Protecting the mission and operational activities of nonprofits remains a fundamental requirement in their organisational structure. Now more than ever, nonprofit risk management is a crucial topic that nonprofits must understand properly.
- Risk management is foreseeing a potential risk in an organisation and handling such properly.
- The first step in managing risk is identifying the risk.
The Essence of Nonprofit Risk Management
Nonprofits, just like any organisation, are prone to certain risks for several reasons. One such skill required is making sound decisions. This can greatly affect the organisation positively or negatively.
In this article, we will guide you through what you need to know about risk management in a nonprofit, what it entails, and how you can apply the needed strategies to minimise risks in your organisation.
What Is Risk Management For Nonprofits?
According to The Alliance for Nonprofit Management, Nonprofit Risk Management can be defined as “a discipline for dealing with the possibility that some future event will cause harm. It provides strategies, techniques, and an approach to recognising and confronting any threat faced by an organisation in fulfilling its mission.”
Nonprofit Risk Management is being able to foresee a potential risk to the organisation and handle such risk properly. This is possible with the right strategy.
Why Is Nonprofit Risk Management Important?
Managing risk in your organisation is essential to your nonprofit as:
- It helps in understanding the threats and opportunities being faced by the organisation.
- It provides a framework for risk management.
- It helps the board to be more aware of potential risks.
- It outlines the roles and responsibilities of groups and individuals in carrying out risk management policy.
Examples Of Nonprofit Risks
Here are some examples of possible risks for nonprofits:
- Cyber security violation
- Theft
- Fraud
- Failure to comply with certain codes of conduct
Steps To Create A Strong Nonprofit Risk Reduction Strategy
So, how can one create a really good strategy that can greatly reduce nonprofit risks? Below are some of the very basic yet effective steps to take:
1. Identifying the risks
It is very important to identify the risks because a problem identified is a problem half-solved. Try to look out for potential risks in the organisation, such as certain insurance policies that might have expired or are due soon.
2. Analysing the Risks
After the first step, it is essential to weigh the impact a risk can have on the organisation.
3. Evaluating the risks
In this step, one has to understand the effect of each risk and list out the ones that have to be addressed quickly and the others that can wait.
4. Eliminating the Risks
Just as the name sounds, you have to eliminate the risks based on their context. For example, if it is a risk that involves a lawyer, then hire the services of such a professional.
5. Regularly Monitoring Risks
Certain risks can’t be eliminated, such as market risks. Hence, there is a need to constantly look out for these types of risks.
Conclusion
Nonprofit risks can pose major detrimental effects that adversely impact organisational growth. Unforeseen events require specific implementation strategies to manage them. You can implement the steps outlined in this article to establish risk management practices within your organisation.
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