Are Charities Gambling With Risk?

25th September 2002

Charities have made significant progress in managing risks but three main areas still need to be addressed - the role of trustees, methods of risk assessment and the frequency of reporting to senior figures.

Balancing risks and rewards - an investment in the future, a survey by accountants and business advisors PKF and the Charity Finance Directors' Group (CFDG), studied the risk management of more than 350 charities.

The key findings include:
· A new era. Formal procedures for managing risk is a new but growing area for charities - almost half (46%) of respondents had started formal risk management processes in the last year and 9% had done so for more than two years. A minority (8%) had yet to begin, although these were mostly smaller organisations.
· Trustees need to be more involved. Trustees are involved in monitoring risk management in less than half (42%) of the charities. In more than a quarter of cases senior management do not perceive trustees to be responsible for the risk statement -signed by trustees - in their annual review.
· Reporting and monitoring risk. Almost half (44%) were least confident about periodic monitoring and assessment. Meanwhile, 44% report to trustees only once a year and one in five charities report to management only once year - a major contrast with recommended business practice of at least quarterly reporting. Yet more than half (56%) of respondents said they use risk management to inform decision-making - which could be dangerous if infrequent reporting results in decisions being based on out of date information.

Charles Cox, PKF head of charities, said, "Proper risk management strategies can tackle charities' vulnerability to bad management, unsafe policies and even fraud, reassessing the procedures at the very heart of these organisations and improving efficiency and transparency, which will ultimately assist them in the extremely important work they do.
"The biggest challenge is going to be getting everyone involved in each organisation to change the way they think so that risk considerations become as intrinsic to decision-making as financial consequences"

CFDG Director, Shirley Scott said "This survey shows that charities are beginning to use risk assessment to develop efficient organisations. We will be working to help more charities embed it within their management and strategic activities."

  • Email
  • Twitter
  • Facebook
  • Linkedin

© Charity Finance Group / © Charities Resource Network / Registered Office: 15-18 White Lion Street, London, N1 9PG.
A Company Limited by Guarantee. Registered in England No. 3182826, Registered Charity No. 1054914, Registered VAT No. 945 6038 09.