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RISK MANAGEMENT

"Any organization that provides programs to the public has a moral, legal and spiritual obligation to institute appropriate risk management practices for volunteer programs. This is not only the right thing to do; it is legally required under the principle of duty of care."

- Marlene Deboisbriand, (former) President of Volunteer Canada

Every activity your nonprofit undertakes has inherent risks and potential liability. Risk management is a proactive process that manages those risks and resulting outcomes. Its purpose is to avoid, reduce or prevent risk from imposing negative consequences.

What is Risk Management?

• Identifies threats and opportunities through ongoing internal and external examination, analysis and adjustment
• Plans organizational-wide strategies to manage risk filtered through the organization's challenges, opportunities, capacity, practices and culture
• Assesses the nonprofit's ability to:
• Respond to risk
• Determine its risk tolerance
• Understand its ability and capacity to mitigate risk
• Realize the training and learning needs of its personnel to implement the risk management plan

Risk management considers:

• The overall management framework
• Governance and accountability structures
• Values and ethics
• Operational work environment
• The current risk management culture and tolerances
• Existing risk management expertise and practices
• Human resources capacity
• Local and corporate policies, procedures and processes
• "Finance" risk means "to pay for the cost of risk"

Strategic Objectives

• Risk Identification and Mitigation
• Be ready to take advantage of opportunities
• Reduce uncertainty - confidence in future
• Be a good citizen
• Fulfilling legal and ethical issues reduces chances of being sued (downside risk)
• Fosters favorable public image - improves public support that attracts volunteers and funding
• Fulfills community service mission

Risk Identification and Mitigation:

• Significant risks to the operations identified and action taken to minimize their consequences
• No process is 100% effective
• Best practices: Manage risk through a systematic approach that minimizes the possibility that risk will go undetected

Risk Management Concepts

Risk includes three key issues:

• The frequency of loss occurring (how often)
• The consequences of loss (how costly/severe)
• The perception of loss (affect on stakeholders needs, issues, concerns)

Risk management activities:

• Go beyond buying insurance
• Prevent, control and manage losses
• Seek alternative approaches to finance risk.

Personal Risk Acceptance

• Degree of personal control: less accepting with no control
• Potential of an event to cause catastrophic consequences
• Less accepting of a painful death rather than quick - end result the same
• Distribution of risks and benefits:
• accept greater risk if benefit results from the activity
• less accepting of uncompensated loss
• Degree to which exposure to the risk is voluntary - NIMBY
• Degree of familiarity with the activity

• Accepts risk based on their perceptions of the consequences, not necessarily the facts
• Perceptions are influenced largely by their personal background and any previous exposure to the risk
• Values a risk differently depending on how the loss affects their needs, issues and concerns