In the present climate, prudent HEI administrators realise the importance of preparing robust responses to financial stress.
Here, Glynne Stanfield of Eversheds Sutherland gives the top five things you need to know to plan for success.
1. Know your legal standing
“You’ve got a very diverse sector in terms of powers, which means some institutions can do things that others cannot do. Therefore, having a one size fits all for the sector is completely the wrong approach. So when you’re looking at any financial stresses and strains, you need to start by looking at what your legal form is. I think as senior management move from one institution to another, they’re not acute to this, so they think that what they could do at one institution they could do at another. This isn’t the case.”
2. Diversify your risk
“There’s been a lot of focus on group structures, and the DfE has paid for a lot of these group structures to be set up. The University of Bolton has a group structure with Bolton College, you’ve got the London South Bank University in Lambeth about to be set up, as well as Hartpury being split into both a University and a College. Hartpury itself is a group structure. That’s a good thing in some ways, you may argue that it helps diversify risk. But on the other extreme, it can increase risk, by taking on unknowns.”
3. Get strong Governors
“It’s a very difficult place right now for an individual to act as a governor of an institution that may be facing some financial failure. We’re starting to see in FE the Further and Technical Education Act, the possibility for FE colleges to be wound up and the Governors to have some personal liability under the Insolvency Act. At the moment we’re not seeing similar rules planned for HECs, but we may see that which could cause a flight of governors. Many of these stresses may be around whether you can attract the right types of governing bodies.”
4. Tap Into other UK finance lines
“We used to talk about cross-border as Britain and the outside world, but now we look at the interplay between the rules of Wales, Scotland, England, and Northern Ireland… There’s a new trick possible under the HERA that a Welsh or Scottish or Northern Irish institution could establish an English institution and enter into a validation with them, and then tap into the English system. Welsh students could then get higher rates of funding through the English system.
5. Reassess your International Commitments
“I think very few institutions make money from international campuses, often it’s a flag on a map. They do well to cover their costs on the whole, but if you look at the Chinese market, there’s been a recent change in Beijing’s policy towards these joint ventures. They’ve now insisted on clauses in the contract that require you to comply with the Communist Party 10 year plan. That includes setting up local branches of the Communist Party on your campus… The international market might not be the great panacea that people have seen it to be in the past.”
Want to find out more? Watch the full Managing Financial Stress & Restructuring in Higher Education video box set here.
