HERIOT-WATT UNIVERSITY

STRATEGIC RISK MANAGEMENT – JUNE 2019

Case Study

Note: In developing your answers you can make any assumptions you wish provided these are reasonable,
do not contradict the content of the case study and are clearly written down.

Note: Company and individual names are shown in italics.

Kitanya is the capital of a north-western European country. The University of Kitanya is an

established research-driven university with a distinguished history stretching back to its
formation in 1821. The university, sited on the outskirts of Kitanya, specialises in science
and engineering disciplines and has an internationally renowned school of Computer
Engineering. It also has a high-profile Business School that offers a range of business-related
courses including Master of Business Administration (MBA), Master of Science (MSc)
and Doctorate in Business Administration (DBA) programmes.

The university has always relied on research as its main source of income. In 2010
research funding provided around 60% of university income. The main sources of
research funding were (a) National Government investment through Research Council
grants and (b) private research funding. At the same time, income from teaching
generated around 30% of total income with the remaining 10% made up of income from
other sources.

Over the past few years income from research has been steadily falling as a result of a
number of different factors. Following change in government policy in 2013, the National
Government has reduced research funding through Research Councils by an average of 5%
each year and has made it clear that such reductions in funding will continue for the
foreseeable future. As a result, private research funding has fallen by an even greater
amount. Since 2013 the university has seen private research funding fall by more than
45% in real terms.

Over the same period, revenue from teaching has increased significantly. In 2015 the
National Government announced it would be withdrawing centralised funding for teaching
following the increasing numbers of overseas students arriving to study in the University of
Kitanya campus. This change in government policy means that from 2015 National
Government no longer supports university teaching and individual universities can charge
teaching fees up to a statutory limit.

As a result of these changes, by 2018 research income provided only about 25% of
university income, while teaching fees generated over 70% of university income. A
market survey indicated that competitors in the higher education sector are taking
measures towards achieving a competitive advantage over the University of Kitanya. The
university has accepted there is a need to realign the strategic objectives of the university
to embrace this long-term change in income profile and generated the ‘Vision 2022’

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strategic programme. The university attempts to maintain research income at the highest
possible level while doing everything possible to maximise income from teaching fees.
The university is investing heavily, therefore, in developing new methods of teaching and
delivery.

The university continues to deliver courses under the traditional format of campus-based
teaching in Kitanya and has tried to expand the range and number of campus-based
courses as much as possible. There is, however, an absolute limit to the number of
campus-based students that can be accommodated within the existing teaching facilities
that exist at the campus. The university, therefore, is introducing a wide range of new
virtual learning courses at MBA, MSc and DBA levels. The university has also committed
to opening a number of new overseas innovation centres in a number of locations
around the world. Under the first phase of the ‘learn through partners’ initiative, the
university is spending €12 million on establishing and supporting local teaching hubs in
the Middle East, Southeast Asia and South America. Each local partner hub will offer 1-
on-5 (a dedicated tutor for every five students) tuition in the local language backed with
24/7 video-streaming support from faculty in the University of Kitanya. Each local hub will
also partner with local companies to develop executive education programmes. The
capital investment is considerable and it is essential that the new overseas partners all
work successfully and that they meet their individual income generation targets by 2022.
If the overseas partners fail for any reason, the long-term financial implications for the
university will be considerable.

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Question 1

(a) From the point of view of the University of Kitanya, identify and discuss six likely
major unforeseen/unforeseeable risks associated with the development of the
overseas partner initiative. In each case, explain why you consider the risk to be
unforeseen/unforeseeable and suggest possible university response options.

(40 marks)

(b) Discuss the concept of strategic drift and identify the main strategic drift drivers
that are likely to apply in the case study from the point of view of the University of
Kitanya.
(60 marks)

(Total 100 marks)

Question 2

(a) Differentiate between decision making under conditions of certainty, risk and
uncertainty and explain how the University of Kitanya might use scenario planning, a
tool to assist decision making under conditions of uncertainty.
(40 marks)

(b) Carry out a scenario planning exercise for the case study from the point of view of
the University of Kitanya.
(60 marks)

(Total 100 marks)

Question 3

(a) Discuss and compare the main characteristics of standard risk management
systems (RMS) and enterprise-wide risk management systems (EWRMS) and
explore the likely viability or otherwise of the University of Kitanya using an
EWRMS in the case study.
(40 marks)

(b) Discuss the concept of the risk interdependency field (RIF) and draw a simple RIF
from the point of view of the University of Kitanya, including example node risks
based on the case study.
(60 marks)

(Total 100 marks)

END OF PAPER