Increasing attention is being paid to risk management by governing bodies. This in part reflects cases of ineffective risk management in the private sector, which have resulted in corporate failure. Equally, the action of higher education governing bodies is in response to the increasingly uncertain and less predictable operating environment faced by institutions.
Governors must be mindful of risk, and, in particular, be vigilant as to whether the decisions they are being asked to make bring significant reputational or financial risks. Where they do, governors need to assure themselves that the risks have been fully assessed and effective mitigation strategies adopted to minimise the likelihood of any adverse reputational or financial consequences occurring.
The Scottish Code of Governance (p9) emphasises that 'institutions must adopt a risk-based approach to strategic planning.' In other words when selecting a strategy, institutions need to assess the risks associated with the different strategic options, and take account of the risks when selecting their preferred option.