Financial risks in training

The training budget has several kinds of built-in risks, and this list is not comprehensive.

New courses and new market segments are a risk. You might incur costs of student recruitment and materials development, with no guarantee of return. You can minimize other risks by having someone very familiar with the segments, better market research, establishing a clearer constituency, and by advertising that the course must have a certain number of students to run. Nevertheless, it is quite likely that the first group of students will have low students numbers and run at a loss.

Marginal students are a risk, as they may need inordinate amounts of staff support to get through. Perhaps your student selection process is not stringent enough.

You face the risk of students dropping out:

• If they drop out early, they may be entitled to a refund which is effectively a cost to you.
• It is effectively a windfall for you if they drop out after the cut-off date for refunds and if assessment is a variable cost (e.g. on-site visits),  because they have paid for assessments they will not do.
• If they drop out after the cut-off date for refunds and if assessment is a fixed cost, it does not affect you, it just means that assessors get a little more free time and a little slower pace in the class-room.

Repeat assessment is a risk. If a student does not perform satisfactorily on the first occasion, you may need to give the assessment again for no extra income. The outlay is minimal for minor corrections to written work, but can be costly for on-site assessment.

Appeals on assessment results are low-risk. Students generally do not appeal if you have given a good assessment and gave clear feedback. An independent review is not a major expense.  However, you could be up for a significant cost if you must pay for a complete re-assessment from scratch, including on-site visits

Instructor dropout is unlikely, but its consequences can be serious if you have a full contingent of students and only one instructor with expertise in that field. The risk can be minimized by a contractual arrangement.

Late or non- payment of student fees is another kind of risk:

• Late-payment of fees. A system of enforced late fees should cover this. They need to be high enough to be a disincentive to late payment.
• Enforced payment of fees. Some students are so late for fees that are so substantial, you might to take legal action. In that case, make sure your recovery costs are less than you recover.
• Nonpayment of fees. This must be written off, and are effectively a cost.

Calculating risk

The normal formula is to ask what sort of things could go wrong and then for each one ask:

• How much harm will it do?
• What likelihood does it have of occurring?

If there is no likelihood of the event occurring or no harm, then there is nothing to consider.

If there is mid to high likelihood of the event occurring and a mid to high likelihood of harm, then you identify it as a risk.

In a large organization, you can calculate some risks by calculating the average for a large number of students over a longer period of time, such as x% of students do not pay their fees, and y% pay their fees late. In a small, new organization, risk is harder to predict and a large unexpected  outlay  is potentially more damaging.

Some student populations have higher risks, in particular, unscrupulous  students who are likely to try to use appeals to pass courses. It may also apply to students who see themselves as a persecuted minority.

In a small organization, you should normally decide to presume that either:

• a risk will always eventuate, making it a cost to be budgeted for every student, or
• a risk will not foreseeably eventuate, in which case you should check that you have some budget for general risk and otherwise ignore it.