Why Risk Management plays an essential part of protecting your charity

August 07, 2018 Paul Eden
Why Risk Management plays an essential part of protecting your charity


Like all organisations, charities and not for profit organisations handle risk daily whether it is organisational planning to meet objectives, operational matters such as running shops, online activities and the like, safeguarding the charity and its beneficiaries from harm, or organising and running fundraising events.

With risk being an everyday part of charitable activity, managing it is essential if the trustees are to achieve their key objectives and safeguard their charity’s assets. In the simplest terms, it comes down to a matter of protecting the trust that has been built up with beneficiaries, funders and donors in order to protect its future.

If you’re struggling to articulate to employees and volunteers the importance of having risk management embedded into the culture and operation of the charity, it may help to remind them of the age-old adage – reputation is everything. Once tarnished, a charity’s reputation is difficult to recover. A charity’s ethics and values can often be under the greater scrutiny than, say, a private sector business.

By managing risk and embedding this approach effectively, trustees can help to ensure that significant risks are identified early, escalated and monitored, enabling the charity to make informed decisions and take appropriate action. A good way to start the process is:

1. Mandate and commitment: a mandate from the Board for risk management to be embedded across an organisation. Then a framework for risk management can be designed, which involves identifying what the risks are and what gaps there are in protection.
2. Implementation: This should be followed by the implementation and execution of the strategy, focusing on whether a risk should be terminated or stopped; tolerated and managed; treated or mitigated; and finally transferred by insurance, contract or some other means. Very often more than one of the above can be used to address risk once you’ve assessed the scale of impact and likelihood that the risk is likely to have on your strategy.
3. Monitor and review: Finally, it is important continuous monitoring and improvement processes are embedded to ensure that the approach remains effective and is updated regularly. The risks that charities face are always changing and regular reviews are an essential part of the process keeping pace with change.

If you’re unsure of the steps to take, a specialist charity risk and insurance broker can support you by working collaboratively with you and your insurers, using specialist risk management teams to deliver the protection you need. The advantage of using a specialist in this area is the experience of working with other similar organisations that they can bring to you and the focus will be on ensuring that both your strategic risk management and insurance programme design and purchasing strategy will be aligned to your organisational objectives.