Risk Oversight for NPOs

chess-strategyBy:  Hadassa Penn

Some may imprudently believe that risk oversight is a corporate issue that is not relevant to nonprofit organizations. However, while nonprofits may not have the same goals or stakeholders as a for-profit corporation, nonprofits are charged with accomplishing their mission and achieving certain goals and objectives.

A key to success for a nonprofit organization is an understanding of the internal and external risks it faces. Many times organizations focus on risks in their internal operations and fail to address risks that might come from external forces, such as the economy, change in donor base, decline in need for services and decrease in federal funding.

There are significant advantages of being proactively informed about potential risks threatening an organization’s mission and objectives. For example, top leadership and management can engage in focused discussions surrounding the organization’s core, mission-critical strategies and the major risks that accompany those. Frequently management will come to realize that strategic objectives might be impacted by several risks that may hinder the ability to achieve the objective. From there, they can then focus on the risks that are most likely to prevent the accomplishment of the organization’s mission.

While implementing a full enterprise risk management process may be cost-prohibitive for some, organizations should consider and discuss these critical ERM steps:

1. Identification of the risk (e.g., not enough volunteers in the long-term to support the cause)

2. Assessment of the risk (e.g., determined this risk has a high probability of occurring and a high impact to the organization if it does)

3. Developing a new risk response plan and taking action through executive support, allocation of funds and establishing a risk owner (e.g., a revised advertising campaign to appeal to the specific generation that was not participating)

4. Monitoring (e.g.., as the revised advertising campaign evolved, the response also drew more donations, new ways to develop services appealing to this generation, and brought in emerging leaders to support and sustain the mission, vision and goals of the organization. The organization would continue to expand their strategic objectives to include this initiative in their yearly objectives.)

Read more about Looking at Enterprise Risk Through a Non-Profit Lens.

One comment on “Risk Oversight for NPOs

  1. Ed Freedom says:

    A good reminder for all NPO’s regardless of size. We are a small outfit with an operating budget of less than $25K a year. We are barely managing but what keeps us going is our mission and the results we have seen so far. Thanks for sharing this very useful piece of information.

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