ERM Adoption and Implementation in Higher Education

History of ERM

ERM stands for enterprise risk management. It was initiated in 2002 after University Risk Management and Insurance (URMIA) realized that the universities and institutes providing higher-level education are in a new world risk. In response to these risks, URMIA appointed a task force to lay out the guidelines of ERM for colleges and universities. The primary purpose of this was to provide a better understanding of ERM to URMIA members and institutional heads and members, who were under these types of risks.

What is ERM?

In general, ERM in any business body includes the methods and processes adopted by the business to minimize and manage any probable risk and make use of any possible opportunity which would help them to achieve their final objective. ERM systematically lays out a plan and helps the business management to identify particular events or circumstances (risks and opportunities), which would be essential in their business. It also evaluates the probable impact of these events and asses the probability of the said event to happen. Likewise, ERM also lays out the framework of risk management practices and prepares a response strategy for them while also monitoring the process thoroughly (Florio & Leoni,2017).

ERM in Higher Education

Higher education in the modern world faces many types of challenges in the form of completion for acquiring a maximum number of students, competent teachers, faculties, and other related staff. Education institutions also face scrutiny from the government, journalists, and concerned parents, which has increased exponentially in the past few decades. Struggle for financial resources, the pressure of updating their existing machinery and teaching techniques, which require a significant investment, an increase in educational ventures by other people in business are some of the risks faced by them. This leads to a situation where the institutions require more funds to achieve that objective. ERM takes into account all of the above problems and any other probable risks and prepares an action plan, which enables the institutes to deal with them efficiently. It further helps the management to sustain the competitive advantage, solidify their reputation, and manage their available resources (Setapa & Zakwan,2019)

Difference from other businesses

The ERM model was initially developed in for-profit businesses. However, in 2001, URMIA found out that it could be applicable for educational institutes as well, and the risk management framework could be shifted from profit business to educational institutes (Bruhn et al. 2017). While the basic structure remains the same, the goals of other companies are vastly different from that of educational institutes, as they aim for maximum profit of the business rather than elimination of risks for smoother functioning. Also, higher education institutes (HEIs) have different organizational layout and structure. Their customs and circumstances are also very much different from educational institutes. Hence, it is evident that the ERM implemented will be different in their case as compared to other businesses.

Conclusion:

Although introduced for profit-based businesses, over the years, HEIs have adopted ERM and implemented it. But, since both the markets are different, the ERM and risk frameworks also significantly vary due to their organizational layouts and nature of risks.

References:

Bruhn, A., Whiting, B., Browne, B., Higgins, T., & Tan, C. I. (2017). Introducing enterprise risk management into the university classroom: a case study. Risk Management and Insurance Review, 20(1), 99-131.

Florio, C., & Leoni, G. (2017). Enterprise risk management and firm performance: The Italian case. The British Accounting Review, 49(1), 56-74.

Setapa, M., & Zakwan, N. M. (2019). The Implementation of Enterprise Risk Management: A Study of Malaysian Private Higher Educational Institution. Journal of Mathematics & Computing Science, 5(1), 39-52.