By Richard G. Mills, Jr.
Neglecting risk management poses long-term hazards for higher education institutions. Colleges and universities face numerous complex threats, yet risk management often remains undervalued. Administrators and trustees frequently view it as a cost center rather than a strategic investment in resilience. This misperception threatens financial stability and exposes institutions to financial, reputational, legal, and existential risks.
This article argues that underfunding risk management in higher education creates a structural vulnerability that institutions can no longer afford to ignore. We evaluate and discuss how budget pressures can translate into compounding legal, operational, and reputational risks and the long-term cost of neglecting this indispensable function.
Why Risk Management Is Undervalued
Underfunding of campus risk management stems from a structural bias. Unlike research, athletics, or student success initiatives, risk management rarely commands attention from boards or legislators. At best, it is perceived as a back-office expense and a necessary but non-strategic cost; at worst, as an impediment to innovation. But this view misses its essential function: not to halt progress, but to enable it sustainably. Risk management safeguards institutional reputation, finances, and mission, ensuring that bold initiatives do not collapse under avoidable crises.
Underinvestment also reflects a bias toward present demands over future protection. From Title IX litigation to cyberattacks and large liability claims, the financial stakes of campus risks are rising. Settlements now routinely reach into the tens of millions of dollars, and cyber incidents can paralyze entire systems. A single uninsured or underinsured event can quickly dwarf available funds.
Academic leaders often allocate resources toward visible priorities such as buildings, research, and recruitment rather than toward prevention and coverage. Risk management succeeds when “nothing happens,” making its value largely invisible until disaster strikes. This dynamic produces chronic neglect that becomes prohibitively expensive once failures occur.
The Legal and Financial Squeeze
Institutions increasingly face overlapping legal, enrollment, and financial challenges. Universities are today more exposed to litigation risk than ever before, and the rise of third-party litigation funding has intensified this trend by increasing both claim frequency and settlement amounts. This combination often drives defense costs, settlement costs, and damage awards beyond traditional legal frameworks.
At the same time, according to the Western Interstate Commission for Higher Education’s latest projections, U.S. colleges are approaching an “enrollment cliff,” with the number of high school graduates projected to decline after 2025, by up to roughly 10% by 2041. This shift has already initiated campus closures, layoffs, and deep financial strain, particularly in small college towns. To adapt, universities are rethinking their models by expanding online, rebranding programs, and diversifying revenue to stay resilient in a shrinking student market.
Financial pressures are compounded by operational risks and a hardening insurance market. Premiums in liability and property lines have increased, while exclusions leave institutions exposed even when insured. Some universities are turning to captives or self-insurance; but without strategic risk management, these approaches can obscure long-term vulnerabilities. The result is a dual squeeze: rising external pressures and insufficient internal investment.
A Reputation and Mission at Risk
Reputation is a university’s most valuable but also most fragile asset, and it is effectively uninsurable. A single mishandled crisis, whether involving misconduct, hazing, or a data breach, can permanently erode public trust, reduce applications, and deter donors. Underfunding risk management is therefore not only a liability issue but a threat to the institutional mission.
When underfunded, a potential reputational harm may compound associated financial pressures. Institutions with fragile reputations may become more risk-averse, avoiding innovation or delaying initiatives that could help them compete. In this way, neglecting risk management creates a vicious cycle: vulnerability breeds defensiveness, and defensiveness erodes competitiveness. Investing in risk literacy at the board and presidential level is essential. Risk management should be understood not as prevention and insurance paperwork but as leadership infrastructure, thus ensuring that the very mission of higher education remains sustainable.
Investing in risk literacy at the board and presidential level is essential.
Risk management must also address the human side of universities. Faculty burnout, student mental health, and leadership succession are rarely viewed through a risk lens, yet they pose existential challenges. When key leaders depart without successors, or faculty work stoppages disrupt semesters, the operational and reputational fallout can rival any cyber breach. The risks of mental health on U.S. campuses have led to increased demand for counseling services and heightened liability exposure in cases of suicide or negligence. Similarly, universities reliant on international students face geopolitical and public health shocks that can abruptly alter enrollment and finances. Risk vulnerabilities differ significantly across institutional types. Large research universities face heightened cyber and intellectual property risks due to their data-rich environments and medical centers. Small private colleges, operating on narrow margins, are vulnerable to enrollment shocks, liquidity crises, and personnel risks. A one-size-fits-all approach is inadequate, so risk frameworks must be tailored to each institution’s scale, mission, and governance culture.
The Upside of Risk
The paradox of risk management is that it succeeds when nothing happens; but when properly funded and integrated, it also creates opportunities. Institutions that treat risk investments as infrastructure rather than overhead can leverage it for a competitive advantage. Embedding enterprise risk management into board governance, student services, and infrastructure planning signals foresight and responsibility, thereby strengthening trust among stakeholders.
In an era where reputational harm, litigation challenges, and systemic shocks threaten institutional survival, neglecting risk management can itself become a liability.
Risk assessments help institutions clarify tradeoffs. At a United Educators (UE) member institution, for example, a proposal to open forested areas of campus sparked debate. While advocates saw the initiative as a way to build community goodwill and showcase the university’s natural assets, skeptics worried about liability claims. Rather than proceeding blindly, the institution worked with UE to conduct a structured assessment by evaluating liability exposures, drafting safety protocols, and considering reputational impacts. This disciplined approach did not eliminate risk, but it transformed the conversation: campus leaders could see the tradeoffs and make a better-informed decision that balanced opportunity with protection.
The Need for a Paradigm Shift
What is required is not just more funding, but a fundamental rethinking of risk management as a strategic function within higher education. Boards and presidents must view risk literacy as a leadership capability. Investment in risk management systems, scenario planning, and cross-campus training should be treated not as administrative overhead but as resilience infrastructure.
Universities should also take a fresh look at their insurance strategies by reviewing liability coverage, pooling arrangements, and captive programs to make sure that cost savings today do not leave them dangerously exposed tomorrow.
In an era where reputational harm, litigation challenges, and systemic shocks threaten institutional survival, neglecting risk management can itself become a liability. The paradox emerges when the very institutions charged with teaching society about foresight and critical thinking are underinvesting in their own capacity to anticipate and withstand risks. Therefore, a paradigm shift that elevates risk management is no longer optional—it is a matter of institutional long-term survival.
Disclaimer: The views and opinions expressed in this article are those of the authors in a personal capacity and are intended for general informational purposes only. They do not reflect the experiences, positions, or official policies of the authors’ institutions or any affiliated organization. The authors would like to thank Sarah Braughler for helpful comments and Tracey Swift for expert editing support.