Risk forms the pillar of a philanthropist’s success! When a generous person, or large-hearted donor, wants to invest money for a charitable cause, it is not very dissimilar to investments made in any business project. You may not be aware where your weaknesses lie and what basic needs you have forgotten to cover. This is where risk management becomes important. And today, it is a priority for any non-profit operation.

What is risk management?

The Alliance for Non-profit Management has gone on record to speak about risk management as, “[…] a discipline that pre-empts the possibility of some future event causing harm.” It can also be defined as the process of weighing policy alternatives in the light of the results of risk assessment and, if required, selecting and implementing appropriate control options, including regulatory measures.

Now, this could mean a bouquet of measures and options. For non-profits, it may mean evaluating finances, reducing liability, screening volunteers, training employees, or bolstering cyber security.

Why is it important?

There are certain similar risks that a non-profit unit, as well as a business for profit, has to account for. At the same time, there are some levels of protection that non-profits have to cover which businesses for profit do not at all have to. The task of protecting donor contributions can become more difficult to control with a limited budget. Many factors can cause possible issues for a charitable or non-profit organization. Here are a few…

Save Your Funds

Some people may try to use your brand name to create a fake event, or try to raise crowd-funding and pocket the money. This will not only harm you, but also those who donated money for the cause that you are fighting for. Their hard-earned money would vanish, whereas they had handed it to an organization they had faith in. This way, you may risk losing the trust you had built with your donors and you can be held responsible for the losses incurred by the donors.

Risk of Thefts

The dread of funds getting stolen is a real threat to non-profits. This can happen from anyone―clients, employees or third-party vendors. Especially for a small organization, any amount of loss can mean a big setback and can greatly impact their daily operations negatively.

Follow the Rules

Non-profit or charitable organizations have to ensure they follow the rules set by the Income-Tax Department to maintain their tax-exempt status. They have to show that they are using funds for certain non-profit causes and not for any personal gain, or financial or political purposes. Risk management will help you validate that your company is unassailable.

Save Your Data

In today’s Dark Web age, many non-profits still do not consider cyber security a priority. According to a survey, more than 50 per cent respondents of such organizations have created a policy to guide their cyber security risk approach, but nearly 40 per cent said they did not have any policy and less than 10 per cent did not even know whether they had one. Data breaches are a real threat today. It is important for an organization, especially non-profits, to have enough protection to keep donor data safe from hackers.

Risk management is very important because it helps philanthropists understand the threats and opportunities they are facing and also to prioritize issues. It is from there that organizations can get the necessary tools and information to create a strategy to move forward. Risk management can work wonders in helping you assess your organization’s performance and sustainability status for future reference.