risk

Every Not For Profit organisation nowadays needs a working system for risk prediction and management. If your internal risk management controls are not working, you have two options before you – either take risks, and eventually make a big mistakes, or not to take risks and impede your company’s development.

When it comes to risk management, it’s a board responsibility. If yours is a small NFP you may not be able to afford to pay an expert risk assessor to guide you so much of your decision making process will need to rely on your experience and common sense.

it is a good idea to have an expert on your board who can advise about the risks a certain decision might create for the NFP. As risks and rewards are directly correlated, one of the most effective ways to expand and advance in the NFP world is to take the risks worth taking, but this is not an easy task and certainly not to be entrusted to someone who does not have the knowledge, skills and experience required.

One of the most important risk factors associated with your NFP organisation is the risk appetite. This term is used to explain the type and amount of risk your board would consider taking in order to achieve your goals. When deciding on the risks to take, however, you need to have in mind the risk tolerance of your company – e.g. how much risk can your company deal with before you are in trouble.

As a board you will need to consider the following risk areas:

  • Issues with your employees – hopefully, having all internal controls in place will help your organisation avoid conflicts arising from harassment, discrimination, wrongful dismissal etc.
  • Risks related to your volunteers – this group includes potential injuries your volunteers may suffer, or damage that may be caused to others as a result of their actions.
  • Physical spaces and equipment – these are risks related to your office or the locations where you hold your events and have to do with health and safety, fire prevention, theft, misuse of equipment, liability etc.
  • Organisation issues – these include lack of proper documentation and reporting structures, inadequate management of cash flow, receipts and payments, unsafe handling of documentation and data etc.
  • Financial risks – one of the most important risk types, taking financial risks may push your organisation forward or bury it if not managed properly. This is especially true in cases when your organisation invests funds in order to multiply them.
  • Other risks – there are many other types of risks that you may be facing without even knowing. These may include poor delivery of service, poor funding, inappropriate control of expenses etc.

It is good practice to develop a risk policy to guide your organisation when they are making risk-related decisions. It is even better practice to develop systems to help your organisation avoid the risk in the first place.  This includes a system of regular reviews to monitor your systems and ensure they are working, and of course to build in a reporting process so that the board is continually updated on risk related issues.

Have you considered the risks that your NFP or club might need to deal with?