Last month, I moderated a panel with two board chairs and two presidents during an AGB member’s board retreat, and separately, I spent three days with 30 board chair-CEO teams at the AGB Institutes. I not only learned about their unique challenges (and successes!), but I also shared leading practices about the principles of strategic board leadership and trusteeship to complement and contribute to their missions, strategic priorities, and desired outcomes. During these conversations, participants frequently discussed the board’s role in overseeing risk.
AGB underscored the critical importance of risk oversight in our recently published Top Strategic Issues for Boards 2022–2023. Further, you may recall that I discussed governance, cyber, and business model risks in a prior update. As foundations prepare for a new academic year, this update is focused on another risk for boards to oversee in collaboration with their chief executives and leadership teams: reputational risk.
As Janice Abraham wrote in the AGB publication Risk Management: An Accountability Guide for University and College Boards, “…reputational risk is the risk that an institution will fail to meet the expectations of its stakeholders, resulting in tangible harm to the institution.” It is a “second-order risk” where, as one colleague shared with me, it can often be a component of other, more concrete types of risk. It is widely acknowledged, but difficult to quantify, and can be overlooked using traditional risk metrics. Therefore, there is value in acknowledging reputational risk separately and as part of the overall risk portfolio.
Foundation boards are in a special position when it comes to understanding reputational risk. Some foundations are more integrated into the institution, while some are entirely separate in structure. No matter how it is positioned, your foundation will have a significant stake in maintaining the reputation of the institution in addition to itself. Embarrassing missteps can lead to expensive consequences: leadership resignations, downgraded bond ratings, and donor flight. It is incumbent on the foundation board to oversee risk in the same manner that institutions do. The foundation board must stay in regular contact and communication with its host institution and board to align with desired outcomes and risk tolerance levels.
It is easy to think of risk oversight as a defensive exercise. Losing a bet is painful; being conservative is safe. But being bold is increasingly necessary as the higher education landscape evolves and transforms. I encourage boards and their members to deepen their knowledge and capacity to oversee risk, follow the steps outlined in Risk Management, and develop crisis leadership and crisis communications plans. Consequential boards have strong risk oversight processes to make substantial, even transformational, decisions.
Questions for Board and Committee Chairs
- How do you integrate risk oversight, including oversight of reputational risk, into committee meetings?
- Should risk oversight be the responsibility of one committee, be distributed throughout each committee, or be a responsibility of the board as a whole?
Questions for Board Members
- How can you leverage your risk oversight experience outside of higher education to help the board oversee risk?
- What might senior leaders overlook that may have an outsized impact on the reputation, and long-term success, of the foundation?
Questions for Chief Executives and Leadership Team Members
- How can you educate board members about the unique aspects of higher education that may have an impact on risk oversight and risk management, especially regarding reputational risk?
AGB Policy Alert on the U.S. Supreme Court’s Recent Decision to Overturn Roe v. Wade
On Friday, June 24, 2022, the Supreme Court of the United States issued its decision in the case of Dobbs v. Jackson Women’s Health Organization. The Court held that the U.S. Constitution does not confer a right to abortion, and that the authority to regulate abortion is returned to the states. This decision may have significant effect on institutional policies and practices. I encourage you to read our Policy Alert to help you consider the ramifications on your campus.
New AGB Membership Benefits
I am delighted to announce that AGB has launched a new suite of unique, complimentary member benefits. Now, included with AGB membership at no additional cost is a Board Self-Assessment Tool, a One Hour-Governance Consultation, a Personal and Customizable Home Page and My Resource Library, and for those in the important role of a board professional, a Board Professional Certificate program. Take a moment to learn more about these new benefits at AGB.org/NewMemberBenefits.
Have a great summer!