Navigating challenging financial circumstances – the OIA adds its perspective

The resources available to institutions navigating financially challenging circumstances continue to develop.  In response to a request from Universities UK’s Transformation and Efficiency Taskforce, Mills & Reeve and KPMG have recently published the joint report “Radical Collaboration: a playbook”.  For more on the innovative models and potential for change outlined in that report see our blog on the report.

Additionally, the OIA working with SUMS consulting has recently published the findings of a cross-sector study examining how higher education providers navigate challenging financial circumstances, specifically market exit.  The Committee of University Chairs was part of the steering group for this work.

The OIA report unsurprisingly and unapologetically has its focus on the student.  It outlines a range of considerations where financial pressure is building on an institution, with a particular eye on mitigating the impact on students.  One of the participants in the study is quoted “…[insolvency] it’s not a linear, logical process with time to consider various steps and priorities…. it’s more like a chaotic storm that precludes logic and requires external support to guide you through it”.  

The report notes a degree of apparent confusion among some participants in the study, sometimes referring to the OfS’s Student Protection Plans (SPPs) and Student Protection Directions (SPDs) interchangeably, as well as flagging the  potential misalignment between SPDs, trustee duties and the legal duties of insolvency practitioners.

The report uses three case studies based on in-depth interviews from those involved in the (unnamed) real-life scenarios:

• Closure of a small, specialist institution with around 40 staff and several hundred students based across two campuses;
• Closure of an academic programme;
• Perspectives from two receiving providers involved in receiving students from two separate market exits of UK-based providers.

The report references a broad range of lessons learned from the perspectives of closing providers, receiving providers and validating providers.  As well as highlighting the need for legislative changes to protect the interests of students, there is particular focus on the importance of due diligence, effective risk management and proactive contingency planning

The report also outlines a range of potential measures intended to better protect students including:

• Reforms to the legal and regulatory frameworks;
• A range of improved sector coordination and support mechanisms
• Additional guidance from sector bodies on a range of matters
• Measures to help drive cultural shifts within organisations, including management teams and governing bodies.

Alongside the report, the OIA has published a framework that sets out some key actions that providers and governing bodies might consider whilst seeking to prevent or manage market exit.  The framework is split across a range of operational areas: Strategy and Finance, Legal and Governance, Operational, Students, Academic Delivery and Staff and HR.  The framework is based on overarching assumptions that:

• The provider “is in a mature state of organisational development, i.e. it is not a start-up”;
• The provider “will have complied with the Office for Students' (OfS) conditions of registration that are intended to ensure that students can continue their studies or receive appropriate compensation (Condition 3: Student protection plan and Condition 4: Student protection directive specifically).”;
• “OfS interventions are out of scope for the framework, as they are outside the control of the HEP”.

A range of additional resources including contact details for our expert taskforce are available here: University financial resilience taskforce | Mills & Reeve