Integrated risk management and strategic planning leverages the benefits of both processes and makes them mutually reinforcing.
Strategic planning is one of the most critical means of fostering the success of an institution and the achievement of its vision, mission, and strategic goals. Strategic planning has been defined as "the process of developing and maintaining a strategic fit between the organization and its changing marketing opportunities" (Kotier and Murphy 1981, p. 471). This definition suggests environmental and resource analyses that allow goals to be set, followed by strategy formulation and systems improvements that lead to better performance. Thus, through the strategic planning process, institutions of every kind - public and private; for profit and non-profit; small, medium, and large - define or refine their visions and missions, set strategic goals and objectives, identify strategies for achieving them, and determine how they will measure the success of their efforts and implement improvements. Subsequent budget processes should then result in resource allocation decisions tied to these strategic imperatives in order to move the institution toward its vision.
There are many external and internal risk factors that, if not carefully managed, can impede the successful accomplishment of an institution's strategic goals, including changing demographics that pose enrollment challenges, developments in the general economy, shifting priorities in state and federal educational policy, natural disasters, and poor planning and management. Further, failure to strategically manage an institution's risks can actually compromise its continued financial viability. In risk management terms, "strategically managing risk" means identifying and planning to manage those uncertainties that could result in financial losses to the institution.
Risk management has been described as a managerial process involving the executive functions of planning, organizing, leading, and controlling activities in a firm relative to specified risks with a view to reducing their cost to the firm in order to maximize the firm's value (Trieschmann and Gustavson 1998). The process further involves systematic identification and evaluation of risks, selection and implementation of strategies for managing them, and continuous monitoring and improvement ofthe risk management program (Trieschmann and Gustavson 1998).
The process of managing all of an institution's risks from a holistic perspective is known as enterprise risk management.2 A decade ago, Cassidy and others noted that the management of risk in higher education has traditionally been equated with crisis management or regulatory compliance and suggested that institutions should develop a balanced view of risk, one that tries to minimize hazards, influence and control uncertainties, and manage opportunities (Cassidy et al. 2001). Regrettably, in a recent study conducted by the Association of Governing Boards of Universities and Colleges and United Educators (2009), 60 percent ofthe 606 college administrators responding to a risk management survey said they are still not engaged in a comprehensive strategic assessment to identify risks that would negatively impact the success of their missions. The study found that fewer than 40 percent of all institutions use such an assessment. Only 5 percent of the study's respondents felt their institutions have exemplary practices that promote the success of their missions.
In the final analysis, the ultimate goal of efforts to maximize an institution's value (through risk management) and set its strategic goals and objectives (through strategic planning) is the achievement of the institution's expressed vision. In light of that, it is both logical and desirable to integrate risk management and strategic planning into one coordinated, holistic process to create a synergistic effect that leverages the benefits of both processes and makes them mutually reinforcing. …