Risk is the possibility of something happening that may have a positive or negative impact. The focus here will be on the negative risks that may threaten the ability of your organization to accomplish its goals. It can be a risk to your people, property, income or goodwill. Risk management is the process of:
- identifying all possibilities for loss;
- determining ways to prevent the loss;
- reducing the amount of the loss if it happens; and,
- paying for the loss so your organization can continue to operate.
Eliminating risk is not practical but a formalized plan may reduce its impact. A formalized plan may:
- increase the chances of your organization’s success;
- result in fewer losses and protect your organization’s time, property, and, most importantly, people;
- allow your volunteers and employees to focus on carrying out the mission of your organization;
- help keep insurance costs down; and,
- protect the organization’s reputation including the goodwill of volunteers and donors.
Developing and implementing an effective risk management plan involves everyone in the organization from the Director to the employees and volunteers. Employees can help identify the risks to the organization by reporting near miss accidents and hazards and identifying safer ways to do things. In order for the plan to be effective, it must be reviewed and updated regularly and/or when there are changes to your organization.
Some practical risk management steps might include:
- requiring two people to make bank deposits during the day at a busy bank machine;
- requiring that all cheques are signed by two people;
- having job descriptions and boundary forms for your volunteers as well as your employees; or,
- using a checklist for regular premises inspections to ensure the area is free from hazards.
A nonprofit will deal with many of the same risks as a for-profit. Having a risk management plan in place is just as important for nonprofits as it is for for-profit organizations. Check out the case in the Canadian Underwriter Aug 2007 that highlights the importance of having and following written procedures.
There are tools and information available to help you develop your risk management plan and the great thing is it doesn’t all have to be done at one time; it can be broken out into sections and worked on by different people. The following websites have tools to help you formalize your plan:
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