Nonprofit Risk Management The Role of the Board

2,230 views

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
2,230
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
42
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Nonprofit Risk Management The Role of the Board

  1. 1. Elder Care of the North Nonprofit Risk Management The Role of the Board
  2. 2. Elder Care of the North Points to Cover – Defining Risk Management – Why is it Important to a Nonprofit – What is the Role of the Board – Connection to Governance – Conclusion
  3. 3. Elder Care of the North Defining Risk Management – Risk is defined in the dictionary as “exposure to the chance of injury or loss; a hazard or dangerous chance” – Management is defined as “the act or manner of managing; handling, direction, or control.” – Putting the two terms together and you have the definition of risk management – basically handling or controlling the exposure that an organization has to loss.
  4. 4. Elder Care of the North Risk management is extremely important to a nonprofit organization because any type of loss could have a significant impact on the ability of the nonprofit to meet its mission and its financial stability. Financial resources need to be protected and a key way to do this is to identify and manage the possible risk that the organization may face.
  5. 5. Elder Care of the North ● The different types of risk that may impact a nonprofit include: – Financial Risk – IT Risk – Insurance Risk – Employment Risk – Vendor Risk – Collaboration Risk
  6. 6. Elder Care of the North The Board of Directors and management need to be involved in identifying the potential risks linked to each of these areas. Once the risks have been identified it is up to management and the Board to create a plan to manage that risk so it does not have an impact on the mission of the organization.
  7. 7. Elder Care of the North ● Financial Risk – Fraud and Embezzlement – Financial Losses Due to Poor Decision Making – Misstatement of Financial Reports – Cuts in Primary Funding – Lack of Proper Controls over Resources
  8. 8. Elder Care of the North ● IT Risk – Virus Infection – Computer Hackers – Lack of Security Controls – Theft of Hardware – Loss of Personal Information
  9. 9. Elder Care of the North ● Insurance Risk – Insufficient Coverage – Incorrect Types of Insurance – Lack of Periodic Reviews – Lapse in Coverage
  10. 10. Elder Care of the North ● Employment Risk – No Background Check – Lack of Proper Hiring Policies and Procedures – Lack of Safety and Training Program – No Controls in Place to Protect Personal Data – Lack of Formal Review Procedures
  11. 11. Elder Care of the North ● Vendor Risk – Lack of Credit Check – No Procedure for Reviewing References – No Policy for Completing Annual Vendor Audit – Lack of Process for Contracting – Lack of Input from Users
  12. 12. Elder Care of the North ● Collaboration Risk – Lack of Review of Potential Partners – Lack of Formal Agreements – Lack of Understanding of Resource Allocation – Lack of Understanding of Duties of Partners
  13. 13. Elder Care of the North ● Role of the Board – Board Members need to be trained to identify potential risk and how to put in place policies and procedures to manage it. – Board Members need to work with management to insure that a risk management plan has been developed and is continually updated to address potential risk
  14. 14. Elder Care of the North ● Role of the Board (continued) – Board Members need to create an environment of accountability and transparency to support this undertaking – Board Members need to understand how poor governance practices can lead to a high risk situation – Sitting on the sidelines is not an option when it comes to risk
  15. 15. Elder Care of the North ● Role of the Board (continued) – The Board needs to create a culture where risk management is part of the normal activities addressed by Board Members and Management – The Board needs to establish a Risk Management Committee to direct, advise, and report to the full Board. This would be structured similar to the Audit or Personnel Committee.
  16. 16. Elder Care of the North ● Risk Management and Governance – Risk Management is about identifying and managing those issues that could become problems for the nonprofit to continue to meet its mission. – Board Governance is about creating an environment that supports the nonprofit in meeting its mission.
  17. 17. Elder Care of the North ● Risk Management and Governance (continued) Boards need to make sure that the nonprofit is in compliance with its Articles of Organization and By-Laws. This could create a serious issue with Federal and State organizations and have a significant impact on the nonprofit having the ability to remain operating.
  18. 18. Elder Care of the North ● Risk Management and Governance (continued) Board Members need to make sure that they are in compliance with the new requirements of the IRS Form 990. There are several new policies that need to be in place such as Whistleblower, Conflict of Interest, and Executive Compensation. Non-compliance could risks the organizations 501(c)(3) status.
  19. 19. Elder Care of the North ● Risk Management and Governance (continued) Board Members need to assume a more active role in the operations of the nonprofit so that they are able to identify potential risks more easily because they will have a much better understanding of the nonprofit. Recommendations can be made to management when risks are identified.
  20. 20. Elder Care of the North Shore ● Risk Management and Governance (continued) The Board needs to make sure it has appropriate committees established that meet on a regular basis, such as Finance, Audit, Personnel, Compensation, and Risk Management that report back to the Board on the different areas of the organization that can be areas of risk.
  21. 21. Elder Care of the North ● Conclusion It is important for the Board of Directors as part of governance to be more aware of risk and its impact on the nonprofit agency. Setting the tone at the top and working with management to put in place policies and procedures to help identify and manage risk needs to be a top priority.
  22. 22. Elder Care of the North ● Conclusion (continued) With the new Federal and State regulations that have been put into place and nonprofit agencies coming under closer scrutiny the Board needs to make sure the organization is protected. The first thing to do is for Board Members to get active and become part of the risk management process.
  23. 23. Elder Care of the North ● Conclusion (continued) The Board of Directors are charged with helping the nonprofit meet its mission by providing appropriate governance. With the world changing rapidly and potential exposure popping up everywhere, risk management has to take more of a role in how things are looked at.
  24. 24. Elder Care of the North ● References Nonprofit Risk Management Center Website – www.nonprofitrisk.org Taylor, B., Chait, R., & Holland, T. (1996, Sept/Oct). The New Work of the Nonprofit Board. Harvard Business Review, 36-46. Benjamin, L. (2008). Bearing More Risks for Results. Administration & Society, 959-983.

×