Why Prioritized Risk Management is Critical for Nonprofits

Nonprofits and Risk Management Protection 

As a nonprofit, there are plenty of opportunities to make tough decisions. With it comes a fair amount of risk. It can be hard to know where you’re vulnerable and which bases you forgot to cover. Risk management is something that needs to be a priority for every organization – including nonprofits.

A good practice for nonprofit owners to get into is:

1) Identify risks
2) Prioritize risks
3) Mitigate risk
4) Monitor risks and mitigation plans
5) Report on risks and mitigation plan status to the board of directors (board) and other stakeholders

The prioritization of risks allows each organization to focus only on the top risks that are not already handled. For example, there is a risk of losing the value of an owned building due to a fire, but if the organization already has adequate property insurance coverage, the risk won’t make the top 10 or 20 list.

However, if the inability to attract and retain volunteers is a major risk for the organization, then maintaining an adequate number of volunteers may be on the list. Part of identifying the risks is understanding how to address them and make detailed plans.

Some common strategies risk areas for nonprofits include:

  • Insufficient funding
  • Unclear mission
  • Lack of visibility in community served
  • Competition from similar organizations for funding, volunteers, clients

Some common operational risks for nonprofits:

  • Lack of acceptable fiscal management
  • Late/forgotten filings, e.g. 990, other required permits, licenses, etc.
  • Insufficient cybersecurity protocol
  • Errors due to lack of training volunteers/staff

When determining the risks associated with an organization, many people should be included. It is not enough for the board, alone, to make the list. For example, staff members, volunteers, donors, as well as board members should have their say on what risks the organization could face.

A great way to address risks in a nonprofit is to secure reliable insurance coverage. Contact the experts at HUB International Insurance Services in Colorado at 719-546-6827. Make sure that your nonprofit is properly covered. We will work with you to ensure you are getting the most out of your coverage.