Managing Nonprofit Risk

Nonprofits are always focused on serving the community, raising funds, and recognizing volunteers. They often overlook identifying and managing the organization’s risks. That can result in some nasty and expensive surprises.


Nonprofit organizations have all the risk exposures that for-profit businesses have. Plus, they are exposed to other risks peculiar to nonprofits, like risks associated with taking donations and engaging a volunteer workforce.


Failure to appropriately manage nonprofit risk can result in reputational damage and a drop in fundraising. In addition to the “normal” processes and insurance coverages used by for-profits, nonprofits should also manage risks related to these four groups of stakeholders:


  1. Directors & Officers

Board directors and key officers, such as the Executive Director, are responsible for making decisions and taking actions using donated funds. The Board should have a robust set of financial policies to establish risk tolerance and decision-making parameters. To further protect those individuals, consult an insurance specialist about appropriate coverages for various liabilities, based on activities and size.


  1. Employees

Every work environment requires guidance for its employees to communicate employer and employee responsibilities, work conditions, benefits, and rights. Employee or Personnel Manuals assist with training and holding people accountable. Employee candidate screening, especially for staff who work with vulnerable populations or financial assets, is a common risk mitigation tool.


  1. Volunteers

Even though they don’t get paid, volunteers should also have set of procedures to guide their recruitment, training, supervision, and expected conduct. Volunteers should also undergo a screening process and be supervised to ensure that she or he is following the organization’s rules and standards. Volunteers involved with serving vulnerable populations or handling donations should undergo additional screening, training, and supervision.


  1. Clients/Participants

Most for-profit businesses provide services or goods to anyone who needs them. Nonprofits can’t necessarily do that because they have a mission and policies that strictly define who is eligible to receive their services. Managing the risk of providing service outside the mission is mitigated by clear, consistent client in-take and screening procedures.


Nonprofits that manage risk for their directors, employees, volunteers and clients experience fewer surprises that can interrupt service delivery and damage reputations. Getting ahead of those risks with a few preventive measures allows nonprofits to focus time and energy on the mission — serving the community.