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RISK MANAGEMENT AS A TOOL FOR SECURING INTERNAL CONTROL IN THE PROCESS OF STUDY PROGRAMME IMPLEMENTATION AT HIGHER EDUCATION INSTITUTIONS
Gita Verdina
BA School of Business and Finance, Latvia, gita.verdina@ba.lv

Abstract
The objective of the paper is to research the risk management process as a tool for securing internal control in the process of study at higher education institutions. Findings The research shows relevant significance of the internal control in the study process. It allows studying and analyzing problems and risks in the qualitative implementation of the study process. Research methodology - Quantitative and qualitative scientific research methods, which correspond to the tasks of the research field, are used in carrying out this analysis. The monographic descriptive and logically constructive methods have been used in order to summarize the results of the preceding researches carried out by scientists and the analysis of the world practice, but the methods of analysis and synthesis were used in order to synthesize interconnections and formulate regularities. The qualitative analysis of the main internally regulating documents of higher educational institutions is carried out in order to explore the impact of internal control environment elements on the study process. Based upon the COSO model, original questionnaires were worked out and students were polled at 6 higher education institutions of the Baltic States, int.al, at 4 Latvian higher education institutions, at one Lithuanian higher education institution and at one Estonian higher education institution. Conclusions By assessing the role of risk management as a tool for securing internal control in the process of study programme implementation at higher education institutions, it can be concluded: the risk management process which is integrated, continuous, systematic and structured does not take place in whole organization, the risk management process is carried out fragmentary and line managers when realizing their tasks and functions perform risk management only when it is urgent, each time focusing on certain types of risks. The research shows that the greatest influence of the internal control system on risk reduction in the process of curriculum implementation is related to provision of quality in study course teaching and internship for students, and also provision of students qualitative and quantitative contents in the study programme. Keywords: risk management, internal control, higher education institutions. JEL Classification: 129.

Introduction
In the globalized, world high schools are facing new challenges in the society the transition from a traditional to the knowledge society, it is important to develop along with all changes. Due to increasing competition in attracting students, it is necessary to elaborate new working methods, new forms of work organisation and partnership of all involved parties. The role of the strategic management is increasing at high schools thus determining that educational institutions use organisation strategic management principles that are affected by the internal control system. Quality assurance processes at high schools are most directly related to management of high schools, internal control, risk management and cover basic processes, i.e. studies and research related processes, and management processes, as well as support processes whose functioning ensures successful operation of the study process. By studying a high school as a complex system that consists of many subsystems being constantly interrelated and providing certain functions, it can be concluded that problems of one subsystem can affect functioning of all other subsystems. The study process in each department is as a separate system that ensures certain functions; and every system at a high school can be improved if there are clearly defined goals and plans how to do it. This process depends on the executive management of the high school. In order to study whether the established internal control systems at high schools ensure effective risk management within the study process caused by the internal and external environment - the objective of the paper is to analyse the risk management process as a tool for ensuring internal control in the study process at higher education institutions. Findings The study shows relevant significance of the internal control in the study process. It allows to study and to analyse problems and risks in the qualitative implementation of the study process.

Literature review
Today the concept control has been explained in various ways like any activity made by organization that focuses on increasing probability that targets of the organization will be reached (Gleim, 2004). He notes that the essence of the quality is receiving the feedback or information for the aims of management. 987

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The internal control has been carried out in order to provide sufficient assurance for accomplishment of organization aims, assessing: operational procedure, efficacy of conditions etc., relevance to binding laws and other legal acts and regulations Control is the supervision over execution of plans and necessary amendments to them, in order to promote sustainability and to reach the goals. The internal control at a high school is similar to the one in an enterprise. This is a process that is linked with high school development and processes planning, budget, processes implementation and control, data collection, analysis, evaluation and reporting etc. regarding its aims and sustainability (Kapper, 2003). Effective structure of the internal control is a balance between expenses of control procedures and risks involved (Berzkalns & Boulton, 2000). C. Newman (Newman & Clarke, 1997) holds a view that the role of control at higher educational institutions is increasing. Control is a way how a faculty, administration, and students can receive a feedback. The author of the paper in her study about the role of internal control system during the study process of higher educational institutions relies on the COSO model developed by The Committee of Sponsoring Organizations of the Treadway Commission. This model has been widely used in practice. The internal control system has been developed by the correlative elements: environment of control, activities of control or procedures, risk assessment, information and communication, monitoring and improvement (COSO, 2006). Henri J.F. (Henri, 2006), evaluating this model notes that the COSO model gives possibility to identify and evaluate acquirements from the control activities. It has been modelled by the mission, strategic aims, plans, structure of organization, politics, systems, procedures and instructions, standards, and evaluation of criteria etc. It has been influenced by factors that either facilitate or retard performance of the control procedures. The element of internal control risk management, within the framework of the COSO model, includes identification of risks, assessment and prevention. Studying high schools as organisations that are in continuous interaction with external environment, the issues connected with risk management have become topical in an absolutely new aspect now. Risk management is one of the main management responsibility fields that have to be carried out by the executive management of an organisation and its employees, including high schools. Although many executive managers associate risk management only with particular processes, currently there is a transition to new understanding of risk management paradigm, i.e., all level managers and employees are involved in risk management. Effective risk management covers the whole organisation and is designed to identify potential events that may have influence in the future and to obtain qualitative information for decision-making and thus to improve quality of a strategic decision (Verdina, Katien, Liela, 2010). The comprehensive risk management is a structured, integrated and continuous process at all levels of organisation to identify, to assess and to report on opportunities and threats that influence achieving goals of an organisation, as well as to make a decision about them (Barton et al, 2002). Each organisation can individually choose methodology for applying a risk management process. It is important that all persons and person groups involved in an organisation process are completely aware of the chosen methodology and the risk management process covers all basic goals.

Research methodology
Quantitative and qualitative scientific research methods that correspond to the tasks of the research field have been used in carrying out this analysis. The monographic descriptive and logically constructive methods have been used in order to summarize the results of the preceding studies carried out by researchers and the analysis of the world practice, furthermore the methods of analysis and synthesis were used in order to synthesize interconnections and formulate regularities. The qualitative analysis of the main internal regulating documents of the higher educational institute is carried out in order to explore the impact of internal control environment elements on the study process. Based on the COSO model, original questionnaires were elaborated and students opinion survey was conducted at 6 higher educational institutions of the Baltic States. The sociological research data processing programme SPSS was used for data analysis, using both the descriptive and the analytical data processing methods.

Results
It is important to carry out risk management at a high school not only at an overall level, but also at the level of the study process or implementation of curriculum.

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In order to assess influence of all elements of the internal control system on the overall management process of a high school and also on the basic process studies, and efficiency of internal control, potential risks and their influence on the curriculum implementation process were studied based on the methodology of the World Bank. Administrative staff , including programme directors, heads of study departments and involved employees (in total 23) filled in a questionnaire at six high schools of the Baltic States, int.al, 4 Latvian higher educational institutions: BA School of Business and Finance (BA), Latvia University of Agriculture (LLU), Ventspils University College (VA), School of Business Administration Turiba,( BAT), one Lithuanian higher educational institution Vilnius kolegia (VK) and one Estonian higher educational institution Mainor Business School (MBS). Based on the data analysis and studying experts assessment of internal control system efficiency, the author of the study concludes that at all high schools internal control systems are developed and operate at similar efficiency level (see Table 1), i.e., at good or at very good level. For determining the efficiency level of the internal control system, evaluation scale starting from very good up to unsatisfactory was used (very good if it is more than 80%; good if it is 64%-80%; satisfactory, if it is 50-64%; weak, if it is 20-49%, unsatisfactory, if it is less than 20% out of maximum possible score). By assessing the efficiency level of particular elements of the internal control system, it is evident that risk management is carried out at high schools at the lowest level, therefore it is necessary to study which the most potential risks are and how the internal control system influences the study process. Table 1. Assessment of internal control system efficiency of the high schools (%)
High school/ elements of ICS BA LLU VA BAT VK MBS Total (avg.) Control environment 85 83 93 87 89 82 87 Control activities 64 83 93 95 73 85 82 Risk assessment 54 68 65 78 64 65 66 Information communication 78 93 90 92 74 83 85 Management Total (avg.) 70 80 82 83 79 78 77

70 75 70 63 71 75 71

Source: Elaborated by the author, based on the study

By studying different risk classifications, strategic, financial, process ensuring or operative and accident risks can be defined as the main risk groups at a high school. Recently great attention has been paid to the compliance risks, i.e. how functions, processes of organisation comply with legal acts, standards, requirements. It is topical for high schools, as well. Therefore also compliance risk was analysed in the study. Basing on the results of the questionnaire, the main and the most significant risks were identified in each risk group, their feasibility (probability) and influence (significance) in achieving goals of a high school and within the study process, as well as influence of efficiency of the developed internal control to decrease risks was assessed. The study shows that each high school has a different internal and external environment, all five risk levels are at the same level and the most significant risk groups are the strategic, financial and study process ensuring risks. By analyzing the most significant strategic risks (see Table 2), it can be concluded that at high schools: there is absence of risk management policy and strategy, irregular, fragmented approach to the risk management process is applied, there is absence of integrated, systematic, comprehensive risk management process that is lead and coordinated by the executive management level and each employee perceives risk management as a part of his/her responsibilities, there is absence of the risk tolerance level, there is no systematic identification of external risks, there is no action plan for significant risks at a high school, risk identification process does not take place at the department level, including systematic risk identification of curriculum implementation. 989

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Table 2. Level of strategic risks (%)

Strategic risks Absence of risk management policy and strategy Absence of systematic identification of internal risks of a high school Absence of systematic identification of external risks Absence of an action plan for significant risks at a high school Irregular, fragmented approach to risk management process is applied Absence of integrated, systematic, comprehensive risk management process that is managed and coordinated by the senior executive management level and each employee perceives the risk management as a part of his/her responsibilities BA 31 35 35 31 51 LLU 52 32 58 51 52 VA 52 46 51 46 51 BAT 27 27 28 32 51 VK 44 35 29 38 42 MBS 32 48 21 40 48 Average at high schools 40 37 37 40 49

36

56

46

46 48

44 36

32 48

43 44

Absence of the risk tolerance level 46 42 41 Source: Elaborated by the author, based on the data analysis of the study

By assessing high level financial risks, it can be concluded that experts indicate as the main risks curriculum inability to secure attraction of necessary funding (financial sources, the number of students etc.) that directly influence financial stability of a high school and points out absence of effective financial management within the implementation process of the curriculum (see Table 3). Table 3. Level of Financial Risks (%)
Financial risks Financial stability of the high school is not ensured The study programme cannot attract the necessary funding (financial sources, the number of students etc) BA 36 48 LLU 64 76 VA 62 63 BAT 20 20 27 VK 38 42 38 MBS 40 40 48 Average 43 48 40

Effective financial management is not performed 33 64 30 within the study programme Source: Elaborated by the author, based on the data analysis of the study

Studying risks within implementation of the study process, the analyses shows (see Table 4) that that the following issues are not provided: the enrolled students quality and quantity, qualitative and contextual study courses, qualitative academic personnel, including guest lecturers, internship, including internship abroad, the quality of students individual and research work. Table 4. Risk level in ensuring study process (%)
Process ensuring risks Enrolled students are not ensured with the level of readiness for studies the number of students Qualitative contextual study process implementation within study courses is not ensured Appropriate teaching methods are not ensured within the study process implementation Students experience qualitatively professional internship abroad BA 42 42 36 25 25 LLU 32 28 25 19 24 VA 29 29 29 31 30 BAT 28 20 20 24 18 VK 27 23 24 22 36 MBS 48 48 40 32 32 Average at high schools 34 32 29 26 28

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Qualitative academic staff and guest lecturers are not ensured within the study process implementation Research Qualitative personal work of students

33 25 30

46 27 32

46 30 28

24 35 35

14 29 23

32 32 48

33 30 33

Source: Elaborated by the author, based on the data analysis of the study

Conclusions and suggestions

Summarizing Baltic States high school experts assessments of internal control system efficiency and risk management, the author of the study concludes that at high schools: in general the established internal control systems ensure effective functioning, however risk assessment processes are at a lower level, the integrated, continuous, systematic, structured risk management process that is lead and coordinated by the executive management level and where each employee perceives risk management as a part of his/her work responsibilities does not take place in the whole organisation, identification of all types of risks and assessment management of their potential impact do not take place, i.e. not all types of risks are reviewed and their potential impact on the development of high schools and implementation of the study process. From the above mentioned it can be concluded that the risk management process is implemented fragmentary and the heads of departments carrying out their tasks and functions perform risk management only when it is topical and each time focusing on certain types of risks. Exploring various risk classifications and factors that have an effect on internal control, as one of the essential risk groups at higher educational institutions is the risks connected with the study process implementation. Though current problems about risk management caused by the external environment have been updated, it is important to realize the risk management not only as a whole in an institution, but also during the curriculum implementation. In order to ensure the competiveness and to raise the quality of provided education, as well as to improve the quality of strategic decisions, high schools are required to transfer to the new understanding of the risk management paradigm and its application, i.e., involvement of all level executives and employees in the risk management. Each high school can choose its own methodology for implementing the risk management process. The most important is that every person and a person group involved in all processes of an organisation are completely aware of and understand the chosen methodology and the risk management process covers all the basic goals and processes.

References
1. 2. 3. 4. 5. 6. 7. Henri, J-F. (2006). Management control systems and strategy: a resource-based perspective. Accounting, Organizations, and Society. Vol. 31 No. 6, pp. 529-58. Brzkalns I., Ian Boulton I.(2000). Iekjs kontroles sistmas rokasgrmata. Rga: pau uzdevumu ministra valsts reformu liets sekretarits, Rga, pp.7-8. Barton T.L., Shenkir W.G., Walker P.L. (2002) Making enterprise risk management pay off., Financial Times/PRENTICE Hall PTR Pearson Education., pp.14 -16. Gleim I. N. CIA Review. (2004). Part I. Internal Audits Role in Governance, Risk, And Control. Eleventh Edition. Florida: Gleim Publications, Inc., pp.320. Kappler, Ekkehard. (2003). Die Engmaschigkeit Betriebswirtschaftlichen Denkens. Universitats entwicklung.Strategien. Erfahrungen. Reflexionen. Peter Lang, Frankfurt am Main, pp. 266-270. Newman & Clarke. (1997). Failing Students in Higher Education, Edited by Moira Peelo and Terry Wareham, The Society for Reserch into Higher Education & Open University Press, pp. 95 96. Verdina G., Katien N., Liela E. (2010). Impact of Internal Control System at Higher Educational Institution on Process of Study Programme Implementation. lpp Economic development: processes and tendencies, Vilniaus Kolegija, pp.242-257. The Committee of Sponsoring Organizations of the Treadway Commission Internal Control - Integrated Framework Executive Summary COSO, 1985-2006. [online]. [looked on 16 January, 2009].Available: http://www.coso.org/publications/executive_summary_integrated_framework.htm

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