Charities need to take risks as well as avoid them, so trustees and managers should draw up a policy to put these in context.
Charities often deal with risk by preparing a register of all the things that could go wrong. But a long list, ranked for probability and impact, does not necessarily mean that you are managing risk.
A better approach is to start by having a conversation among trustees and senior managers about what the risk policy of your charity ought to be. This is about setting the tone from the top. But it is not about avoiding or minimising all risk: a charity’s risk policy needs to state where the charity is prepared to take risks as well.
A simple risk policy for a hypothetical children’s charity might state: “ABC Charity is committed to improving life outcomes for children. The charity is completely intolerant of all risks to children and young people. But to fulfil the charity’s objectives, it has to raise funds and will therefore accept some risk in undertaking new fundraising activities.”
Setting the initial framework allows the board to see the risk register in a context. The trustees of ABC Charity might question whether enough risk is being taken in fundraising. This changes the tone of the conversation at board level, which is too often focused on avoiding risk.
Board members are also much more likely to engage with high-level analysis of the strategic risks if they are small in number. This approach does away with number-based ranking and relies instead on descriptions of the risks and regular monitoring. It can be helpful to think in terms of the big five risks:
ABC Charity runs a number of programmes to improve children’s lives. While it believes that the programmes are well run and are well received, it needs evidence of outcomes. Unless the charity is able to demonstrate impact, it will not be achieving its objects and is unlikely to receive future funding.
A charity’s reputation is everything, but it can be a slippery concept. Boards and senior managers need to understand how reputation weaves through everything a charity does. Inadvertently, you could be giving out contradictory messages that jeopardise your reputation. In fundraising, for example, you might adopt an ethical fundraising policy, but then give the fundraising team aggressive targets; which will matter most to the team?
Source: Directory of Social Change