A game of risk

The English HE sector has a complex risk profile – we all know it is likely that an institution, somewhere, will not meet expected standards at some point. The question is, which one? The regulatory burden that is put on to all institutions has to be proportional to the potential for each individual institution to have problems.

Regulation is, at heart, the bureaucratisation of risk. Risks that would otherwise be taken on an individual basis are managed, centrally, by a body designated for that purpose. To aid the management of these risks, processes will be devised that allow for either early warning of emerging risks, or their direct mitigation.

So – when we look at a consultation on regulatory reform, we need to look at whether the proposals meet these goals and whether processes usefully add anything to the risk management process.

Assessing the assessment

So how does the new framework measure up? The first thing that stuck out for me was the use of a “Basic registration” category for institutions where most risk may exist. English higher education delivery institutions need to be just that – “English higher education delivery institutions” (each word is defined in the consultation) – in order to qualify for this registration category. In terms of ongoing requirements, all that is needed is a (nominal) annual fee and submission of data via the designated data body relating to the higher education courses in question. Institutions in this category cannot apply for degree awarding powers (DAPs), university title (UT) or Tier 4 designation (which would allow for the recruitment of international students).

It’s helpful to think here in terms of investment – the Approved categories are the premium product; Basic is… well… sub prime. In financial instrument development terms, the OfS is recognising that this tranche of the overall English HE sector is more likely to present quality issues, and flagging it as such in order to limit the risk to the overall package.

You’d think here that this approach would be useful in developing proportional risk management processes, which might present a higher regulatory burden on such institutions. And you would be wrong.

Whose risk?

Despite the avowed focus on students at the heart of the system, the proposed regulatory framework is focused on managing the risk to the state. Only Approved (in receipt of state funding) institutions are required, for instance, to present a Student Protection Plan as a hedge against the possibility of institutional failure. Students at Basic institutions do not have this level of protection – institutional failure here is a risk borne by the student. This is doubly perplexing as we recall that this category of institution recruits primarily from groups that are underserved by traditional HE.

If the OfS is intending to be a market regulator –  it must regulate the entire market. It will, after all, be held to account for doing so.  If it wants to speak up for the interests of students it needs to do so for all students. What is actually being done is laudable – accountability, effectively, for the use of state funding. But it is limited – it protects the use of the state as the customer rather than the student.

Information sharing

This pattern continues with the way information about institutions is presented. The register will be the primary means of gathering reliable independent information on a provider. Students applying to institutions in Approved categories will have a wealth of information to go on, ranging from TEF (suggested as mandatory) to detailed HESA (or other designated data body) statistics and QAA (or other designated quality body) reviews.

But correspondingly little information will be provided in the basic category. OfS will collect lead indicators, but neither these – nor their overall risk profile of each institution – will be published. This almost certainly comes after concerted sector lobbying, but is – alas – the wrong decision.

The data use to construct these lead indicators is generally in the public domain – student numbers, NSS scores, financial data. But the overall judgement reached by OfS is not shared (as is currently the case with HEFCE financial risk monitoring) despite it being, in the Basic category, the most complete and informed judgement on institutional quality that may exist.

The other potential information source in that category is the OfS formal risk assessment, carried out on registration. Again, this is not published. The current system requires QAA involvement on any kind of sector entry – and this involvement culminates with a published report. It is not clear why this change has been made, except to facilitate a low entry bar to OfS recognition.

And all institutions are expected to self-report on “reportable events” such as a change of senior manager or owner, or a fraud investigation. Surely there are more robust ways to check for financial irregularities? Approved providers have annual financial returns (still), why not basic?

Degrees of confidence

The Basic registration category is designed to “provide a degree of confidence for students that is not present in the current system, with providers in the Registered basic category being able to let students and other bodies know that they are recognised by the OfS as offering higher education courses.”

It says nothing about the quality of said courses, and offers no safeguards for students who take them. The idea that it provides a degree of confidence is laughable – it adds the OfS mark of approval to any institution that can reasonably demonstrate that it is a higher education institution in England – something that most students could probably work out for themselves.

With all providers required to re-register with the OfS, even those currently on the HEFCE register, it feels like now should be the time to manage risk by making registration meaningful. The urge to grow and diversify the sector is a good one – but the interests of all students, be they supported by public funds or not, must be paramount.

Find the full Wonkhe index of all documents published by DfE here and all of Wonkhe’s coverage of the new framework at #Regulation.