

The point of the exercise is to understand:

• What might affect the organisation in the future, so it can prepare.

• What is happening in the sector, locally, nationally and globally and looking more widely outside the sector at what is affecting organisations, both negatively and positively.

• What can be learnt from others and how they responded, adapted and learned.

Capturing the outcomes of the horizon scanning and emerging risk exercise is crucial. Summarise these, create appropriate actions and monitor progress – make them core to your future boardroom agenda.

Five questions your governing body should be asking

1. What do we see as the emerging risks to our school?
2. How far will these emerging risks affect our school and our objectives?
3. How far will these emerging risks play through into our existing strategic risks?
4. How far will they change the way we currently manage our strategic risks?
5. How will we respond? How will we continue to review the emerging risks?

At RSM, we produce an emerging risk radar to help organisations facilitate these considerations and inform emerging risk conversations of boards. The emerging risk radar is compiled using the cumulative knowledge and experience of boards from across all sectors with which we work, coupled with our own understanding of emerging risks at the time.

Call to action for governing bodies

The emerging risk landscape is constantly changing. Governing bodies will benefit from:

• Making time to undertake horizon scanning and consider what emerging risks might exist.
• Assessing what actions can be taken by the school in preparation so as to minimise loss and maximise opportunity.
• Considering how these will be subject to ongoing watching, assessment and monitoring by the governing body.

Adam Lickorish