Risk Assessment for Nonprofits

As the guardians of charitable organizations, nonprofit board members should take steps to evaluate and mitigate the risk. A risk assessment can help you identify and rank the risk of your organization, including the likelihood that they will be a reality and the consequences for operations. You can then develop a risk register or use scenario planning to help you determine the best way to manage your risks and make informed decisions regarding avoiding, reducing, or eliminating them.

Nonprofits face unique challenges in assessing and managing risk. While for-profit businesses face similar concerns, such as employee training and decreasing liability, nonprofits must also focus on protecting the contributions of donors, both money and time. This means that the risks of data breaches funding shortages, and political turmoil are as relevant for nonprofits as they are for for-profit companies.

This article offers a three-step process that can help you transition from reactive to pro-active in protecting your mission in the long run. Whatever your organization's size or level of expertise, the basic steps are the same.

Begin by identifying any risks that your organization is exposed to. This includes everything from a decreasing reserve ratio to the way your staff manages passwords. During this phase it is important to not let any department slip through your fingers such as accounting and finance; IT and donor relations; engineering and human resource management and public relations. Consider what a negative situation might look like for each of these areas, which includes costs, schedules and projects, and long-term campaigns. Then, evaluate the probability of each risk and the amount of damage that could be incurred if it happens.

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