Regulatory compliance has been cited as one of the biggest risks facing the independent school sector. This is according to research carried out by insurnace broker Lucas Fettes, in association with chartered accountants Baker Tilly. The report explores how independent schools develop and implement risk management strategies.

The report also reveals that 66% of risks covered within schools’ risk management strategies are compliance or operational driven at the expense of strategic and financial risks. This approach could result in schools leaving themselves exposed to more risk.

Robin Lucas, chairman of Lucas Fettes & Partners said: “We are committed to not only developing solutions that respond to the challenges, threats and opportunities that our clients tell us drive them, but also keeping two steps ahead – pre-empting the areas in which schools are likely to be exposed in the future and making recommendations that will support business growth.”

Heather Wheelhouse, head of independent schools at Baker Tilly said: ‘This report reveals that the issues that keep heads and bursars awake at night are not always reflected in their formal risk management strategies. In particular, non-regulated and emerging risks such as business continuity and cybercrime are often overlooked. Failure to manage risk could lead to financial instability and/or damage to a school’s reputation, both of which will prove much more difficult to manage than addressing the underlying risks.’

On the face of it, schools perceive themselves to be well informed and prepared about the risks they face, with 96% stating they have a formal risk management strategy. But the research highlighted that schools’ approach to risk management tends to be operational rather than strategic: an exercise in achieving a required level of legislative compliance. When asked what’s included within their strategy, all but a few cited child welfare, health and safety, buildings and assets and school trips – all risks that schools are required by law to manage.

More telling are the types of risk that schools are failing to proactively manage. The two areas highlighted as posing the most significant threat were risks to revenue and reputation (ie long-term business viability). These are areas in which risk management solutions can’t simply be prescribed via legislation and instead have to be more bespoke to the school. Schools readily admit to being ill equipped to deal with these risks. 24% don’t believe that revenue related risks are covered by insurance and 18% believe the same is true of reputational risks.

Other risks that schools cite as being ill equipped to manage are also non-regulated, such as business continuity and emerging risks. 38% of schools are ill equipped to manage business continuity risk and 15% do not even include business continuity in their risk management strategy. This should be of particular concern – if a business continuity process needs to be implemented, the school will need a robust plan in order to keep its doors open.

In spite of the rise in cyber crime and in particular cyber bullying, 31% of schools surveyed do not have a strategy that covers this emerging risk. Schools are beginning to respond as awareness of the threat grows, but it’s a reactive rather than pre-emptive stance.

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