Small Charities And Risk Management

The effective management of risk is an essential part of the commitments for trustees of charities and is often overlooked by means of those responsible for managing the smaller charity.

Risk is an affair or action that may adversely affect an organisation's chance to survive or compete in its market or to maintain its fiscal stability or its positive public image and the entire quality of its people and services. Risk might also arise from a failure to exploit opportunities or from a dysfunction in operational controls and procedures.

The requirement to manage the possibility

For registered charities the Charities SORP (Statement of Recommended Practice) sets out the reporting requirements for trustee sale on the:

identification of major risks
the review of threats
the systems or procedures established to manage risk
Therefore, it's essential for all charities that they have a sound risk management insurance plan

The role of the trustees

The responsibility for the management and control of a charity rests with the board of walnut creek ca. The board's involvement in the key aspects of the risk managing process is essential. Trustees do not have to undertake each aspect of doing this themselves. Their level of involvement should be such that the foreclosure auctions can make the required statement on risk management in the statutory annual report with reasonable confidence.

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  • The actual management of risk will involve the following key steps:
  • establishing the risk policy
  • identifying risk
  • assessing risk
  • evaluating as well as implementing what action needs to be taken
    reviewing and creating a system of periodic monitoring and assessment
  • Although these ingredients can be used as 'steps' or 'stages', it is likely that trustees will likely need to revisit each stage as their knowledge of the charity's probability profile increases.

Any risk management policy will need to possibly be:

comprehensive
continuous
integrated
suitable and proportional
Establish hazard policy

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Risk is an inherent feature of all activity and can arise from inaction as well as new initiatives. Charities can have differing exposures to risk arising from their activities all of which will have different capacities to tolerate or absorb risk. A new charity with sound reserves could perhaps embark on a new undertaking with a higher risk profile than, say, a charity experiencing solvency difficulties.

The risk policy process will include a consideration with the following:

the charity's objectives, philosophy and strategy;

the type and scale of the charity's activities; the success components that need to be achieved;
external factors that might affect the charity including legislation and regulation, and the charity's reputation with its important funders and supporters;

past mistakes and problems that often the charity has faced;
the operating structure - elizabeth. g. use of branches, subsidiary companies or joint efforts;

comparison with other charities working in the same area or associated with similar size; and
checklists of risk factors prepared by other charities or other organisations.
It is essential that due to process to work, trustees and executive management need to be invested in it. Trustees will need to consult widely with key professionals and staff, and may even involve supporters and beneficiaries everywhere reputational risk or provision of service to beneficiaries is it being considered.

Gary Klungreseth