Key risks facing independent schools

  • Cash flow is a major concern for independent schools, according to new research
  • Other risks facing the sector range from political change to major incidents
  • Independent schools need robust strategies to manage a diverse array of risks

Around 625,000 pupils are taught at Britain’s independent schools; institutions whose reputation and prestige carries far beyond these shores. But latest research from Zurich Municipal highlights a wide range of risks, which could have short, medium and long-term impacts.

Our focus group, hosted in December, saw representatives from six of Britain’s leading independent schools identify and rank the key risks facing their organisations, and the sector overall.

Cash flow

Cash flow is seen as the number one risk facing independent schools. While income is generally seasonal, outgoings occur year-round. A failure to carefully manage cash flow can have damaging consequences, e.g. less money for repairs and improvements, which can lead to a failure to meet parents’ expectations. This in turn affects reputation, and potentially drives pupil numbers down.

As well as scheduling work carefully, so that significant repairs and improvements take place during school holidays, independent schools should monitor cash flow continuously to ensure that what appears to be a small variation does not have significant impact over time.

For example, reduced demand from paying pupils might be countered by a cut in bursaries. Independent schools should also make allowances for the vagaries of running costs – for example, a sudden rise in energy prices.

While the focus group acknowledged cash flow is a risk over which schools have relatively little control, they agreed that continuous monitoring of cash flow is essential. As one participant observed: “If an independent school takes its eye off the ball it could suffer very quickly.”

Political risk

The group ranked political change as a critical risk.

David Forster, Head of Risk Proposition at Zurich Municipal, says: “The sector’s ability to manage forthcoming political issues is nil, apart from some lobbying power.”

Regulation

The inspection and regulatory standards that govern independent schools are becoming more stringent year-on-year.

At the Future of Independent Schools Inside Government conference in November, Christine Ryan, Chief Inspector of the Independent Schools Inspectorate, noted that from having to comply with a handful of “loose requirements” two decades ago, schools now have around 400 regulations to contend with.

She told the conference: “Regulation is a major cause of concern for schools, because for many it seems like a virtually impenetrable mass of legislation, statutory guidance, non-statutory guidance, advice and best practice.”

Schools face penalties for breaching these regulations, including those relating to health and safety, data protection, and, for those schools with an international intake, border control. Dealing with the outcome of breaches can also significantly increase the workload for staff.

The good news is that the focus group agreed that independent schools are generally strong at complying with regulations. However, one notable exception was in the area of data protection. For example, many staff have mobile phones that may contain unencrypted sensitive data which could potentially fall into the wrong hands.

Poor performance

The head teachers participating in the focus group said parents’ expectations of the education their children should receive have increased in recent years. If parents become dissatisfied with the standard of education on offer, the reputation of a school could suffer.

Disaffected parents are also more likely than ever to make a claim for damages. As a focus group participant observed: “Parents are more ready to sue you, or threaten to sue you.” Rebuffing any claim puts a heavy burden on staff in terms of time and increased workload.

Major incident

It may be impossible for schools to predict when a major incident will happen, but it is possible to plan for one.

For independent schools, there are a number of particular risks to consider. A large fire or flood, for instance, could cause major damage to an irreplaceable historic building. Infection, meanwhile, may be a particular consideration in boarding schools that have a high intake of pupils from overseas, and potentially where diseases can be transmitted relatively easily.

Parents are more ready to sue you, or threaten to sue you

Focus group participant

All of these risks could potentially cause significant disruption and damage a school’s reputation. Where a major incident leads to death or injury, the school will be closely scrutinised to see if its actions (or lack of action) caused or contributed to the incident, and there may be claims for compensation and possible regulatory penalties.

Importance of effective management

Our research highlights how independent schools need to work together to manage some of the key risks they are facing as a sector. Above all, it shows a thorough risk-management strategy is key to the future prosperity of individual institutions and the independent schools sector as a whole.

To discuss any aspect of this report please contact us at info@zurichmunicipal.com.