Don't let funding cuts increase your risk

  • FE colleges have been hit hard by Government cuts
  • This means real risk management challenges as exposures broaden
  • Leaders need to take the time to plan and build truly resilient operations

Everyone in the public sector is struggling to find a way to negotiate an increasingly risky landscape, with less and less money coming in from central Government – but Further Education colleges have it particularly tough.

Overall education spending will have dropped in real terms by 3.5% between 2010-11 and 2014-15, according to the Institute for Fiscal Studies. But these cuts have not fallen evenly across the sector.

Funding for education for ages five-16 has been protected, meaning post-16 money has been slashed by 35%.

Uncertainty of funding

A survey by Zurich Municipal of nearly 300 FE institutions, revealed that 80% of respondents felt that uncertainty of funding was a major worry for them, with the knock-on effect being an inability to invest in opportunities that will help their institution grow financially (20%) and fears about capacity to improve facilities (20%).

“It is all about funding – end of,” says Nick Linford, former editor of FE Week. “The whole sector is petrified of what’s coming next to find more savings.”

The immediate risk is to service provision, and the college’s reputation. With money so tight, college leaders are resorting to desperate measures, and one popular response has been to run larger classes and employ less teachers.

Another tactic has been to axe courses. Modern languages and art and drama have been hard hit and even economics and further maths have been withdrawn at some colleges.

The Skills Funding Agency announced in August that nearly 200 FE courses could lose their funding.

Importance of partnerships

However, these kind of short-term savings don’t translate into a long-term, sustainable strategy for FE colleges. Partnerships with other local providers can offer a valuable alternative, allowing colleges to specialise and collaborate to keep running courses.

In the Zurich Municipal survey 45% cited joint ventures and partnerships as an innovation space, while 15% would consider a partnership abroad.

But such arrangements bring risks. “Beware of the ‘optimism bias’ that leads many into promising projects without consideration of what is at stake if things go wrong,” says Tilden Watson, Head of Education at Zurich Municipal.

“While a partnership, like any great relationship, can bring massive benefits to both parties – opening up new markets, enhancing reputations and letting colleges be more ambitious – it is crucial to put a pound sign against what’s to be gained, and what stands to be lost. Managing expectations on both sides is critical.”

Finding time to plan is essential. Writing in The Guardian, Mark Ravenhall, CEO at Further Education Trust for Leadership, argues that FE leaders, “struggle to find the space to properly consider how their organisation interacts with others locally, how it can adapt to industry changes and how it might develop. The sector has more than enough talent to confront the challenges it faces, but people need to be given the time to use it.”

Top risks

Beyond service provision, FE colleges face many of the same risks as other public bodies.

All colleges are increasingly reliant on technology for the safe storage of valuable, sensitive data – making them vulnerable to hackers and accidental data losses.

If such a breach occurs, it could mean a fine of up to £500,000 from the Information Commissioner’s Office and real reputational damage. How would you cope if your systems were compromised? What is your insurance cover?

In addition, FE colleges need to think seriously about how they would react in the event of pandemics, flooding and terrorist attacks. According to the Business Continuity Institute, critical business continuity incidents are now seen to hit 1 in 5 organisations every year.

“We know it is a matter of when, not if, crisis risks will strike.” says Tilden. “Of course, it’s tempting to say ‘that will never happen to us’, especially when money is tight. But as recent global health scares – the Ebola crisis being a case in point – and increasingly severe weather year-on-year have shown us, that is the sort of thinking that belongs in the past.

“It’s worth taking a moment to imagine how a major risk may impact on staff and students.”

Despite the incredibly difficult operating environment, no-one can afford to neglect risk management. The advice is: talk to your insurer.