The Importance of Nonprofit Risk Management

Risk management is defined as a discipline for dealing with the possibility that some future event will cause harm and nonprofit risk comes in an endless number of forms—data security, fundraising fraud, regulatory compliance, employee relations, volunteer staff, and theft just to name a few. Given the myriad of ways that nonprofits are changing the world and the impossible task of being able to predict every potential mission-disrupting event, every organization stands to benefit from risk reducing tactics. This is where risk management comes in—an essential necessity that helps nonprofits understand the threats they face and how to prioritize strategies that create sustainability in the future.

Developing a risk management process is essential to every nonprofit but many remain unprotected simply because they don’t have the funds or resources to implement such a strategy. There are however other ways to protect your organization without breaking the bank that just require more time and dedication to create and streamline. So, if you don’t have a risk management strategy in place already, now is the time to start.

Follow these four steps to create a risk management strategy:

• Perform a risk assessment across all functions of the organization and look at all of the data your nonprofit collects—from donors, employees, volunteers, and investors. The Nonprofit Technology Network offers a helpful assessment tool template to accomplish this beginning stage in an easy and organized manner.
• Gather pertinent organizational documentation—operational plans, mission, and value statements to understand context.
• Develop a timeline and set goals to ensure a phased and deliberate process with metrics to measure success. An effective risk management strategy doesn’t happen overnight but requires thoughtful attention and consideration.
• Implement a risk cycle that regularly evaluates what risks came to life and how they were addressed to understand what works, what needs improvement, and what else can be done. This ultimately enables an organization to adjust quickly and strengthen their risk management strategies.

A single liability incident can easily cost tens of thousands of dollars, not to mention the harm it can do to your reputation. In short, by taking the time to identify risks, prioritize issues, respond to the problems, assess the situation, and improve your strategy, nonprofit employers can better protect their assets and avoid future risks.