Article by Dorothy Gjerdrum, Gallagher
We have launched a new school year with some heavy risk baggage. Some of that baggage we’ve been carrying a long time. Some is new weight. And if we’re honest, we know that more considerations are yet to come, as new risks continue to emerge and demand our attention. For all of these risks there are potential solutions, especially for organizations that can adopt a broader framework, such as enterprise risk management (ERM). Before turning to solutions, though, let’s consider the risks we carried into this new school year.
New Baggage
Pandemic-Related Lawsuits
From preschools to universities, educational institutions have been under intense pressure and scrutiny. Schools have not only had to increase safety measures and adjust to constantly changing protocols and requirements, but manage very vocal and divergent opinions from parents, students, staff, faculty, alumni and donors. These parties have increased pressure on boards, heads of school and business officers to proactively manage a crisis that seems to have no end.
It’s likely that a new wave of lawsuits will emerge from the pandemic in the months and years to come. Everything from “failure to educate” to “failure to protect” could be raised by parents and students who are angry and seeking accountability. Lawsuits over insurance coverage have already begun, and the twists and turns related to communicable disease exclusions and insurability are cropping up in the courts. As with all complex liability claims, these cases could take years to resolve.
Mental Health
For nearly two years now, the pandemic has challenged faculty and staff to maintain and achieve educational outcomes in the most difficult of circumstances, resulting in high stress and mental health struggles for many. These risks blend into employment issues as independent schools face turnover and retention challenges
The pandemic has illuminated and elevated previously known risks. Mental health issues that may have been under the surface previously have now become critical risks for students, staff and teachers. On August 14, 2020, the CDC reported that younger adults, racial and ethnic minorities, essential workers and unpaid adult caregivers reported disproportionately worse mental health outcomes, increased substance use and elevated suicidal ideation resulting from the pandemic. Six months later, in February of 2021, Kaiser Health reported that anxiety, depression, sleep disruptions and thoughts of suicide had increased significantly for many young adults.
Faculty and Staff Retention
For nearly two years now, the pandemic has challenged faculty and staff to maintain and achieve educational outcomes in the most difficult of circumstances, resulting in high stress and mental health struggles for many. These risks blend into employment issues as independent schools face turnover and retention challenges. A report from the nonprofit RAND Corporation indicates that one in four teachers planned to leave their job, an increase from one-in-six before the pandemic. The demand for qualified staff is high, which challenges the ability to recruit new talent. Early retirement is another trend, especially for an aging generation that may find it difficult to adjust to constantly changing or hybrid schedules or the potential exposure to COVID-19 and its variants.
Carryon Baggage
Sexual Abuse Claims
Many states across the country have expanded (or eliminated) the reporting period for sexual abuse and molestation claims, giving individuals or groups of plaintiffs the opportunity to raise claims of abuse that may be decades old. From a claims perspective, anticipated difficulties include finding the applicable insurance policies, determining coverage and who and what type of expenses can be paid, and making decisions about whether and how to settle old claims. The accused may have moved on or even passed on, and the identification of one potential victim nearly always opens the possibility of identifying more.
Determining a transparent, yet appropriately confidential process and communication to current and former students and parents must be handled with care. These issues layer on top of the uncomfortable nature of the claim itself, and the impact upon a school’s credibility and reputation will be determined by how well these challenges are met.
Cyber Risks
As the frequency and cost of ransomware attacks have grown, the insurance industry has responded with dramatic price increases for coverage and increased underwriting demands.
Cyber risks continue to evolve and create headaches for schools and insurers alike. Maintaining appropriate security protocols during in-person and remote learning scenarios has been difficult for many schools. As the frequency and cost of ransomware attacks have grown, the insurance industry has responded with dramatic price increases for coverage and increased underwriting demands. A few years ago, multi-factor authentication was an unknown term to many of us; today it is a baseline requirement for coverage. The risks associated with the use of personal and school-issued laptops, online learning, private information stored in electronic format, social media and virtual communications will continue to evolve, and there are no easy solutions in sight.
Carrying the Load: Developing an ERM Plan
These risks represent a heavy load for K-12 independent schools to carry. Traditional risk management programs that focus only on claims prevention and insurance policies will not be sufficient. More than ever, schools need a plan to identify and prioritize their key risks that will also allow for the management of the emerging risks to come. Awareness and management of these risks will minimize potential disruptions and support a successful school year.
Determining a transparent, yet appropriately confidential process and communication to current and former students and parents must be handled with care. These issues layer on top of the uncomfortable nature of the claim itself, and the impact upon a school’s credibility and reputation will be determined by how well these challenges are met.
A strategic, holistic ERM plan can help schools identify and prioritize risks to optimize that success. ERM evaluates risk and uncertainty in relation to the overall mission of the school, rather than managing risk through a segregated, functional approach. Central to ERM is a focus on preserving the value the school community has created and creating new value through innovation as risks are understood and measured.
Implementing ERM is typically a multi-year endeavor for any organization — that is especially true within the independent school world, which revolves around an academic calendar that includes a three-month summer break. The upside of this timeframe is that people have time to understand and adapt, and the slower pacing will not overwhelm the schedules of already busy people.
Some organizations that use ERM explain the acronym to stakeholders as “Everyone is a Risk Manager,” in order to underscore the importance of engaging stakeholders in the risk management process. Forming an ERM team with representation from all aspects of school operations will assure that the planning process is inclusive and comprehensive. Once the appropriate team is created, and people understand and agree upon the importance of managing all risks (insurable and not insurable, known and emerging), the work of developing a multi-year plan can begin. These four steps outline the critical components of an ERM plan.
1) Gather information and organize the plan. Your institution’s ERM plan must be customized to your operations. The education of stakeholders, the risk prioritization process, the identification of risk owners and how and to whom you will communicate results are examples of components that need to be customized to the school’s mission, culture and available resources. For example, stakeholders such as donors, governing board members, parents and parent groups, the local community, or colleges and universities may influence how you educate stakeholders about ERM and your process to identify, prioritize and communicate key risks. Understanding these elements will help determine the appropriate scope and timing of the plan. Creating a multi-year agenda with expected outcomes along the way will engender support and engagement.
2) Identify and prioritize risks. There are multiple ways that independent schools identify, analyze and prioritize risks; the plan should identify the timing, approach and evaluation tools that will be used. A common starting point is to host a risk workshop to gather key stakeholders to brainstorm and prioritize risks. Risk workshops may be conducted for specific groups (such as the governing board, leadership team, faculty, staff or functional area of operations) or with key representatives from the school as a whole. Some schools have developed online tools for faculty and staff to report risks (which are then vetted by the ERM team). A modified risk workshop may be used by select leaders to identify risks to strategic goals or specific projects. Individual interviews with key personnel may shed light on risk threats and opportunities, and online surveys may also be used to create an initial prioritized list of risks. Any combination of approaches can be utilized to meet the needs of your operations and culture.
3) Assign risk owners and develop treatment plans. Schools that take a broad approach to risk identification may produce a list of 50 or more risks, but they will not all be of equal importance or urgency. The prioritization process should winnow the field to a manageable number, and those individual risks should be assigned to a risk owner who will be held accountable for treatment plans and engagement with teams or across divisions, as needed. The purpose of this portion of the plan is to manage risks to an appropriate level of tolerance. The tolerance of risk will vary by institution and reflect its culture and environment. It is another important element of customization, and the plan should reflect both the expectations for risk tolerance and accountability for managing key risks.
4) Review results, communicate and continually improve. The ERM process is iterative and inclusive, and continuous learning is necessary for a plan to thrive. As risk treatment results are communicated to appropriate stakeholders, lessons will be learned and applied to future processes. Monitoring and communicating results develops trust, accountability, engagement and support. All of these aspects will contribute to create more resiliency for the institution, and confidence in the ability to react to and manage emerging risks as they develop.
Core to any ERM program is project planning, the development of effective governance and risk communication, and the execution of risk identification, evaluation and prioritization processes. Spreading the responsibility for managing risk across school leadership and to those who have accountability and authority will make the most effective use of existing resources, and establishing reviews and planning for continual improvement will assure the program stays up to date. Establishing an ERM plan — or updating your plan, if that’s the next step — will assure that you have the people, processes and systems in place to manage all risks.
We can expect that the remainder of the school year will continue to be fraught with uncertainty, and therefore managing the baggage of current and emerging risks has never been more important. Building an ERM program can help your institution understand the critical risks, manage the weight of those risks and be prepared for what may come.
