As the world faces an unprecedented volume of risks, it has become more important than ever to impart a “risk mindset” among professionals – one which allows organizations to navigate the various risks they encounter, many of which are yet to be fully understood.
Recently, St Joseph’s University (SJU) was named the champion of the Spencer-RIMS Risk Management Challenge 2020. This year’s case study, provided by the University of Dayton, centered on risks facing the higher education space, with special focus on the COVID-19 pandemic and risk management strategies for re-opening the campus in the fall.
Michael Angelina (pictured), academic advisor of the winning team, spoke to Corporate Risk and Insurance about the team’s experiences in the contest, as well as the importance of teaching risk management in school, especially in a post-COVID-19 world.
According to Angelina, who is also executive director of SJU’s Maguire Academy of Insurance and Risk Management, the challenge was set in three phases. The first was to submit a paper outlining the five major risks, including the upsides and downsides, for the University of Dayton. The judges selected the eight teams to advance to the next round which featured a 20-minute presentation on their paper. For the final round, the judges then selected three teams, and they were tasked with coming up with a recommendation on how The University of Dayton should react to the COVID-19 crisis when school reopens in the fall semester.
“Based on an enterprise risk management approach, the SJU team identified approximately 30 risks and scored them in a risk register/heat map,” he said. “Based on a risk quantification exercise, incorporating the enterprise value of the University of Dayton, the team selected the top five risks to be (in no particular order): student safety (including the coronavirus); changing demographics; campus/school culture; the business model of academia; and political environment.”
The team then quantified both the impact and the upside potential along with mitigation strategies for the above risks.
The main takeaway, Angelina said, was twofold:
“First, quantifying the full enterprise value and long-term effects of risks is critical in prioritizing risks; and second, universities are complex,” he said. “Given the internal and external factors affecting a university, good risk management can be a vital strategic partner in helping to assess the future course of the institution.”
The team, composed of Joseph Angelina, Kayla Cecchine, Nicholas Myers, and Brendan Tarte, worked well together, according to their adviser.
“They identified and debated the merits of each risk and also worked together to properly assess the impacts of each risk so that they could ensure the quantification of the impact to enterprise value seemed appropriate,” he said. “They each had different skills that they brought to the table, thus making for a better product.”
Exercises such as the Spencer-RIMS Risk Management Challenge seek to raise the profile of risk management to the next generation of professionals, especially in an age where less-understood risks such as cyber and new pandemics pose a huge threat to the economy’s wellbeing.
“Risk management has always been important, but adding the strategic component enables the students to add value to their respective organizations,” Angelina said. “COVID-19 highlighted a few things (that to their credit, the students identified in their initial paper), that were more nebulous. These items would be the power of low frequency/high severity tail risks; the inter-connectivity of risks; and thoroughly understanding the root causes of risk when creating a mitigation strategy.”
To conclude, Angelina provided the following best practices to develop a risk mindset among both students and professionals:
- To fully understand risk, one needs to engage a diverse group of practitioners so that all angles may be observed.
- Understanding emerging risks (like pandemics) is important – they are remote, but severe, so ignoring them could be devastating.
- Think strategically about risk – the greatest risk is the failure to seize an opportunity, so having a well-managed risk function may enable an organization to respond more quickly when opportunities arise.