Offshore Education

1. Offshore Education A Risk Perspective

2. Outline • Current position of offshore education in the tertiary education sector • Risks relating to international students in New Zealand • Risks relating to distance-based offshore education • Risks relating to campus-based offshore education • Risk management approaches • Strategic approaches to offshore education • Best practice requirements

3. Current position • 17 of 36 providers deliver offshore • 63 programs were delivered offshore in 2001 • 3 institutions account for 35 programs • Total number of students is increasing and is c. 2,200 • Programs mostly in SE Asia, China and Pacific • Most programs are recent • Subjects delivered vary

4. Risks relating to international students studying in New Zealand • Lack of overall strategy and poor target setting -reactive and cash cow treatment • Current growth trends in relation to domestic EFTS can create dependence on this revenue stream • Volatility of demand and pipeline effects can have dramatic impacts on viability • Recruitment and marketing costs are not well understood or managed • Support costs can be very high • Legal risks associated with pastoral care, accreditation etc often not well managed • If costs are correctly attributed and risks estimated for materiality, what is the margin on international students?

5. Continued... • Academic issues • challenges in teaching mixed classes • accreditation issues • need for quality foundation and bridging programs • access to international students of target academic ability • Cultural issues and balance with local learners-what is the optimal proposition/mix at your institution? What about the mix within faculties or programs? • Marketing issues: • Scattergun marketing leads to high spend for low yield • Over-reliance on one market e.g. China • Lagged relationship marketing issues • Non strategic approach to pricing for international fees

6. Risks relating to distance-based offshore education • Strategic risks • is the venture part of an integrated overall distance ed strategy? • is the distance business model appropriate for local conditions? • Is the venture subject to trumping by superior branded programmes? Or to local inroads by competitors/partners? • Is the venture legally compliant in both local and NZ jurisdictions? • Financial Risks • does a robust multi-year business case underpin the venture? • is it both marginally and fully costed? • have multi-year cash flows, sensitivities and shocks been modelled? • are exchange rate hedges or other controls in place? • are financial and non financial risks monitored, reported and acted upon?

7. Risks relating to distance-based offshore education • Operational Risks • is the risk of Elearning or MIS technology failure managed? • are the SMIS and MIS infrastructures robust? • are client satisfactions measures in place? • are specific, measurable KPIs identified? • Academic Risks • is an academic QMS in place? • are local and NZ accreditation issues properly addressed? • are retention and achievement targets/strategies in place? • are the international partners accredited or validated? • Marketing issues • how will you measure repeat sales or multi year sales? • do you understand your marketing costs on a per student basis?

8. Risk relating to campus-based offshore education • Common risks we see include: • Poorly crafted joint venture agreements with unbalanced risk/rewards • Lack of partner due diligence • Potentially clonable or short-life value proposition business models • Lack of both local and NZ legal advice • Naivete or poor understanding of local regulatory issues and protocols and of cultural issues around relationship marketing • Lack of monitoring of local issues which may affect the venture • Weak risk monitorting, reporting and management framework • Failure to protect core business from downside risks of venture and to ringfence liabilities( incl. personal liabilities)

9. Risk management approaches • You should have a risk management framework which includes strategic, operation, financial and academic risks • It should include a probability/impact matrix and estimates of materiality • It should be supported by risk management and mitigation plans • These should list accountability for risks • They should be reported to executive and Council regularly

10. Strategic approaches to offshore education • Is your strategy for offshore education part of an overall integrated medium term institutional strategy? • Are KPIs for the venture developed and regularly reported? • Are the financials integrated with the entity’s long term financial model? • Are you monitoring and scanning local strategic issues which may affect the venture? • Have you undertaken scenario analysis/modelling with regard to the venture? Is this regularly updated? • Are your links with the local community well-developed? • Do you have contingency and extraction plans?

11. Best practice approaches to offshore education • Be clear about the strategic value proposition • Invest in quality due diligence and legal advice generally • Practise hands on management • Ensure you have quality and timely information • Protect the core business • If in doubt-don’t

12. Actions for ‘Monday morning’ at your place • What could you do to improve the strategic focus and risk management surrounding your offshore ventures?

13. Discussion