Financial Risk Assessment Protocol

A logo with a symbol and compass Description automatically generated with medium confidence    Financial Risk Assessment Protocol
Document Owner: Office of the Dean
Date of Creation: March 2024Date of Review: March 2028Members of the Review:
John ClarkTom MallinsonCsaba DioszeghyAebhric O’Kelly
Document Type: Contact/Creator: John Clark

1. Purpose

The purpose of this protocol is to establish a systematic approach to identifying, assessing, and mitigating financial risks that could potentially impact the financial stability and operations of CoROM. This protocol ensures that the College remains financially sound and able to meet its obligations to students, staff, and stakeholders.

2. Scope

This protocol applies to all financial activities and decisions of CoROM, including but not limited to budgeting, expenditure, revenue generation, investment, and financial forecasting. It covers risks related to internal operations, external market conditions, and regulatory changes.

3. Definitions

  1. Financial Risk: Any factor or event that could result in financial loss, reduced revenue, or increased expenditure, thereby impacting CoROM’s financial stability.
  2. Risk Mitigation: Strategies and actions taken to reduce the likelihood or impact of financial risks.

4. Risk Identification

Financial risks will be identified through regular reviews of CoROM’s financial activities, as well as through consultations with department heads, financial staff, and external advisors. Potential sources of financial risk include:

  1. Budget Overruns: Expenditure exceeding allocated budgets.
  2. Revenue Shortfalls: Insufficient income from student fees, grants, or other revenue streams.
  3. Currency Fluctuations: Adverse exchange rate movements impacting international transactions.
  4. Regulatory Changes: New regulations that could increase operational costs or reduce funding.
  5. Fraud and Financial Mismanagement: Internal or external activities that could lead to financial losses.
  6. External Economic Conditions: Recession, inflation, or economic instability that could affect student enrolment or donations.

5. Risk Assessment

Each identified financial risk will be assessed based on the following criteria:

  1. Likelihood: The probability of the risk occurring (high, medium, low).
  2. Impact: The potential financial loss or operational disruption if the risk materialises (high, medium, low).
  3. Risk Rating: A combined assessment of likelihood and impact to prioritise risks.

This assessment will be documented in a “Risk Register”, which will be updated regularly to reflect new risks or changes in existing ones.

6. Risk Mitigation Strategies

Mitigation strategies will be developed based on the priority level of each risk. These strategies may include:

  1. Budget Controls: Implementing strict budget monitoring and approval processes to avoid overruns.
  2. Diversification of Revenue Streams: Developing new income sources to reduce dependence on a single revenue stream, such as expanding short courses or introducing new academic programmes.
  3. Financial Reserves: Maintaining adequate financial reserves to absorb unexpected losses or increased costs.
  4. Hedging Currency Exposure: Using financial instruments to hedge against adverse currency fluctuations.
  5. Compliance Monitoring: Staying up-to-date with regulatory changes and implementing necessary adjustments promptly.
  6. Fraud Prevention Measures: Strengthening internal controls, regular audits, and training staff to detect and prevent fraudulent activities.
  7. Cost-Reduction Initiatives: Identifying areas where operational efficiencies can be increased to reduce costs.

7. Risk Monitoring and Reporting

Regular financial reviews will be conducted to monitor existing risks and identify new ones. The “Financial Risk Register” will be reviewed by the Executive Dean and ASMG’s CFO on a quarterly basis, and any significant risks will be reported to the College’s Board of Regents.

8. Contingency Planning

For high-priority risks, contingency plans will be developed to ensure rapid and effective responses in the event of a financial crisis. These plans will include steps to secure emergency funding, cut non-essential expenditures, or delay non-critical investments.

9. Roles and Responsibilities

  1. Bookkeeper: Responsible for monitoring day-to-day financial activities, maintaining the risk register, and implementing risk mitigation strategies.
  2. Executive Dean: Oversees the financial risk management process and ensures alignment with the College’s strategic goals.
  3. Board of Regents: Reviews financial risk reports and provides guidance on high-level risk mitigation strategies.

10. Policy Review

This protocol will be reviewed annually to ensure its effectiveness in managing CoROM’s financial risks. Updates will be made as necessary to address changing financial conditions, emerging risks, or lessons learned from past incidents.