8 TPF JOURNAL
RISK AWARENESS & PREPAREDNESS :
WHAT ARE YOUR POTENTIAL RISKS ?
RALPH MCNAMARA
To start a nonprofit you must choose a name , obtain your license , your tax status , choose initial directors , find a location , prepare a business plan , line up donors , select volunteers , open a bank account , etc . Once all of that is completed you are ready to hang out your shingle and focus on making the nonprofit successful and beneficial to your mission / cause . Then there is the matter of promoting your nonprofit , getting a digital presence , media coverage , and community support and recognition .
Many nonprofits do not take the time to consider possible risks whether their nonprofit is home based or it is in a brick-and-mortar location . There are many risks that can arise unexpectedly that may cause harm to your nonprofit , to your financial situation , and to your professional and personal reputation .
When developing and starting your nonprofit what do you think about when it comes to potential risks to your nonprofit ? Do you think of a risk of a fire , a risk of theft , a risk from fraud , a risk of liability or legal issues , a risk of a loss of donors , or a risk of a loss of your professional reputation ? What do you think will be the greatest potential risk to your nonprofit ? Or , do you think about risks at all or that risks will never happen to your nonprofit because they only happen to other people in other places ?
Starting a nonprofit is challenging enough without having your dreams ruined because of an unexpected risk event . New , as well as established , nonprofits are so focused on providing for its mission or cause , growing their nonprofit , and maintaining financially stability , that one of the last things they think about is risk management or planning for unexpected potential risks .
Since there is very little in the way of making new ( or established ) nonprofit owners aware of how to identify , understand , and prepare for potential risks , the only way they become aware is after the adverse unexpected risk occurs . More needs to be done to make the nonprofit community aware of operational risks such as how to identify , understand , address , and plan for potential risks . Not being aware of or prepared for potential unexpected risks could destroy the nonprofit ’ s financial stability , the nonprofit , and the reputation of the nonprofit , as well as its owner . Operational risk management is different than traditional risk management in that traditional risk management usually only addresses compliance , financial , or insurance risks . Operational risk management addresses a much broader range of risk areas , with the most common areas being Legal / Liability Issues , Safety / Security , Trusted Employees / Volunteers , Fraud / Theft , Financial / Insurance Exposure , and Internal Controls / Policies & Procedures . Therefore , nonprofits need a more nontraditional risk management assessment that covers at least all the common areas listed above , as well as other areas . A comprehensive initial operational risk assessment will provide an overview that not only points out the potential risk areas , but helps the nonprofit leadership understand and plan for addressing those risks if , and when , they occur . A premier risk management assessment will also provide a list of subject matter experts for the nonprofit to contact
THE PHILANTREPRENEUR JOURNAL | JULY 2016