Organizations placing a higher onus on risk

August 1, 2013

Organizations placing a higher onus on risk

Many nonprofits found it difficult to keep their heads above water during the financial crisis. While the recession seems to be a thing of the past, many decision-makers at organizations today have learned their lesson and are making risk management a higher priority, setting aside more their of budgets to focus on potential threats.

Nonprofits are run similarly to many for-profit companies, which were recently surveyed about risk management practices by Deloitte. The "Setting a Higher Bar" study found roughly two-thirds of financial institutions are ramping up their spending on combating some of their issue the organization can face down the down.

Risk management has become more important
In the past, organizations thought they could focus on threats without having to make big changes that could affect the future, but now the study found 48 percent of firms said increased regulations have led them to adjust practices. Increased regulatory issues are just one concern risk management teams can help decision-makers with, which is why 39 percent or larger organizations that took part in the survey have more than 250 full-time employees working in risk management. 

In addition, 62 percent of respondents have a enterprise risk management program in place, while 82 percent either have a strategy or are developing new initiatives for risk management, a 23 percentage point increase from a similar study conducted in 2010.

Organizations can save their reputation
The last thing nonprofits want is to be placed in compromising position, demonstrating why risk management has gained traction in recent years. However, it is troubling that less than one-quarter of companies surveyed by Deloitte believe their technology used to monitor risk is effective while 40 percent are concerned about their capabilities to protect related data. Nonprofits often have a lot of donor information stored in their virtual infrastructure, and could simply not afford to experience a data breach.

"Where concerns linger particularly is around operational risk, with a number of recent headlines – like management breakdowns and large-scale cyberattacks – underscoring the important impacts this area can have on a firm's reputation." said Edward Hida, global lead of risk and capital management services at Deloitte. "This is a gap that needs to be addressed."

Better decisions happen when risk is understood
Many nonprofit leaders understand how potential risks have changed strategies for organizations throughout North America. This is why decision-makers have to be more informed than ever, and the only way to gain the knowledge is to seek out the insights they need by being a part of important conversations.

These instances illustrate the importance of being able to make good decisions. An article for The NonProfit Times shared a list of strategies to use protect the organization from bad choices:

  • Gain access to important information: Nonprofit leaders cannot make decisions that will impact the future of the organizations if they don't have all of the data and resources they need to evaluate the pros and cons of each potential choice that they make.
  • Attend key meetings: Board members, employees and volunteers meet from time-to-time to discuss the state of current projects, future fundraising strategies and much more. Leaders must be at these meetings and make sure the decisions made are low risk.
  • Question everything: Before making any key choice that will shape the upcoming few years for the organization, nonprofit leaders have to ask as many questions as possible to be sure board members and employees are making the right decision.
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