When does a board take responsibility?


Recent reports of a private school in Melborne, Victoria calling in administrators and facing possible closure due to its banks refusing to continue providing credit. The school is reportedly $18M in debt. According to media reports almost two years ago the Australian Securities and Investment Commission red-flagged the schools rising indebtness.

Now like many commentators I am not privy to the internal discussions by the board of Mowbray College. Therefore the purpose of this article is not to pass judgment; rather to pose a question or two for other organisations to consider.

At what point do board members beging to ask questions? How much debt must an organisation accrue before board members implement risk management strategies? Why did the board allow this situation to reach a point that a major funder withdraws funding? When did the board members stop considering the future wellbeing of stakeholders such as students and staff?

This is not the benefit of hindsight. I am not proposing a solution to Mowbray College here. I am hoping to raise awareness amongst those of you engaged in governance or management of your own organisation.

The questions I pose are not rocket science. They could be posed by a 10-year old. They could be answered by a third year student of business studies.

Those engaged in governance and management of our organisations have a responsibility to manage risk. This is a key management function. It is not about eliminating risk. There will always be elements of risk. It is not about avoiding risk. That is self defeating. It’s about being able to recognise potential risk, having in place some form of risk analysis, being able to identify the risk triggers or events and implementing appropriate remedial strategies in advance.

Failure to do so is a failure of management.

It is irrelevant how Mowbray College is bailed out of this situation. In some form or another there will be a bailout. Somehow the community will pay collectively for this failure of management. The real point is, this should never have occured.

I know businesses operate on debt. So being in debt isn’t the issue either. The issue is that no one appears to have started to ask questions. No one appears to have taken action. Or if they did ask questions they were ignored by the board and management.

What can you do in your organisation to manage risk? Firstly have in place a process for identifying and assessing risk. Then have in place a process for minimising the negative impact as a risk environment presents itself.

Those are the tools. Equally as important, though some might suggest even more important is this. Ask questions. Challenge the assumptions inherent in decisions. Seek clarification and seek evidence to support decision making processes.

You will not recieve an award for employee of the year. In many instances you will not be either liked or appreciated for you efforts. No matter. What is really important is this. In doing the above you might just have done sufficient to ensure your organisation is not the next Mowbray College.

Those are my thoughts for the day.

Let The Journey Continue

John Coxon

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About John Coxon

Principal consultant for John Coxon & Associates, a management consultancy working with boards and management teams in healthcare, aged care and not for profit organisations to develop effective strategic planning processes and social enterprise business plans
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