Emerging Risks of Higher Education that Auditors Need to Know

Publication Date: May 14, 2024

Higher education institutions play a vital role in an individual’s intellectual development as well as reshaping societal progress by offering advanced knowledge and skillsets that foster critical thinking and contributions to research and innovation. Serving as centers for academic and cultural exchange, higher education institutions are looked up to as catalysts for positive changes in the job market and drivers of humankind.
 
In recent times, higher education has been exposed to various emerging risks. Due to the nature of these risks, each one requires a concentrated approach for review. In this article, we investigate the following key risks that higher education auditors need to be aware of.

Impact of Digitalization

The rapid pace of technology advancements requires higher education institutions to stay abreast of digital trends that result in universities increasingly relying on digital infrastructure and the need to manage vast amounts of student data. Technology integration, if hindered at varying infrastructure levels can contribute to a digital divide for higher education institutions. Auditors need to evaluate the adequacy of the technology landscape of the institutions for information flow effectiveness and utilization of emerging technologies such as generative AI, blockchain, and cloud computing. Furthermore, protecting sensitive student data, research information, and financial records is crucial. Regular assessment of cybersecurity measures, incident reporting, response plans, and compliance with the data protection law should be performed. A robust data governance practice and institution data safeguarding protocol is paramount.

Shifts in Job Market Dynamics

Technological advancements, particularly in the fields of automation, biotechnology, and renewable energy, pose both opportunities and challenges for higher education. Even though these innovations offer potential for groundbreaking research and education programs, higher education institutions must adapt curricula to meet evolving industry demands, ensuring that the graduates possess relevant skills. They also need to collaborate with industry partners to align education with the evolving job markets. As auditors, we need to be able to evaluate the effectiveness of the academic program review process established in the institution for regular curriculum updates. To mitigate this risk, we need to incorporate periodic reviews focused on fostering critical thinking and adaptability of curricula.

Impact of Global Events and Climate Changes

The unpredictability around the unfolding of global events such as the recent pandemic, geopolitical tensions, economic downturns, and environmental changes like extreme weather events, can affect the institution’s infrastructure and disrupt the delivery of academic activities. Auditors should periodically assess institutional resilience and the adequacy of contingency plans to mitigate the effects of such unforeseen global events.

Diversity, Equity, and Inclusion

Higher education institutions are judged for the diversity, equity, and inclusion of students and faculty from all norms, posing reputational risks related to gender disparities and the preservation of cultural identity. Ensuring equal access to higher education for all socioeconomic groups and genders requires tailored strategies addressing cultural disparities. Auditors need to assess the effectiveness and adherence of inclusion policies and practices established in the institution. Periodic reviews of recruitment, admissions, and support services for inclusivity should be performed as well.

Funding and Financial Sustainability

In recent times, most higher education institutions have faced funding and financial struggles. Reduced government funding, uncertainties around tuition fees, and economic fluctuations, coupled with fewer private investments through research grants, limit the financial stability of universities, affecting academic program offerings and student services. Auditors need to evaluate the creditability and financial position of the institution through additional revenue creation assessment and accounts receivable reviews to identify any funding opportunities.

Social and Political Shifts

Social and political dynamics prevalent within the state also contribute to risks such as ideological divides on campuses, affecting academic freedom and fostering an environment where diverse perspectives may face challenges. Geopolitical complexities within a region may also affect the ease of establishing and maintaining international partnerships, which could limit the flow of talent and ideas. Furthermore, issues related to campus safety, including instances of violence and harassment, pose ongoing concerns. Auditors need to identify these risks and conduct institutional governance reviews to strike a balance between government priorities and maintaining the strategic plans of the university.

Demographic Changes and Internationalization of Institutions

Shifts in population demographics, such as changes in age distribution of students, diverse student profiles, socio-economic disparities, underrepresentation of certain demographics, and expansion of online education facilities provided by institutions require adjustments to educational approach and mode of delivery. Auditors need to evaluate the adequacy of internal controls prevalent around academic integrity, data privacy in virtual classrooms, and quality assurance mechanisms for academic programs offered by the institution. For higher education institutions with a global footprint, auditors should assess the risks associated with international collaborations, branch campus operations, and compliance with federal and state regulatory requirements governing student aid, accreditation, and financial reporting in the region of operations. In addition, the well-being of students, particularly mental health wellness, is a growing concern. Auditors need to assess the awareness of the importance of well-being in academic settings, the adequacy of student recreational programs, and the infrastructure available in the institution to ensure that adequate student support is provided in handling the pressures of academic life, social challenges, and transitions to the university.

Institutional Governance and Tone at the Top

An institution’s control culture is well determined by the Tone at the Top of the respective institution. A robust governance structure is crucial for ensuring ethical conduct and maintaining public trust. Auditors should periodically evaluate the effectiveness of internal controls, whistleblower mechanisms, and the effectiveness of the ethical policies practiced in the institution. The emphasis on metrics, institutional rankings, and performance indicators can create pressures on institutions to meet specific criteria, causing institutions to compromise on academic ethical standard practices followed in the institution. Balancing quality assurance with the need for diverse educational offerings and navigating changes in global dynamics are continual challenges for the institution that need to be assessed by auditors.
 
In conclusion, higher education faces multidimensional risks such as cybersecurity threats, regulatory compliance, geopolitical tensions, data integrity, job market dynamics, technological advancements, privacy, inclusion and diversity, and demographic student shifts that may disrupt academic activities, hinder international collaborations and lead to migration of students and faculty. As higher education institution auditors, the evolving risk magnitude requires us to stay informed, conduct thorough risk assessments, and collaborate to ensure institutional resilience through a proactive adaptive approach.