As guardians of charities Board members of nonprofits must consider ways to assess and reduce the risk. A risk assessment allows you to determine and rank your organization’s risk in terms of their likelihood of occurring and impact on the operations. You can then develop the risk register or scenario planning to help you determine the best way to manage your risks and make informed decisions about avoiding, mitigating, or eliminating them.
Nonprofits face unique challenges in assessing and managing risk. While for-profit companies have similar concerns, including employee training and cutting down on liability, nonprofits have to be mindful of protecting the contributions of donors, both money and time. This means that the risks of data breaches financial problems, and political turmoil are just as real for nonprofits as they are for for-profit businesses.
This article outlines a three-step process that can aid you in transitioning from reactive to pro-active, protecting your mission in the long run. Whatever your organization’s size or expertise, the essential steps are the same.
Begin by identifying the risk that your nonprofit faces. This includes everything from a decreasing reserve ratio to how your staff handles passwords. In this phase, don’t let any department be left unaffected by your scrutiny: accounting and finance IT, donor relations, engineering, human resources, and public relations. Consider what a negative incident might look like for each of these areas, including costs, schedules, projects, and long-term campaigns. Assess the probability of each risk, and then determine the extent of damage it can cause if it occurs.
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