8.3 Risk Management
Our risk management system is based on the ISO 31000 Risk Management Framework supplemented by the Kaplan-Mikes model. In doing so, we use the three-line model in the awareness that adequate risk management is not only anchored in structures such as governance, systems, and procedures but that awareness and behavior of students and employees are just as important. Tilburg University operates from the Code of Good Governance of Dutch Universities.
Governance
The governance structure of the foundation is defined in the Structure Regulations. This is further elaborated in the Administration and Management Regulations. Our guiding principle here is integral management at the decentralized level. As internal supervisor, the Board of Governors is charged with approving the strategy and budget and adopting the annual report and is closely involved in major policy decisions. The Audit, Risk & Compliance Committee oversees the presence and operation of systems and processes for internal control and finance. The Education, Research and Impact Committee oversees the quality of primary processes.
The Executive Board has mandated the tasks and powers for education and research—insofar as this does not already follow from the law—to the Deans. Personnel and financial management are mandated to Division Managing Directors and Deans with a sub-mandate to School Managing Directors. Decisions on common issues are largely based on support from the Deans and management. In the spring and fall, the Executive Board meets separately with the Schools’ MTs.
Three-line model
The lines function in relation to each other and contribute to internal control.
Figure 8.1 Three-line model
The Executive Board and Deans ensure that the organization has adequate resources to achieve goals, seize opportunities, and mitigate risks. A culture of ethical and responsible behavior is fostered. The Executive Board sets the frameworks for risk acceptance and is accountable to stakeholders.
First line: Management (Vice-Deans, Managing Directors, managers) provides first-line leadership and direction for management activities and is in dialogue with the Executive Board and Deans on goals, opportunities, and risk management.
Second line: The internal control positions in the second line monitor specific risks and report progress to management. Coordination of risk management is housed in the independently positioned Internal Audit & Compliance unit.
Third line: Internal Audit & Compliance assesses the reliability of information and systems and advises on improving risk management and internal controls.
Culture and behavior
The organizational culture is healthier if mistakes can be discussed, and staff and students hold each other accountable for behavior. Our Strategy Towards 2027: Weaving Minds & Characters focuses on four core values that guide our behavior and actions: curious, caring, connected, and courageous. Everyone active within Tilburg University's academic community is expected to work from these values. The Executive Board and Deans play a leading role in the dialogue about how students and employees put these values into practice and how to act in matters of compliance and integrity. The Tilburg University Code of Conduct addresses seven themes concerning good behavior and manners with a reference to further elaborations and guidelines.
Risk Management
Within the risk control framework, the strategic and tactical risks are periodically mapped out on the basis of various scenarios. Management measures are linked to these based on risk assessments.
Within the planning & control cycle, the management of each management unit reports on risks and the control of these. Tilburg University pays considerable attention to detecting threats in the areas of IT, knowledge security, and integrity.
In the fall meeting, the Executive Board talks to the Schools and Divisions about the greatest risks. Risk management is regularly on the agenda of the Audit, Risk & Compliance Committee and the Board of Governors' Education, Research, and Impact Committee.
Key external risks and uncertainties
Tilburg University identifies the following risks in the external environment.
Figure 8.2 Risks
The main external risks are detailed below.
Geopolitical situation
To respond to geopolitical uncertainties in the world and their economic consequences, Schools and Divisions must be sufficiently agile and flexible. The sanctions, the energy crisis, and inflation caused by the war in Ukraine not only affect the university's education and research processes and business operations but also national policies regarding knowledge security and internationalization.
Knowledge security refers to the risk of undesired knowledge transfer and the risk of undesired influence. A national guideline for this was created in 2022. It plays out in technical universities where theft of technological research is a genuine risk, but the humanities and other sciences are also affected. There is concern that measures to control these risks will lead to a restriction of academic freedom, the right to science, the independence of universities, and opportunities for the exchange of scientific research. The Executive Board commissioned an integrated analysis of the current system of integrity and security within Tilburg University to identify gaps and improve the level of security and integrity. The Schools started a risk analysis for research areas with an increased risk of undesirable knowledge transfer or influence, as well as for collaborative relationships with high-risk countries[1].
Political environment
In the university education (WO) Administrative Agreement, the Minister has announced a future study, the possible effects of which for important topics such as internationalization and capacity funding are not yet determined at this time. Increasing emphasis from national politics is placed on controlling the intake of international students so that education remains accessible to Dutch students. Examples include the recently passed motion on Dutch as the language of instruction for Bachelor’s programs and the call to stop actively recruiting international students. A vision on internationalization is expected to be published in March and, before the summer, a future study that will also address funding. We are steering for customization, monitoring developments, and making risk assessments to make timely adjustments.
A stricter admission policy will potentially have a negative effect on the intake of non-EEA students. Currently, 77% of Tilburg University students are from the Netherlands, 17% from other EEA countries ,and 6% from non-EEA countries. The potential impact of a stricter admission policy depends on the nature of the measures, and this is currently difficult to estimate. In the short term, the impact is expected to be limited because current students will want to complete their studies. The proportion of international students is relatively low compared to other universities: in 2021, 21% of enrolled students at Tilburg University were from abroad compared to 23% nationally. OCW's reference estimate still shows growth for university education, both nationally and for Tilburg University.
Macroeconomic conditions/inflation
In 2022, we faced significantly higher inflation. The wage and price-sensitive part of the government contribution is being adjusted for the nominal development of market wages and prices through the usual system in the course of the year. OCW announced that the government contribution will be increased retroactively in the Spring Memorandum 2023 to compensate for the sharp increase in energy costs in 2022. The indexation of statutory tuition fees has been adjusted starting in the academic year 2022–2023, thus temporizing the increase for students.
Energy: The 2023 budget takes into account €5 million higher energy costs compared to 2021. Through the price-sensitive part of the government contribution, this will be partially or fully compensated. Tilburg University is in the process of (accelerating) making its real estate more sustainable, which will involve additional costs in the short term, but which will be recovered in the future.
Construction costs: The campus is in the midst of development. The increase in both the cost of construction materials and labor will eventually be reflected in operating charges through higher depreciation and interest costs.
Wages: three-quarters of our charges are personnel expenses. Wage development in 2023 depends on the CLA of Dutch Universities for which negotiations are ongoing. The unions assume a wage increase of 14.3 percent in line with the inflation level of October 2022.Through the wage-sensitive part of the government contribution, part of the university wage development is compensated on the basis of the development of the market CLAs.
Pandemic
In recent years, the university has been dealing with the effects of the COVID-19 pandemic. Tilburg University has acted quickly and the impact on education and research was limited as much as possible. Initiatives such as hybrid education and hybrid working were considered opportunities, and this has been translated into new policies. This will require constant adjustment as ways of working and learning have changed. The pandemic had a major impact on the organization, which continues even now. The after-effects of the pandemic such as the effect on work pressure and the well-being of staff and students also require attention in the coming period.
Strategic risks
Twelve key strategic risks were identified in 2021, which are detailed below.
Figure 8.3 Strategic risks
Student intake. The risk is threefold - (1) declining enrollment will eventually affect government funding, (2) excessive growth could potentially have a negative effect on educational quality, and (3) funding for our programs falls short. Growth is not an end in itself. Tilburg University's strategy is focused on controlled growth, with excellence and quality as preconditions. Student numbers stabilized in 2022. Any national measures could put pressure on student numbers. We have been paying close attention to the increase in our student/staff ratio in recent years because it poses a risk to the workload and quality of education. The difference with other universities is partly caused by the low funding of our programs and the historically low basic funding. With the OCW’s 2022 Administrative Agreement, part of the backlog in funding will be made up through the basic funding. However, most of our programs are not in the STEM sectors that are being intensified nationally. Funding for pre-Master’s program, on which Tilburg University consciously focuses, is also lacking. As a result of growth in recent years, we have reinforced our position in the university landscape.
Continuity & quality of education & research. Quality of education and research and scientific integrity are vital to the university and essential to gain and maintain social trust. Tilburg University is well aware of this. The university uses various monitoring systems to ensure and improve quality. There are also various initiatives to ensure the quality of research, data management, and the code of conduct for research integrity (awareness). Tilburg University subscribes to the Netherlands Code of Conduct for Research Integrity (2018) and uses the Scientific Integrity Complaints Procedure. This complaints procedure aims to lower the threshold for reporting suspected violations of scientific integrity.
(Research) Collaborations. In line with our strategy, Tilburg University has various partnerships in the field of education and research. One example is the academic collaborative centers. Through these collaborations, benefits are intended and expected for all parties. To keep the quality of our education and research high, more collaboration is required, preferably also interdisciplinary. The administrative organization, finances, human resources, and other activities related to these collaborations are complex due to the involvement of very different organizations with different forms of governance, procedures, and systems. This potentially creates financial and reputational risks for Tilburg University. These risks are mitigated by clear agreements, good monitoring, and accountability.
(Workload) Personnel. The risk regarding personnel is twofold - (1) inability to fill vacancies and (2) high work pressure. For high-quality education and research, Tilburg University must have sufficient high-quality staff. Because of, among other things, intensification in education, high quality ambitions, and an aging workforce, this need is increasing. With a view to the (international) labor market, efforts are being made to strengthen our academic reputation, gender policy, leadership skills, and involvement in networks, including an attractive campus that is part of the Brabant knowledge region. Due to demographic developments (external threat), the labor market is tight, so we focus on attracting and retaining talent. Various studies show that the workload for (academic) staff is as high as ever. Tilburg University now has various initiatives aimed at workload and staff well-being, such as Recognition & Rewards and Connected Leading, which have been merged into Use (y)our Talents.
Innovation. Innovation is an important source for the quality development of education and research. With programs in the areas of digitalization and Learning Analytics, concrete work is being done on educational innovation. Nationally, in the field of research innovation, Tilburg University is very actively involved in the development of OA and Open Science. Tilburg University has established the Knowledge Transfer Office (KTO). Making an impact and collaborating with other parties involve a range of issues such as intellectual property, legal agreements, funding, and a validated business model. This can be complex and the KTO provides professional support in this regard.
Information/knowledge security. Dutch universities are vulnerable to cybercrime (external threat). Universities are traditionally and by definition open and accessible. This means a higher risk for information security. Tilburg University is well aware of this. Accessibility remains the starting point but not at any price. Tilburg University has defined a risk-based improvement plan (ISIP) to improve information security. In addition to the implementation of preventive technical measures, this plan also includes the establishment of an ISMS framework to monitor and control these risks. For example, a SOC-SIEM was implemented in 2022. In addition, annual external audits are part of this program. International collaborations are crucial for research and academic education and bring opportunities but also knowledge security risks. In accordance with national agreements, we conducted a risk analysis on knowledge security risks of research areas and an inventory of collaborations with high-risk countries. Although the risks at our university are smaller than at most other Dutch universities, they do exist. Awareness of this is increasing among Schools and scientists. We are also implementing an advisory team and developing handouts for Schools and scientists based on nationally developed checklists. 2023 is an important year for the implementation of the action plan we have defined for knowledge safety, for which the first steps were taken in 2022.
Housing. Quantitative and qualitative space needs are changing due to growth but also due to intensification of education, digitalization, work organization (hybrid working), and external developments (such as sustainability requirements). It takes a long time to develop new buildings due to permit and environmental requirements. In addition, construction costs are rising due to continued tightness in the construction market. These developments require efficient and effective housing concepts for which a strategic housing vision has been developed and is periodically updated. The availability and affordability of housing for (international) students is becoming increasingly difficult. This puts pressure on the development of student numbers. Through a covenant with, among others, the municipality and active involvement in new developments, we are addressing this issue.
Social Safety & Integrity. Tilburg University strives for a safe environment based on openness, integrity, trust, and transparency. Tilburg has a Code of Conduct in which the ground rules in terms of behavior and manners are laid down, and in which diversity, inclusion, and social safety are embedded. Various studies show that social safety for both employees and students at universities is a concern. Tilburg University is aware of this and has initiated various actions on this topic, and this theme has also been included in the new 2027 Strategy as a spearhead. Our international environment also creates potential higher risks in terms of social safety and integrity. Awareness of bias and increasing our intercultural knowledge and skills, therefore, contribute to mitigating such risks. Integrity issues are discussed within the Executive Board as well as the Board of Governors' advisory committees (Audit, Risk & Compliance Committee and/or Education, Research, and Impact Committee) In addition, there are various programs to maintain awareness of (scientific) integrity and so-called roadmaps have been drawn up to lower the thresholds for reporting and discussing dilemmas and suspicions of violations.
Compliance. Tilburg University complies with extensive and very diverse laws and regulations such as, for example, the HERA, the General Data Protection Regulation (GDPR), and the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act (Wet Normering bezoldiging Topfunctionarissen publieke en semipublieke sector (WNT)). The increasing complexity of laws and regulations puts ever-increasing pressure on the organization and its employees. Tilburg University continuously monitors developments in the field of laws and regulations to ensure that we remain compliant. An important part of this is training and awareness. Tilburg University determined its tax strategy in the spring of 2022 and is developing a tax control framework and a risk matrix based on this with a focus on key risks aiming to be able to conclude a fully developed Horizontal Monitoring Covenant with the tax authorities by the end of 2023. We want to handle the public and private resources made available to us carefully. This is reinforced by the awareness that we provide leading education in the tax field. Tilburg University is responsible for educating the tax specialists of the future and also conducts academic research in the tax field. We strive for a good relationship with the tax authorities in which we do not avoid discussions. The tax control framework ensures that we know the tax risks, but also provides insight into how we mitigate these risks through control measures.
Quality and continuity of operations. Quality and continuity of support services is critical to the delivery of good education and research. The COVID-19 pandemic illustrated how important this is. Being attractive for the right support staff of a sufficient quality level is becoming increasingly important in the tight labor market. (Internal) training also plays an important role here. Good education and research practices are the starting point for the design of our internal (support) processes and procedures. The starting points here are to set up the organization as effectively and efficiently as possible, whereby comprehensibility, accessibility, and simplicity are basic principles. The objective is that we do things right but also design the right things in the right way. This is part of the untangling and unburdening program that is part of our new strategic vision.
Well-being. The COVID-19 pandemic, intensification of education, high quality ambitions, and growing student numbers have increased the workload, which impacts student and staff well-being. Factors such as performance and financial pressures (e.g., loan system, inflation) impact student well-being. However, the aftermath of the COVID-19 pandemic also affects this. This also applies to PhD researchers, for whom this is mainly caused by performance pressure. Tilburg University has several initiatives aimed at staff well-being such as Recognition & Rewards. During the COVID-19 crisis, several good initiatives were started to support the well-being of students and PhD researchers. These will be continued and built upon as part of our Strategy Towards 2027.
Sustainability. Climate change and the societal discussions about it pose a risk if Tilburg University does not fully commit to sustainability. In our research and education, we are increasingly focusing on the Sustainable Development Goals (SDGs). In the Strategy Towards 2027, a number of sustainability goals are firmly embedded in our business operations, and at the same time, we want to accelerate major steps in the sustainability of our buildings and grounds.
Financial Planning & Control and some specific financial risks
As of 2022, the strategic planning period has been extended from four to six years. Budgeted operating results for each management unit are task-setting. Management units report interim progress during the year and make concluding analyses for the purpose of the financial statements. Deans and Managing Directors in the first line are supported by controllers who fall hierarchically under the Director of Finance & Control. The deviations from the budgeted operating results and the size of the financial reserves at the management units are standardized. Short-term fluctuations in operating revenues are absorbed by temporary deployment of reserves. Any further increase in decentralized reserves above the norm bandwidth is capped. Lower limits for liquidity (current ratio) and solvency have been set for the university as a whole.
Tilburg University conducts its business primarily within Europe, and financial transactions are settled in euros for the major part. Therefore, the currency risk is limited. A USD bank account with a limited balance is maintained for transactions in US dollars.
The financial assets are partially invested in fixed-interest government bonds. The price risk is limited as the entire portfolio complies with the OCW’s 2016 Investment, Borrowing, and Derivatives Regulations.
Credit risk from our customers is limited due to the nature of Tilburg University's activities. The university's cash is outstanding with Dutch banks that meet OCW's rating requirements. Liquidity is spread across various bank accounts. The university makes use of Treasury Banking for day-to-day liquidity with the Ministry of Finance.
Tilburg University has a current account position with the TiU-Holding B.V. of which the university is a full owner. Tilburg University has not issued a 403 statement.
- 1According to the national threat assessment, China, Russia, Iran, and North Korea are named as high-risk countries.
