The environment within which the non-profit sector operates is constantly changing. There are always new developments and trends to monitor in terms of impact and effect on non-profit organisations. It is important for every organisation to be aware of the environment in which it is operating, as changes bring with them not only new opportunities but also new risks.
Most organisations have developed informal ways of dealing with risk. However, risk management is not getting sufficient attention in the non-profit sector. “Damage controls” is often implemented after an organisation has already exposed itself to levels of risk. Adopting an approach of anticipating risk, and trying to prevent damage before it occurs, is a much better way of managing risk. This approach is possible with a strong and effective board that recognises its risk management possibilities.
Boards are tasked with governing non-profit organisations in a responsible and effective manner and they must therefore ensure that the organisation is not unnecessarily exposed to risk. As custodians of the assets of the organisation, board members accept fiduciary responsibility for its affairs and act as employer in relation to the employees. Accountability for risk management cannot be shifted and board members cannot shift their accountability for risk management to the CEO and staff.
A diligent board, attentive to the affairs of the organisation, is one of the most important protections against exposure to risk. The board must take the lead in ensuring that a proper risk management strategy is embraced by the whole organisation.
Predicting and avoiding potential harm to the organisation are important skills that board members can develop and improve over time. Having a risk management strategy will not only avoid harm, but can also improve organisational reputation.
Risk management is not only about dealing with potential threats an organisation may encounter. It is also about protecting the reputation of the organisation. A positive reputation is one of the principal assets that non-profit organisation can maintain.
Author: Inyathelo Publication: The Board Walk | Good Governance Guide No. 2 | Second Edition