Risk Management Prevents Risky Business

Risk Management Prevents Risky Business
By Barbara McCullough-Jones

Creating strong, well managed nonprofits means giving the clients and communities you serve confidence to engage with your organization. It also gives your staff and leadership a foundation necessary to ensure the health and well-being of the organization.

Risk Management is one of the most important practices your organization should pay attention to. Risk Management is the practice of protecting the organization, programs and services, the Board of Directors, staff and clients.

Here are 7 quick tips to get you started checking your current practices today.

The nature of your nonprofit mission will dictate the types of polices, procedures and insurance coverages relevant to your organization’s work. Here are a few areas that are applicable to all organizations regardless of your mission.

  1. Review your General Policies and Procedures manuals. Don’t have them? Start writing! You should have a manual for general issues like building security, hiring practices and equipment purchases. You should also have a separate manual for financial policies and procedures.
  2. Review your insurance coverages. Coverages might include, but are not limited to:
    1. Directors and Officers (D&O) – protects executives and officers against claims against them.
    2. Errors and Omissions – protects professionals against claims made by clients.
    3. General Liability – covers areas such as theft, damage, onsite injuries, etc.
    4. Professional Liability – covers claims of negligence even if you have not made a mistake.
  3. Review your program plan on a regular basis. This helps ensure that your Board of Directors, staff and volunteers understand the scope of your mission and services. This review helps ensure no one operates outside of approved program goals and objectives. Having everyone on the same page helps reduce your program risk and liability. These reviews can also help prevent “mission creep” which may potentially dilute your brand and purpose, but which could also effectively diminish the overall impact of your agency.
  4. Review your human resources (HR) manual. Many small and mid-size organizations do not have an HR professional on staff. This does not abrogate your responsibility to know and follow the laws related to hiring, supervising and evaluating staff. Often organizations will strive to have an HR professional on their Board of Directors to guide staff and volunteers in current human resource best practices. Thorough “on-boarding” practices help employees understand boundaries and makes them feel secure in their knowledge of the agency’s policies and practices.
  5. Consult with an attorney familiar with the programs and services offered by your organization. They can advise the Board of Directors and executive staff on ways to further manage potential risk for your organization. If you don’t have such an attorney on your Board of Directors, it is well worth paying for an annual review of your Risk Management strategies.
  6. If your agency serves vulnerable populations (youth, seniors, differently-abled, etc.) know and understand your responsibility as a “mandatory reporter”. Again, this is not a responsibility to ignore. Many local and state jurisdictions provide training on local laws regarding mandatory reporting requirements.
  7. Have a strong business plan and review it regularly. Your organization and especially your clients will benefit from you developing a road map for your organization that lays out a smooth path forward instead of flying by the seat of your pants and constantly dodging potholes along the way. A business plan outlines your goals, measurable objectives, position in community, future opportunities, financial well-being and can identify gaps in your risk management planning.

Remember, there is no substitute for common sense. Seek expert advise where necessary and don’t put your organization out on a limb! Finally, never ever make decisions that are contrary to your written policies and procedures. You will find yourself in hot water!


Pen in Hand LLC can assist you in writing the manuals and plans discussed in this blog and provide training for your staff and Board of Directors. Please contact us for more details on how to get started today.

Barbara has served as a nonprofit executive with more than 30 years nonprofit management experience. You can read more about Barbara’s work at www.peninhandsolutions.com or contact her at [email protected] | 971-208-7441.

 Disclaimer: This article is not intended to serve as legal advice. Please consult legal and financial professionals for information specific to your nonprofit.

What Is Nonprofit Capacity?

We often hear discussions about an organization’s “capacity” but for some what that means is unclear. How to assess an organization’s capacity and what to do with the results can be even more puzzling.

Capacity refers to elements necessary to successfully fulfill the organization’s mission. Common areas assessed in determining capacity often include personnel, fundraising, communications, volunteers, clients, technology and facility.

Organizations are generally classified into three sizes based on budget: small, medium and large. A small organization with a  <$100,000 budget can operate at high capacity as much as a large organization with revenue over >$5,000,000 can have elements of low capacity. An organization with well balanced capacity is the most likely to succeed.

The following table from the 2016 Northwest Nonprofit Report illustrates that organizations of all sizes may struggle similarly with elements of capacity. (Capacity level in this chart reflects an organization’s self-assessment based on a 10-point scale in evaluating their level of financial capacity to fulfill their mission.) Consider for example when reporting to funders both Low Capacity and High Capacity organizations have indicated they have nearly identical experiences in this area.

It is not uncommon to see organizations struggle with one or more capacity elements. For example, they may have identified professional staff positions necessary to serve their clients but have high turnover or positions that remain unfilled for extended periods of time. This means they may need to improve their human resource capacity in order to effectively serve their clients.

If you would like to learn more about the capacities of nonprofits operating in the Pacific Northwest, I recommend reading the 2016 Northwest Nonprofit Capacity Report. You can compare your nonprofit with other organizations from five different states.