As a result of the COVID-19 pandemic, higher education is facing an uncertain path. Even with the overall economy on high alert, most experts would agree that the full impact of the pandemic has yet to be felt. Institutions are facing challenges to their business model, including declines in state funding, questionable enrollments, and uncertain endowment returns. The additional costs needed to deal with the crisis could be material.
To navigate these uncertain times, institutions should focus on the items that are core to their mission, and make data informed decisions to ensure optimal use of resources, time and people.
Some will have a difficult path to maintaining their financial solvency. The key is liquidity and, at the core, the issue is simple: how much cash is being generated? In other words, what is the surplus or deficit after unrestricted net assets are triangulated against revenues and expenses? If there is a deficit, when will this deficit deplete the unrestricted net assets? If there is a surplus, can this surplus build significant reserves for the future? These are critical questions that must be assessed by institutions as they chart their path forward.
We can look at these challenges as an opportunity to better understand the levers an institution can engage to streamline operations. This will take time and resources but the risk is too high not to do so. Financial analytics is more important than ever, as it will allow institutions to leverage their data to develop cost management alternatives and engage in stress testing, providing operational perspectives. The ultimate goal should be to have a repeatable process in which the data tells a factual story of an institution's fiscal health and provide potential paths to sustainability.
The decisions resulting from financial analysis, and the ability to properly influence and project liquidity, takes time to implement. Some decisions will be difficult (cost reductions for example), while others will be as simple as adjusting priorities. We can all agree that without the right tools, data and resources, it will be much more challenging for institutional leadership to make data informed decisions addressing financial risks.
The value of having data comes from the ability to turn this data into meaningful insights. Leaders must identify patterns and develop modeling and dashboarding capabilities to inform and educate constituents. Eventually we will come out of this crisis and return to normal but the question is, what will this new normal be and will institutions be ready for what's ahead? The only thing we know for sure is that analytics will be instrumental in guiding institutions down the right path.