May 2022 edition: Managing the Changing Risk Profile of Academy Trusts

Managing the Changing Risk Profile of Academy Trusts

It has long been a requirement for Academy Trusts to formally manage their risks through a risk management policy and system and maintenance of a risk register. As the academy system matures, greater emphasis has been placed on governance and scrutiny to ensure that governance and the risk management system is working as it should.

It is critical that the board identifies the right risks and has assurance that those risks are being mitigated. Boards will be used to considering the risks that would prevent them achieving their strategic objectives, but it is good practice to horizon scan for upcoming risks and any that may have been overlooked. RSM’s review of the highest scoring strategic risks for a cross sector of our education clients will help Trusts do this.

The top risk theme (i.e. reported the most times) for Trusts was finance. This is probably no surprise and includes concerns such as weak budgetary management processes and a lack of financial forecasting, alongside rising staff costs. There is some symmetry here with the government initiatives of introducing school resource management advisers to find cost savings. However, the initiative is likely to have increased awareness and heightened the risk assessment. Risks in this area can be expected to increase further with the rise in energy costs and cost of living.

Identifying the right risks is only one part of the risk management equation, they then need to be mitigated and reduced to an acceptable level.

Stephanie Mason

Next highest were organisational risks, including safeguarding, health and safety and welfare. This picks up on the light being shone on mental health concerns of both staff and students as well as physical injury. Similarly, the public profile given to radicalisation, bullying and sexual harassment has led to the acknowledgement of higher risks in these areas.

The third area is risks linked to staffing, in particular not being able to fill teaching vacancies with staff of the right skills and experience. The effect of this risk can be devastating in terms of outcomes for students and the reputation of the Trust. Trusts are working hard to address this workforce challenge but face an uphill battle as they compete for staff.

Of interest is the movement in importance of risks and whilst finance has consistently been a high risk the chart below shows the movement in other areas (measurement being in terms of the number of risks):

The increased risk from governance, regulation, legal and compliance reflects the greater emphasis on these areas from government. The Academy Trust Handbook now addresses a wider range of matters than its predecessor, the Academies Financial Handbook, with closer scrutiny of compliance with, for example, related party transaction approvals and reporting. This further codifying of requirements has led to greater concerns over ensuring compliance.

The regulatory landscape is ever evolving and we now have the Levelling Up white paper and Schools Bill for Trusts to digest and adapt their ways of operation to better meet new requirements. All of this comes with a cost and is likely to lead, at least in the short term, to greater financial risk.

New in the top risks are safeguarding, business planning and performance and student satisfaction and experience. These are all areas where new risks will have developed with the pandemic and moving to online and hybrid delivery with additional costs, a potential decline in the student experience and new safeguarding concerns online or in a home environment.

Trusts moved quickly to ensure that students had access to IT and this declined in importance, albeit the linked cyber-crime risks have increased.

Identifying the right risks is only one part of the risk management equation, they then need to be mitigated and reduced to an acceptable level. This is a job for management but the board needs to know that the system is working and to have assurance that controls are working and risks are being mitigated.

To support Academy Trusts in this process, RSM has been working with CST and Stone King, through the Risk Management Masterclasses, to introduce the concept of a board assurance framework. Here, the board identifies the strategic risks and what might cause them and then considers assurance – from management processes, their own challenge and monitoring and from third parties such as internal audit or Ofsted. More assurance may be needed in some areas but in others there may be unnecessary controls and monitoring costs can be saved.

RSM is a CST Platinum Partner.

To read more about trust risks and how trusts compare to other parts of the education sector, our full analysis can be found here Education risk register analysis | Maximising your impact: Managing risks and building resilience | RSM UK