Every not-for-profit has a story worth protecting. While daily operations and program delivery often take center stage, implementing strategic risk assessment practices can transform your organization’s ability to serve and grow. Understanding and managing different types of risk isn’t just about compliance – it’s about building a stronger foundation for your mission.
Starting the Conversation
Many organizations struggle with initiating risk assessment discussions. Start by gathering key stakeholders and pose these essential questions:
Key Questions to Consider:
- What keeps you up at night regarding our organization?
- What potential challenges could impact our ability to deliver our mission?
- What opportunities might we be missing due to unaddressed risks?
Document these discussions in a simple memo format that can serve as your foundation. As your organization grows more comfortable with risk assessment, you might choose to evolve toward a more detailed matrix approach that maps risks against their likelihood and potential impact. The key is choosing a format that aligns with your organization’s culture – some organizations thrive with complex matrices, while others find continued success with well-crafted memos that focus on key priorities.
Key Areas of Risk Assessment
Strategic Risk
Strategic risk assessment examines threats to your organization’s long-term sustainability and mission effectiveness. This includes evaluating changing community needs, funding landscape shifts, and competitive pressures. Strong governance begins with a qualified, committed board of directors who maintain the right mix of expertise, diversity, and mission alignment. Begin by examining your strategic plan: Are your current strategies still relevant? Do you have the right resources to execute them? How might external factors impact your ability to serve your community? Regular strategic risk assessment helps ensure your organization remains adaptable and responsive to changing community needs while maintaining focus on your core mission.
Compliance Risk
For not-for-profit organizations, maintaining tax-exempt status requires diligent compliance practices. A well-structured compliance assessment helps protect your status by identifying potential gaps in reporting practices and governance procedures. Start with a review of your current policies: Are they documented and up to date? Do they reflect current regulatory requirements?
Financial Risk
Financial risk assessment goes beyond basic budgeting to examine cash flow patterns, investment policies, and donor concentration. Review your cash flow projections, assess investment policy compliance, evaluate donor concentration levels, and examine internal controls. Organizations that regularly conduct financial risk assessments are better positioned to maintain stable operations and seize growth opportunities.
Operational Risk
Day-to-day operations face numerous challenges, from program delivery disruptions to technology failures. Consider how you would continue serving your community if key systems failed. Examine volunteer management, data security, facility maintenance, and succession planning for key positions. These questions often reveal opportunities to strengthen your operational foundation.
Making It Work
Risk assessment is an iterative process. While the initial assessment requires significant time investment, subsequent reviews become more streamlined. Schedule regular risk discussions at board meetings, incorporate assessment into annual planning, and assign specific risk areas to relevant committees.
Success in risk assessment comes from consistent attention and clear accountability. Establish a regular schedule for reviewing each risk area – perhaps focusing on one key area each quarter. Create a risk management calendar that aligns with your fiscal year and other organizational planning cycles. Document who owns each risk area and ensure they have the resources and authority to address identified issues. This approach helps prevent risk assessment from becoming just another administrative task and transforms it into a valuable tool for organizational growth.
Moving Forward
When properly implemented, comprehensive risk assessment strengthens every aspect of your organization. Remember: Risk assessment isn’t about avoiding all risks – it’s about making informed decisions that balance organizational growth with responsible stewardship.
Ready to strengthen your organization’s foundation? Contact Rea’s not-for-profit advisory team to create a customized approach to protecting and growing your mission.
By Ben Antonelli (Dublin)