Risk assessment, strategic planning and innovation – What does the way forward look like for the tertiary education sector in the face of COVID-19?
Without question, the higher education sector in Australia has been heavily impacted by COVID-19.
The sector is expected to face ongoing revenue slumps of around 30% for up to 3 years, with the Mitchell Institute predicting a cumulative loss of between $10 bn and $19 bn from 2020-2023 across the sector.
Federal government funding has remained static for a number of years, so universities have innovated new income streams, increasing international student revenue exponentially. International fees account for approximately 25% of industry revenue, used to fund big-ticket items like research, asset renewal, student services and student experience.
The hit on international student revenue could have a flow-on effect – including an impact on university rankings. International fees contribute generously to research, and university rankings rely upon the offerings of the university, including research opportunities.
COVID-19 has seen international students becoming “stranded” in Australia, having lost their jobs and not qualifying for Commonwealth welfare payments. In some cases, institutions are putting together food and care packages – although state governments are stepping in with contributions to crisis organisations to support international students.
The Chinese student market is Australia’s largest. Canada competes strongly for Chinese students and currently, unlike Australia, the Canadian government is subsidising international students who have lost income during the pandemic.
Despite the obvious challenges, if Australian universities and other higher education institutions implement the appropriate risk assessment, strategic planning and innovation, there is an opportunity to maintain a resilient stance through the uncertainty.
Of course, factors to consider in terms of resilience are the proportion of revenue the institution earns from overseas students compared to the cost of continuing operations.
Institutions need to have enough liquid resources to get through the most pessimistic outlook. Most institutions haven’t even looked at that yet, because they’ve been funding the decrease in revenue. They haven’t seen it drop, they’re trying to get more in.
To ensure recovery, it’s important institutions keep a short to medium-term focus:
- Cutting back on capital expenditure and works.
- Reducing other spend such as travel, conferences, contracts and looking at staffing levels.
- Rationalisation and mothballing of assets such as lecture theatres.
They need to look at expenses like head office costs, student experience areas, student welfare – non-fee earners will need to be justified and they’ll need to work out whether to keep those areas going. They’re good to have as selling points, but in bad times, they need to be able to turn it down as well.
The future of tertiary education needs to be reimagined to meet changing needs, and whilst universities are already moving to expand their online education capabilities, consideration needs to be put into how to enhance the “Australian experience” in online education.
How can RSM help?
To discuss risk assessment, scenario planning and your business continuity plan, contact your local RSM office today. Working closely with universities for over 20 years, RSM Australia looks beyond just the back office – understanding tuition, quality of teaching and degree provision as well.