The Philantrepreneur Journal - Page 9

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