Calculating your risks

Thoughts on how nonprofits can mitigate risk to get ahead

By Robin Minick

Earlier this year I participated in a panel discussion about risk management for nonprofit groups as part of the United Way of Metropolitan Dallas’ Nonprofit Success Institute. It was an interesting discussion that I think had merit for nonprofit as well as for-profit organizations. All organizations have to make decisions about risk, whether to take it, avoid it, or mitigate it. Taking risk can be a good thing, as it can lead to growth and a greater reach for the organization. For-profit businesses, for example, take risk by spending money on marketing or research — as the saying goes, you have to spend money to make money.

Here are a few takeaways from the discussion:

  • Make sure that the risk that you want to take supports your organization’s mission. If it doesn’t, it isn’t worth the risk.
  • Understanding and addressing risk starts with having all of the available information. Nonprofits can access many resources for this, most free of charge. Talk to other nonprofit leaders about how they’ve managed certain risks. All nonprofits need insurance of some sort, so talk to your broker to find out if coverage is available for the risk that you want to take; insurance companies have policies and procedures for a variety of situations. Lawyers are other good resources. You don’t have to involve them in the entire process but an hour of a lawyer’s time is worth it. Consult your accountants and auditors; they can walk you through possible financial and tax implications of what you want to do.
  • Document your policies and procedures. This doesn’t have to be fancy or complicated, but the process of writing them down will assist in thinking through where the risks are and how you can mitigate them. A good example is who can sign checks and for what amounts. By putting your policy in writing you can think through possible risk scenarios and how you would handle them.
  • Create a calendar of critical dates for your organization. When do certain filings have to be made? When are grant reports due? When do you schedule employee reviews? When are your major fundraisers set to occur? And when are events happening for other organizations that might detract from yours? This gives you a big picture view of what risks you may face.
  • Create a culture of transparency and accountability for your organization, starting with your board. Your board gets most of its information from the staff. Involve them in and make them accountable for the risk-taking decisions. Be responsive to their questions and concerns. If your culture fosters transparency and accountability, your risk management will be much better for it.

 

Bottom line: With a little forethought and planning, risks can be managed and made to work for the benefit of your organization. If you want to know more about this topic, watch the entire discussion at https://unitedwaydallas.org/programs/nonprofit-success-institute/.