The state of risk management in business schools

Abstract

Purpose

The spread of entrepreneurial rent seeking (or entrepreneurialism for short) and market-based performance measurement (accreditation, rankings) have transformed many business schools into risk-taking organizations. The establishment of formal risk management activities would represent the fitting counterpart to this development. The purpose of this paper is to examine the state of risk management activities in business schools and evaluates the presence of discrepancies from first-best practices found in the corporate sector.

Design/methodology/approach

The data for this study were collected through a structured questionnaire addressed to heads of internationally active business schools in cooperation with a major international accreditation provider. Non-parametric and parametric methods (logistic regression) were used to analyze the formalization of risk management in business schools, in particular the differentiating role of entrepreneurial rent seeking and international accreditation.

Findings

Risk management is still in the early stages of formalization compared to the corporate sector. The results indicate that entrepreneurial rent seeking does not encourage the institutional establishment of risk management in business schools, while holding international accreditation has the opposite effect.

Practical implications

Risk management has become a focus area of regulators and accreditation agencies. The rising number of business schools struggling financially also serves as evidence that risk taking is frequently not matched by formal risk management policies (further supported by descriptive statistics of the survey published separately). The largely uncontested statement of the R. Lyons, Dean of the Haas School/Berkeley, that 50 per cent of business schools will disappear within the next five to ten years can only be rationalized in the context of risk not being appropriately addressed by business schools.

Originality/value

The paper represents the first empirical study analyzing risk management practices in business schools. The study design follows the approach commonly employed in the corporate risk management literature to capture the design of the risk management process covering governance aspects as well as approaches to risk identification, risk assessment, risk mitigation and performance controlling.

Citation

Hommel, U., Li, W. and Pastwa, A.M. (2016), "The state of risk management in business schools", Journal of Management Development, Vol. 35 No. 5, pp. 606-622. https://doi.org/10.1108/JMD-08-2014-0088