Skip navigation
EAB Logo Navigate to the EAB Homepage Navigate to EAB home

2 long-term planning exercises to prepare for future revenue threats

Higher education institutions’ futures are increasingly uncertain. But higher education leaders are not powerless bystanders to these external events. Finance leaders, in particular, are critical to anticipating these future scenarios and preparing their institutions to respond.

To plan for future risks, all finance teams should consider two exercises: First, building scenario-based financial models and second, facilitating scenario planning workshops.

1. Model the financial impact of potential revenue threats

Scenario-based financial models are powerful tools that help leaders control their institutions’ destinies. They allow finance leaders to anticipate the financial impact of known, likely, and unlikely future events—and to educate boards and cabinets on the gravity of those events occurring. But by Kaufman Hall’s estimate, only 19% of higher ed institutions regularly perform this type of analysis.

  • 19%

    of higher ed institutions regularly perform financial analysis

Leaders at Stevens Institute of Technology credit scenario-based modeling with helping them prepare to respond to enrollment risks. More than half of Stevens’ enrollments are graduate students from India and China. This international enrollment saturation creates significant revenue risk. When recent political events elevated the risk to the board’s attention, Stevens’ finance team built a model to help them understand the magnitude of the risk and develop a mitigation plan. The model used what-if scenarios and sensitivity analyses to demonstrate the impact of one or both markets faltering. Ultimately, the finance team estimated that for every one lost international enrollment, they’d need to enroll 1.5 new undergraduate students.

Stevens Institute of Technology – International Recruitment Shortfall Modeling Exercise

  • Board Raises Concerns About International Market Saturation

    “Most of our graduate population is international, predominantly from India and China. What will we do if these markets disappear?”

  • Finance Builds Model to Project Impact and Inform Response

    Select Inputs (Current State and Future Assumptions)

    • Undergrad enrollments
    • Undergrad tuition rate
    • Undergrad discount rate
    • Undergrad instructional costs
    • Grad program enrollments
  • CBO and Board Develop Response Plan

    1.5 projected new undergraduate students needed to compensate for every one lost international student

Without quantifying the risk, campus stakeholders didn’t understand the gravity of the potential fallout. The numbers were a rude awakening. They prompted leaders to plan, so they could act quickly to recover if these enrollment events unfolded.

2. Workshop the impact of revenue risks with senior leaders

Some finance leaders are also facilitating scenario planning workshops to plan for future revenue risks. In these sessions, academic and administrative leaders convene to discuss a handful of potential future scenarios that would affect institutional sustainability.

The graphic below illustrates how leaders at a private research institution in the Midwest conducted such a workshop. The CBO, President, and VP of Enrollment Management brought together 38 leaders and board members to discuss four hypothetical scenarios related to pricing, financial aid, and local competition. Stakeholders discussed the scenarios in small groups and then shared out ideas with attendees more broadly.

Even if the discussed scenarios never occur, leaders benefit from deliberating over them. They may choose to implement some of their ideas anyway, and the “doomsday” nature of the discussion may be the spark needed to prompt necessary changes to institutional policy and processes.

“Even if these scenarios don’t come true, we’ll pursue some of the ideas we discussed. They’re creative ways to better meet student needs.”

Eagleton University

Customizing scenario planning exercises to your campus

Whether you build quantitative models or host qualitative discussions to plan for future uncertainties, a key first step is determining which scenarios to consider. To help you get started, we built out a list of the most common scenarios modeled in higher education (on the left of the graphic below) and a starter list of assumptions to incorporate (on the right). Finance leaders should consult external research and historical results when making assumptions and should check their reasonableness with relevant subject matter experts, such as advancement leaders for assumptions about alumni giving rates.

  • Sample Scenarios to Model

    • Long-term financial impact of strategic plans investment
    • Growth and decline in professional fields central to program portfolio
    • Shift in international student markets
    • Changes in federal aid policy
    • Expansion of campus auxilliaries
    • Changes to tax code
    • New alumni giving patterns
    • Declines in federal research grants
    • Public relations scandal
  • Select Assumptions to Incorporate

    • Enrollment (undergraduate, graduate)
    • State appropriations
    • Tuition and fees
    • Alumni giving
    • Research funding
    • Faculty mix
    • Student mix
    • Discount rate
    • Retention rate
    • Research growth
    • Faculty growth

More resources on building financial dashboards

Research Report

Impactful Financial Dashboards

In 2014, a majority of board members at public and private institutions identified fiscal sustainability and affordability as…
Strategic Advisory Services

Build Financial Dashboards to Communicate with Boards and Other Stakeholders

Higher education’s tough budgetary climate has heightened board and other stakeholders’ (for example, academic leaders, alumni, and parents)…
Strategic Advisory Services