The University of Glasgow has embarked on a search for a successor to Sir Muir Russell, who retires in September 2009 after six years as principal.
The new recruit will have to cope with the fallout from a disappointing funding allocation to Scotland and the challenge of competing with English institutions, which have income from top-up fees.
A recent Universities UK steering group also predicted a continuing fall in full-time Scottish undergraduates over the next two decades.
But Sir Muir, who completed his stint as convener of Universities Scotland on 1 August and chaired the steering group, remains optimistic.
"People like me don't get involved in the selection of our successors, so I don't know what the runes are that you can read at the moment," he said.
"But if anyone were to phone me up and say, 'What's it like being principal of a large Scottish university?' I'd say it's immensely rewarding. It's quite challenging and it's hard work, but you get a lot of great things back - the graduations, the quality of the academic staff, the commitment and enthusiasm of the support staff.
"If I sound like a recruiting sergeant, I am. I haven't regretted coming here for a minute."
The UUK report, he said, was neither a prediction nor a prescription, and did not foretell the imminent collapse of higher education in Scotland.
"It (is saying), this is the way the world might move. You need to be considering your student recruitment, the courses that you offer, the balance between domestic and international, whether you go more part-time, whether you provide more flexible adult-learning opportunities."
And he challenges the notion of a special Scottish dimension that demands a special Scottish solution. Individual institutions throughout Britain must examine their own position, he believes, and then decide on their own strategy.
Glasgow has started to recruit more international and postgraduate students and beef up its research. It is also now back in the black after a longstanding multimillion-pound deficit which Sir Muir combated with radical restructuring, involving shedding 230 of the university's 5,800 staff. The institution achieved a £2 million surplus in 2005-06.
"We have firm budgets for next year, and the aim is to continue that operating surplus," Sir Muir said.
"But the pressures are very, very heavy at the moment. The energy bills are going up dramatically, and the cost of the three-year pay settlement has a tremendously expensive sting in the tail - the retail price index has moved well beyond what most people thought was likely when the deal was done."
He concedes that last year's spending review, giving the sector a £30 million rise over three years instead of the £168 million requested, "was a huge disappointment".
Universities Scotland felt it had made a good case to Government for a real-terms increase to boost work which would support both Scotland's economy and its quality of life.
The two sides are currently debating the future through the higher education taskforce, and Sir Muir's hope is that universities will end up being able to influence Government more directly.
"The proof of the pudding will be (in) the level of resourcing. Irrespective of what happens to level of funding in England with fees, there is a real apprehension that gradually the English system is moving ahead of us. We can't let that happen, otherwise this jewel in Scotland's crown is at risk of being damaged."
The universities are not challenging Scotland's political consensus that there should be no top-up fees, said Sir Muir.
"The issue of fees has simply not been on the political agenda and no one, I think, in the leaders of the sector who has explicitly called for fees. But what we have made clear is that we need the resources to be able to compete to retain the best staff and students and to continue to do the best research," he said. "We have to try to make sure the Government does understand what's involved in running universities and maintaining quality. We've seen hard choices made at Glasgow, and other universities are doing that, too. It's really quite important that we take every opportunity to demonstrate to Government that we are run in a business-like and efficient way."
But Scotland still maintains its research edge through pooling, Sir Muir believes. Setting up cross- institutional research pools in a range of disciplines has not only produced an infusion of talent and enthusiasm, but encouraged an atmosphere of collaboration throughout higher education. "We're seeing a sector that is using its strengths in an integrated way," he said.
And he is not alarmed by the post-92 universities mooting federalisation as a means of increasing their research activity, and does not see this as threatening the future of Universities Scotland.
"They have been at pains to emphasise throughout the work of the taskforce that all universities in Scotland do research, and they want to be able to have the capacity to keep that credibility factor," he said.
"In the taskforce report, there is a reference to capacity-building. That seems to me a good example of an identifiable articulated point of pressure being responded to by the system, without rushing off into a kind of schismatic future of the break-up of Universities Scotland.
"One of the strengths of the system in Scotland is that we've been able to speak with one voice and get across to Government the points we want to get across."