Enablers for success: Financial flexibility and sustainability

Irrespective of an institution’s purpose, size and shape, we think there are six enablers of success that every institution will need in the new normal: Financial flexibility and sustainability, Student-centricity; Vibrant partnerships and networks; Future-fit workforce; Tailored learning experiences; and Community trust

Financial flexibility and sustainability will enable your institution to not only survive but also thrive in a more volatile and unpredictable world. Every institution should consider the below enablers for financial flexibility and sustainability.

Business intelligence tools: With the appropriate business tools and analytics, you can monitor and track performance and make informed strategic and operational decisions in a timely manner.
Digital finance tools: Digital finance tools can provide transparency on the use of funds and amplify their impact. They also enable staff to focus their effort on higher value work.
Asset optimisation: Many educational institutions have large asset bases that may no longer be appropriate for its future scale and modes of learning and research. A prudent short- and long term financial strategy can release cash, repurpose existing assets or source new assets that will meet future needs.
Adaptable cost structure: A stable and sustainable balance sheet is essential for the new normal. Fixed costs need to be matched by sustainable income. Where income is likely to be volatile, an operating model that can flex in response is needed.
Diversity of income: New and alternative sources of income can help to buffer from future shocks. Ideally, new sources of revenue should be aligned to your purpose. For example, the commercialisation of technology as a source of revenue for a ‘university of technology’, the provision of executive or mid-career courses by an institution that values and emphasises lifelong learning.

The challenge

When the CFO of one of Australia’s technology universities was unclear on whether its investment program was affordable, they approached PwC. They wanted to know the likelihood of a surplus or deficit in the coming years. What were their options for building transparency and flexibility into their financial systems?

What we did

The university’s data systems and financial planning processes posed challenges. Without coordinated information management there was no single source of truth. The university’s biggest asset, its people, were spread across a myriad permanent, fixed-term, casual and consulting arrangements.

We modelled the university’s income, costs, balance sheet and cash flows over several years under three market scenarios, and concluded that the university would likely make a loss in less than 2 years.

We identified a number of levers across its strategic investments and ongoing operations that could reduce fixed costs and increase flexibility in cash flows to respond to uncertain market conditions. The two most important levers for the university were workforce management and asset optimisation.

The impact we had

The university was in the position of redesigning its investment plan and was able to remain in surplus.

Our work with the university also triggered fundamental changes in how it manages its two biggest investments – its people and its infrastructure assets.

It implemented a new human resource management system to provide clear and detailed real-time data on its employees, including their skills, experience, tenure, location and current work engagements, no matter the type of contract. In addition, the university developed options for sale and leaseback of key buildings, one of which was triggered during the COVID-19 pandemic.