TPF JOURNAL
for follow-up action/planning on how best to prepare
for and address those areas identified. An example: a
nonprofit is identified as having potential legal/liability
risks, the assessment would list several law firms for the
nonprofit to contact for consultation or to enter into a
retainer agreement as a way of planning for those risks.
One of the reasons that new nonprofit startups do not
consider operational risk management is because of the
lack of resources for staff or funds to pay to outsource this
service. However, there are consulting firms available
that offer outsourcing risk management packages at reasonable costs. Another work-a-round is to ask the local
Chamber of Commerce if they offer workshops or seminars on operational risk awareness and/or management.
The important thing is to do something, take measures
to increase awareness of your potential risks because not
increasing your awareness puts the nonprofit, and you,
at a greater risk of failing.
Usually, nonprofits are on a fixed budget and spend the
majority of its income on the mission/cause of the nonprofit. Given this position, if an unexpected risk event
(say a safety, security, or legal event) occurs, where does
the money come from to address this risk event? In most
cases, the nonprofit must get donations to cover the
costs of the risk event and we all know that it’s challenging enough just getting donations to keep the nonprofit
active and beneficial to its mission/cause. Plus having to
add donors for money to pay for a risk event that could
have been identified early on and planned for makes the
nonprofit look unprofessional. Having a risk assessment
plan, line item budget allocation, and subject matter
experts at your disposal give the nonprofit the added
protection it truly needs and adds to its professional
image.
As mentioned above, expected risks can come from
many areas, both internal and external. One nonprofit
whose mission was packaging food to send to needy
children overseas became the victim of unexpected risks.
They accepted cash donations, as well as nonperishable
food items, along with clothing items. The nonprofit
was a small organization that relied on some volunteers
to accept the cash and items, put the items into boxes,
move the boxes to a storage room, and load them onto
9
a truck for shipping. Long story short, the nonprofit
suffered losses from trusted volunteers who stole cash
donations and food items, which they later resold or
kept, and they forged names and amounts on some
of the donation checks so that they could cash them.
This could have been avoided if they had proper internal controls, physical security measures, and some sort
of volunteer vetting process in place. Another nonprofit was sued by a volunteer because of the lack of
proper safety precautions, another nonprofit was a
victim of break-ins because of a lack of proper security, and another nonprofit became a victim of theft
when funds were missing; the list is endless. These
types of risks fall into several different areas, but most
of them could have been mitigated with the proper
operational risk assessment that included recommendations on internal controls, policies and procedures,
a risk plan, and a list of experts to contact for in-depth
follow-up. To maintain a sound operational risk management plan it is extremely important to update the
risk assessment and the risk plan on a regular basis,
such as yearly, or when there are operational changes
or growth to the nonprofit. Always remember to ask
yourself these questions, “Do I know what my potential
risks are, how can these risks adversely affect my nonprofit, and do I have the appropriate mitigation contacts available to call on should I need their assistance?”
Being aware and prepared for unexpected operational
risks is the key to insuring that you have taken the necessary steps to properly protect your nonprofit. This will
allow you more time to focus on running and growing
the nonprofit and allow you to breathe a little more
comfortably when it comes to unexpected risks.
Think of preparing for unexpected operational risks in
the same way as you would for preparing for a natural
disaster that could potentially destroy people’s lives,
homes, and communities. After all, if you lose your
nonprofit, it is a disaster for you and the nonprofit.
Since there is very little in the way of making a new
nonprofit owner aware to identify, understand, and
prepare for potential risks, finding the best way to
increase you awareness and preparedness will go a
long way in securing your investment and protecting
your dream. There are several ways you can prepare
THE PHILANTREPRENEUR JOURNAL
| J U LY 2 0 1 6