Risk Management

Charities have seen a period of significant uncertainty caused by the pandemic and it is worth taking time to reflect on the lessons learnt during this period and the impact they have for Boards when considering risk management.

Risk is an everyday part of charitable activity and managing it effectively is essential if the trustees are to achieve their key objectives and safeguard their charity’s funds and assets.

By managing risk effectively, trustees can help ensure that:

  • Significant risks are known and monitored, enabling trustees to make informed decisions and take timely action 
  • The charity makes the most of opportunities and develops them with the confidence that any risks will be managed 
  • Forward and strategic planning are improved 
  • The charity’s aims are achieved more successfully

When considering risk management, there are 5 key areas to look at:

  • Governance risk
  • Operational risk
  • Financial risk
  • External risks
  • Compliance risk (risk of non-compliance with laws & regulations)

For each key area you will need to:

  • Identify the risks:
    It is important that those involved in the process understand the charity’s operations and how each aspect is interconnected; you will need to consider any relevant external factors and past experience as well as comparing yourself to similar charities
  • Assess the risk:
    What is the severity of the impact and the likelihood of occurrence? 
    Using this assessment you will then want to rate the risks (i.e. RAG rating). This will ensure you focus on high probability high impact risks
  • Evaluate actions to mitigate risks:
    What are your quick wins?
    Do you need to consider ceasing activities in a particular area?
    Can you reduce your risk via insuring or use of an intermediary?
  • Monitor and assess your risk management report/register
    The process is dynamic and over time, as we have seen only too well over the last 18 months, new risks will need to be included and others may no longer be applicable  

A review of the risks facing your charity and the effectiveness of actions taken to mitigate them should be a regular feature of Board meetings.