Enterprise Risk Management (ERM) at US Colleges and Universities
Total Page：16
File Type：pdf, Size：1020Kb
Western Michigan University ScholarWorks at WMU Dissertations Graduate College 12-2015 Enterprise Risk Management (ERM) at U.S. Colleges and Universities: Administration Processes Regarding the Adoption, Implementation, and Integration of ERM Anne E. Lundquist Western Michigan University, [email protected] Follow this and additional works at: https://scholarworks.wmich.edu/dissertations Part of the Educational Administration and Supervision Commons, Educational Leadership Commons, and the Higher Education Commons Recommended Citation Lundquist, Anne E., "Enterprise Risk Management (ERM) at U.S. Colleges and Universities: Administration Processes Regarding the Adoption, Implementation, and Integration of ERM" (2015). Dissertations. 1181. https://scholarworks.wmich.edu/dissertations/1181 This Dissertation-Open Access is brought to you for free and open access by the Graduate College at ScholarWorks at WMU. It has been accepted for inclusion in Dissertations by an authorized administrator of ScholarWorks at WMU. For more information, please contact [email protected]. ENTERPRISE RISK MANAGEMENT (ERM) AT U.S. COLLEGES AND UNIVERSITIES: ADMINISTRATION PROCESSES REGARDING THE ADOPTION, IMPLEMENTATION, AND INTEGRATION OF ERM by Anne E. Lundquist A dissertation submitted to the Graduate College in partial fulfillment of the requirements for the degree of Doctor of Philosophy Educational Leadership, Research, and Technology Western Michigan University December 2015 Doctoral Committee: Andrea Beach, Ph. D., Chair Patricia Reeves, Ph. D Betty J. Simkins, Ph. D ENTERPRISE RISK MANAGEMENT (ERM) AT U.S. COLLEGES AND UNIVERSITIES: ADMINISTRATION PROCESSES REGARDING THE ADOPTION, IMPLEMENTATION, AND INTEGRATION OF ERM Anne E. Lundquist, Ph.D. Western Michigan University, 2015 The variety, type and volume of risks affecting higher education are numerous and the consequences for unmanaged risks and missed opportunities are more significant than ever before. In response, many institutions of higher education are adopting an Enterprise Risk Management (ERM) approach. External factors, as well as institutional culture, play a role in the decision to adopt ERM, as well as the path of implementation. Because higher education has unique characteristics that differentiate it from other organizations, particularly a shared governance structure, the adoption and implementation decisions, and resulting ERM frameworks, have aspects that make them unique to the higher education environment. While adoption of ERM is increasingly widespread, empirical research is limited, particularly in the higher education sector. The purpose of this constructivist grounded theory mixed methods study was to understand decision-making and administration processes regarding the adoption, implementation, and integration of ERM at institutions of higher education (IHE) in the United States (U.S.) from the point of view of administrators with ERM responsibility and oversight and to build theory of ERM implementation in the higher education sector to be used by researchers and practitioners. Results reveal that IHEs adopt ERM either as a proactive initiative by the board or president or in response to a sentinel event (or a combination). ERM implementation activities move through four levels (forming, developing, established, and integrated), not in a linear progression, rather in deepening phases organized around the academic year. The process of dialogue across institutional silos in the decentralized college and university environment may have equal benefit to the identification, evaluation, and mitigation of risks. While most administrators regard ERM as essential for achieving the institution’s objectives, practitioners articulate that most faculty do not. This study opens up many other areas for research regarding particular aspects of ERM in higher education and also provides practical ideas and models for administrators tasked with adopting, implementing, and integrating ERM on their campus. Key words: enterprise risk management; ERM; risk maturity; higher education; colleges and universities; shared governance Copyright by Anne E. Lundquist 2015 ACKNOWLEDGMENTS I would like to thank the members of my dissertation committee for their support, insight, and advice throughout the process from concept to completion – Dr. Andrea Beach, Dr. Pat Reeves, and Dr. Betty Simkins. Your wisdom and insights were invaluable. Many thanks to my ERM colleagues who offered insight along the way: Roger Ward, Pete Gilbert, Shulamith Klein, Al Turgeon, Andrew Faris, Tim Wiseman, Paula Smith, Andre LeDuc, Louise Reist, and many others. I’d like to acknowledge Donna Talbot, for launching me on this PhD journey; Ramona Lewis for the teaching opportunities and her collegial friendship; Diane Anderson, for her unfailing support of me as a student affairs administrator and a friend; Kelly Reed - the best GA and TA in the world; and Julia Reich, from Stone Soup Creative, for her graphic design talent on my conceptual models. Finally, I’d like to acknowledge the support and patience of my family - David Lundquist, Tom, Diana and Riley Lundquist; Sarah, Dave, Zach and Alex Leskovec – and friends: Jamey & Elly; Julie & Steve; Don and Sarah; Mehegan & Aaron; Mark and Tina; Sue, Ewa, Tana, Jennifer, Carol P., Jamie, Carol VZ, Laura, Cathy, and Karen. I couldn’t have done it without you. Anne E. Lundquist ii DEDICATION I dedicate this dissertation work to the memory of my mother, Georgia Townsend Lundquist, and my husband, Allan Lash Shackelford. My dissertation journey was interlaced with my mother’s illness and death from Lewy Body dementia in May 2013, and the diagnosis of my husband with ALS Lou Gehrig’s disease that same summer and his death in August 2013. Their love of learning supported and inspired me. I dedicate it as well to my children, Andrew Lundquist-Wentz and Chelsea Lundquist-Wentz, who, even though far away in Denver and D.C. are always close to me in my heart. iii TABLE OF CONTENTS ACKNOWLEDGMENTS .................................................................................................. ii DEDICATION ................................................................................................................... iii LIST OF TABLES ............................................................................................................. ix LIST OF FIGURES ............................................................................................................ x CHAPTER I. INTRODUCTION .................................................................................................. 1 Practical Problem Statement .......................................................................... 3 Research Problem Statement ......................................................................... 5 Purpose Statement and Research Questions .................................................. 7 Methods Overview ......................................................................................... 8 Preliminary Conceptual Framework .............................................................. 9 Organization of the Dissertation .................................................................. 10 II. LITERATURE REVIEW ..................................................................................... 12 Definition of Risk ........................................................................................ 12 Risk Perception ............................................................................................ 13 Risk Management ........................................................................................ 14 Risk and Risk Management at Colleges and Universities ........................... 16 Enterprise Risk Management ....................................................................... 20 Definition of ERM .............................................................................. 21 Evolution of ERM............................................................................... 23 iv Table of Contents—Continued CHAPTER ERM Frameworks and Standards ....................................................... 26 Variability of ERM Approaches ......................................................... 32 ERM Process................................................................................................ 32 Objective Setting ................................................................................ 33 Risk Identification .............................................................................. 34 Risk Assessment ................................................................................. 35 Risk Response ..................................................................................... 36 Monitoring and Review ...................................................................... 36 Risk Maturity ............................................................................................... 37 Responsibility for ERM ............................................................................... 38 Internal Audit ...................................................................................... 38 CEOs, Presidents, and Governing Boards .......................................... 39 Risk Manager ...................................................................................... 41 Benefits and Critiques of ERM .................................................................... 42 Transferability of ERM to Higher Education