How to Conduct a Detailed Organizational Risk Assessment for Nonprofits

Risks are a part of any organization, even non-profit organizations. Risks may affect the operational, financial or reputational aspects of an organization. It is thus imperative to conduct a comprehensive organizational risk assessment to help non-profits pinpoint the potential areas of weakness and come up with ways to remedy that. This process ensures that the organization is standing, working smart, and delivering on its mandate. In this side of the guideline, we bring forward the basic steps of assessing risks for non-profit organizations.

Identification of the Key Risks

Identifying the risks that have been defined to a great detail is the first step in performing a detailed risk assessment on the organization. Such risks generally fall into the following broad categories:

  • Operational Risks: This category includes disturbances of normal processes such as turnovers, breaks of technology, and interruptions in supply chains.
  • Financial Risks: Non-profits in general rely on grants, donations, and funding, which are prone to variability on the revenues/budgets or changing times in funding strategies.
  • Compliance Risks: Non profits are required to observe many rules and regulations which may be about taxes or employment, among other things. Any breaks are likely to warrant penalties and sanction of the nonprofit organization.
  • Reputational Risks: Several factors like mismanagement, scandals, and poor communication may lead to damage to the organization’s reputation and trust from the donors and other stakeholders.

Categorizing everything enables the non-for profit organization in concentrating on the risks that are most likely to jeopardize its sustainability and mission.

Evaluating the Risk Probability and Consequences

Once potential risks have been recognized, the next thing to do next is carry out a probability estimation and effect evaluation of each identified risk and the loss it would be to the organization. A simple matrix can be used for plotting the risks according to the likelihood (low, medium or high) and the impact (low, medium or high).

This practice helps them rank risks to which some would be considering necessary for their occurrence and others for the amount of harm such risks would inflict. For instance, a risk which has high chances of occurrence and will eventually be damaging that risk would include anything from losing an important amount of funding would need action now while a risk that has very minimal chances of occurrence and impact such as a slip of the socket would be given less urgency.

Formulation of Mitigation Plans

The organization in dealing with the risk in this case is after evaluating the probability and effect of the given risks should look forward to addressing these risks. In this phase specific details will be worked out to the extent of how to prevent the occurrence of the risk in question as well as how to limit damage if it does occur.

Mitigation measures may comprise having more than one recipient of revenues to reduce risk from one body, enhancing regulations to ensure that private information remains safe, or providing staff training schemes to cut down on the rate of staff leaving an organization. Organizations whose objectives are not primarily driven by the aspect of making profits require preparedness aimed at addressing the risk as soon as that risk occurs.

Expanding Actions For Continuous Monitoring And Updating

Assessment of risks can never be termed as a once and for all undertaking. It is critical for nonprofits to review risks and revise their risk management strategies as circumstances evolve. New risks may be seen to arise and existing risks may change in the course of time. As a result, all types of Organisation risk assessment should be conducted and reviewed regularly in any organization.

In the case of nonprofits, there are no doubts that constant threat emanating from the disagreements undertaken by the board members and volunteers can be prevented through periodic assessment of management of risk undertaken by the organization.

Let Nonprofits Be Stronger With The Help Of Risk Management

Essentially, risk management must be regarded as a step in the very beginning of every organization if it wishes to grow, remain operational and functional. Discovering the potential risks, their probability of happening and their consequences is crucial in offering the facilities to the carrying the activities of the organization in an appropriate manner. For additional information on good governance and effective risk management within the nonprofit sector check this at boardroommind.com.