Melvyn Keen, programme director of the Leadership Foundation’s Strategic Finance Programme dissects the importance of financial literacy for strategic leaders, in the context of Hefce’s recent annual review of the health of the higher education sector.
According to Hefce’s annual review of the higher education sector’s financial heath, university finances continue to be sound overall but there is a “widening gap between the lowest and highest performing institutions.” Do you know if your institution is at the right end of that gap? How do you work out where it sits? Do you understand how your institution’s strategy is improving its financial sustainability?
While Hefce’s financial reviews are doubtless required reading for your institution’s finance directors, it’s probably not the case for other senior managers. Even if they do glance at them, they might not feel confident that they really have a firm grasp on what they mean – and what the impact is for your institution.
Yet a clear understanding of the figures is crucial to good strategic decision-making. Senior leaders need to understand how their institution’s finances stack up and how sustainable they are in order to plan, grow and strengthen.
At the Leadership Foundation we recognised this need and developed our Strategic Finance programme specifically to demystify financial reviews and forecasts for senior managers without a background in finance.
The Strategic Finance programme will help you to understand how you can develop a picture of an organisation’s financial sustainability. Just as Hefce does with its financial forecasts review, we look at (and, more importantly, explain) sustainability through surpluses, cash generated from those surpluses, levels of borrowing, sources of capital funding and other measures. We explain how reserves are accumulated, what they represent and what the impact of large pension deficits in the sector (and beyond) might be.
Once you understand what contributes to financial sustainability and how these measures relate to each other, the next step is to develop a better understanding of the impact of strategic decisions on an institution’s finances. The programme looks at some simple financial decision-making tools to assess resource planning and capital investments.
The Hefce review tells us that levels of borrowing across the sector are predicted to rise from £8.9 billion at the end of 2015-16 to £11.7 billion by the end of 2019-20. As a strategic decision-maker, you need to understand how much your institution can borrow, if it needs to, where from and what the implications could be. We take a look at the different types of borrowing out there, how you judge if an institution can afford to borrow and what banks and the funding bodies are looking at when assessing that affordability.
Building senior managers’ financial and legal literacy is critical if they are to operate confidently in higher education’s complex area of financial resourcing. It’s worth having a glance at Hefce’s review and assessing if you’ve got the right tools for the job to decode it.
After working for Price Waterhouse, Andersen Consulting and as Interim Finance Director at the University of Cambridge, Melvyn Keen moved to Middlesex University as Director of Finance. In his 13 years at Middlesex University Melvyn went on to become Deputy Vice-Chancellor and held the position of Deputy Chief Executive before moving on to set up his own consultancy practice.
The Strategic Finance Programme is for senior executive leaders who are looking to demystify the complexities of university finances. Previous attendees of the programme have included deputy vice-chancellors, pro vice-chancellors, deans, heads of school and professional service departments and directors.
Taking place over two, two-day modules with additional coaching and online learning, the next cohort of the programme will start on 26 February 2018 in Greater London. Find out more and book a place here: Leadership Foundation Strategic Finance Programme