The World of Nonprofit Finance Risk
Estimated Reading Time: 2 minutes
By Melanie Lockwood Herman and Whitney Thomey
Myriad situations make up the world of nonprofit finance risk. The image above illustrates some of the common preventable, strategic, and external sources of risky financial situations nonprofit finance leaders may encounter. We offer the following recommendations for fortifying your organization against downside effects.
Uncover
What are the risks? Take stock of these suggestions and look for other areas that your organization might be exposed to financial risk events.
Sort and Discuss
The NRMC team has suggested the categories of external, strategic, and preventable to help you organize and classify risks that you uncover in your nonprofit. Utilizing a classification system is one way to inspire appropriate proactive and reactive responses for each risk. For example, external risks are those that are beyond your direct control. Appropriate risk mitigation strategies for external risks tend to focus on contingency planning. Strategic risks are those that arise from the strategies your agency has adopted. Risk mitigation for strategy risks involves identifying what circumstances necessitate possible changes in those strategies. Preventable risks are those that your agency wants to avoid. Associated risk strategies tend to focus on ensuring that safety rules are clear, training is thorough, and all staff feel empowered to raise safety concerns without fear of negative consequences.
Act
Determine reasonable steps and initiatives to:
- Monitor how the risk is changing
- Assess your vulnerability
- Build resilience through cross-training, contingency planning, and more!
- Ensure awareness and oversight. Ask:
- Which teams need to know the status of mitigation strategies?
- Who might need to make a decision that would be informed by our understanding of the risk?
“First let me congratulate you on a conference well done. I had a great time at the Nonprofit Employee Benefits Conference and walked away with some valuable tools and questions that we’ll need to be addressing in both the short and long term. Thanks to you and your staff for all you do to provide us with quality resources in support of our missions.”
— Scott Brown, Mohonk Preserve
“BBYO’s engagement of the Center to conduct a risk assessment was one of the most valuable processes undertaken over the past five years. Numerous programmatic and procedural changes were recommended and have since been implemented. Additionally, dozens (literally) of insurance coverage gaps were identified that would never have been without the work of the Center. This assessment led to a broker bidding process that resulted in BBYO’s selection of a new broker that we have been extremely satisfied with. I unconditionally recommend the Center for their consultative services.
— Sidney Abrams, BBYO
“Melanie Herman has provided expert, insightful, timely and well resourced information to our Executive Team and Board of Directors. Our corporation recently experienced massive growth through merger and the Board has been working to better integrate their expanded set of roles and responsibilities. Melanie presented at our Annual Board of Director’s Retreat and captured the interest of our Board members. As a result of her excellent presentation the Board has engaged in focused review which is having immediate effects on governance.”
— Pamela Mattel, Basics Promesa Systems Inc
“The Nonprofit Risk Management Center has been an outstanding partner for us. They are attentive to our needs, and work hard to successfully meet our requests for information. Being an Affiliate member gave us access to so many time- and money-saving resources that it easily paid for itself! Nonprofit Risk Management Center is truly a valued partner of The Community Foundation of Elkhart County and we are continuously able to optimize staff time with the support given by their team.”
— Jodi Spataro, Community Foundation of Elkhart County
“The board and staff of the Prince George’s Child Resource Center are extremely pleased with the results of the risk assessment conducted by the Nonprofit Risk Management Center. A thorough scan revealed that while we are a well run organization, we had risks that we never imagined. We are grateful to know that we have now minimized our organizational risks and we recommend the Center to other nonprofits.”
— Marti Worshtil, Prince George’s Child Resource Center
Great American Insurance Group’s Specialty Human Services is committed to protecting those who improve your communities. The Center team has committed to delivering dynamic risk management solutions tailored to nonprofit organizations. These organizations have many and varied risk issues, hence the need for specialized coverage and expert knowledge for their protection. We’ve had Melanie speak on several occasions to employees and our agents. She is always on point and delivers such great value. Thank you for the terrific partnership and allowing our nonprofits to focus on their mission!