Risk Management and Your Nonprofit

Earlier this summer, we wrote a blog called Six Risks Your Nonprofit Should Be Taking, because for nonprofits as well as for-profits, without risk there is rarely any reward.

However, even acceptable risks should be managed, so now we’ve prepared a short set of tips for risk management at your nonprofit.

What Risks Face You?

Many of the resources addressing “risk management” for for-profits focus on financial risk, but nonprofits may be equally as concerned with other kinds of risk.

Risks can be:

• Financial. Are you managing donations and overhead correctly?
• Legal. Nonprofits have certain legal requirements. If your nonprofit was set up more than 10 years ago, you may have to make some adjustments to ensure compliance.
• Time-related. Many nonprofit programs have strict deadlines for reporting to funders or for completing promises to the community you serve. Timeliness must be incorporated in your strategic plan.
• Mission-related. Is something putting your mission in danger? If your mission is compromised, then you may find that your reputation is also at risk.
• Reputation-related. This article suggests that a nonprofit’s reputation is really the ONLY thing it has to risk. Your organization’s reputation directly affects—and can increase—all of the other kinds of risk you face.

How High is Your Risk?

Try to prioritize the risks facing you. Keep a close watch on high-priority risks, decide if some of the lower-priority risks can be safely sidelined and be sure to set a reminder to reassess this later, as priorities can change. Some kinds of risk may be an ongoing high priority, for example you might have a reputational risk if your mission is controversial in your community.

What Can You Do To Avoid Bad Risk?

Once you have determined that a risk is so high that it is unacceptable, you need to have a plan to avoid it. For example, if a risk looks likely to derail your mission or to alienate a major funder, you will probably want to avoid the risk as much as possible.

Brainstorm ways to avoid the risk with your board and staff and be sure to come up with more than one actionable plan that will help get your program out of harm’s way if the risk cannot be completely avoided.

What Can You Do Differently in the Future?

We’re big fans of strategic planning. A healthy strategic plan, one that you and your staff check back with and adjust as necessary, will help you take old risks into consideration so that you avoid new risks.

We’ve said it before, but it’s worth saying again: make sure everyone on your staff knows that it’s OK to fail. Any failure now will help steer you away from risk in the future.

Do you have any additional tips for nonprofit managers looking to manage risk? Leave your suggestions in the comments below!

Additional information:

This video addresses managing certain kinds of risks for nonprofits

This video lays out six questions managers can use to determine risks.