The Top 10 Nonprofit Risks

Every nonprofit would love to avoid risk all together. Unfortunately, that is not the world in which we live. Risk is everywhere and, in order to survive it, you must be prepared.

The first step to developing a good risk management plan is to understand the kind of dangers you will be facing. At a recent Risk Management and Finance Summit for nonprofits, Melanie Lockwood Herman of the Nonprofit Risk Management Center discussed the top 10 risks that are faces by nonprofits. They are:

• Financial loss. To prevent this, it helps to have a well-trained, well-informed board.
• Exposures from social media use, misuse and naivete. Risk-management strategies include written guidelines for employees, volunteers and members and a point person to monitor social media.
• Incivility. Investigate complaints without delay and hold staff and volunteers accountable.
• IRS Form 990 and federal tax-exempt status. Losing that status is really easy.
• Copyrights and trademarks. Use the copyright symbol. Use work-for-hire agreements with contractors. Respect the work of others.
• Failure to limit a contracting authority and other common mistakes in contracting. Develop a simple policy, clarify who has authority to enter one and obtain legal review, before signing.
• Lack of synchronicity in board policy and practice. Look at policies. Do they need changing?
• Failure to understand and manage conflicts of interest. Make sure the policy is easily understood.
• Fraud. Understand the inherent risks and fraud schemes.
• Harm to reputation. Remember humility (admit mistakes) and speed (without delay).