A certain amount of risk is good for your nonprofit organization. Risk is not always determined just by finances, but by market factors such as the economy, competition, and volunteer policies. Does your organization have defined areas of risk and what is acceptable? For example, too much risk and you expose your organization to financial deficit and disgruntled donors. Play it too safe and you miss opportunities to grow. Here are 9 ways to mitigate a broad range of risks and still be open to opportunities:
- Identify all areas of risk in your organization: financial, technological, social, political, competitive and economic. Not all areas will apply to all organizations.
- Make sure that you have a person(s) or process in place to assess, measure and monitor risk. For example, being too conservative with certain technology risks can inhibit your ability to grow.
- Talk with your board about risk management and have a vetting process regarding expenditures that may be deemed risky. Your annual
budgeting process is a good time to address all areas of risk.
- Establish a process for evaluating risk and create definitions as needed.
- Create an investment committee to monitor organization investments.
- Make sure that internal controls are in place to deter fraud. Have policies for cash receipts, and handling checks and bank deposits. (This subject is much bigger than this blog post allows. Watch for more information to come on deterring fraud.)
- Have more than one person responsible for information reporting to ensure accuracy.
- Provide hard data evidence to organization stakeholders (board, donors, employees) of responsible financial management.
- Have a prioritized plan in place in the event of risk failure.
Entire books are written on managing risk. Make sure that you become familiar with the issues at stake for your organization.