Risk management practices, disclosures and risk governance maturity of South African universities : an annual report disclosures analysis

Abstract

In recent years South African universities have been confronted by a series of events such as #Feesmustfall protests, demand for the decolonisation of education and free higher education which in many instances resulted in vandalism and disruption of recent academic years. These challenges resulted in increased scrutiny from stakeholders such as government, external funders, and the public, driven by the need for detailed disclosures on how these important societal establishments are managed by those entrusted with such responsibility and utilises the public funds to continue creating value, remain viable and responsible organisations. Due to the uncertainty presented by these emerging and strategic threatening events in a global and rapidly changing educational sector, South African universities had to find mechanisms to manage the uncertainty and provide stakeholders with detailed disclosures to promote transparency and accountability as per the Higher education Act and King IV. This study aimed to assess the extent to which South African universities have adopted, applied and explained King IV’s recommended practices for effective risk management and the corresponding risk governance maturity of institutional practices. This study was motivated by the #Feesmustfall event as experienced in 2015, which pointed to the lack of effective risk management practices and volatility preparedness at South African universities. The introduction of King IV in 2016 with the “Apply and Explain” philosophy, which possibly led to the improvement of the lack of detailed disclosure on the actual risk management practices applied as highlighted by prior studies since previous King codes were underpinned by the “Comply or Explain” and “Apply or Explain” philosophy. The study is further motivated by the lack of risk management literature in the South African educational sector as most studies explore the corporate sector. The study was conducted into two phases; with phase one conducting a literature review and the second phase developed a risk disclosure Checklist using King IV recommended practices and risk governance maturity framework, which was used to assess the annual reports of the sampled universities. A qualitative content analysis was conducted and analysed using exploratory research designs within constructive paradigms and employed deductive reasoning. The results of the study revealed that South African universities have the correct risk management structures in place and have “Applied and Explained” their risk management practices. However, challenges were identified in areas such as defining and approval of risk appetites and risk tolerance, development, and implementation of business continuity plans confirming the lack of preparedness for disruptions, annual revision, and approval of policies which should promote an ethical environment and lastly integrating risk management into the culture and business activities of the universities. The results also revealed that South African universities are mature regarding risk governance as they are at an Integrated level 3 and improving. This is attributed to some universities already applied the minimum risk governance requirements in higher levels of maturity such as Predictive Level 4 and Advanced level 5. Nevertheless, there were challenges such as embedding risk management into decision-making, capital allocation, strategic objective and conducting risk management training for awareness and promoting a culture that embraces risk management. This study contributes to the gap in the literature by generating new insights on risk management practices and disclosures at universities in South Africa. These insights are of significance to risk practitioners, risk managers, university policymakers and other academics due to the implications highlighted. The study further provides recommendations on the risk disclosure gaps identified and the potential future studies due to the limitations outlined.