UK Charities Getting To Grips With Risk But Vital Gaps Remain

30th September 2003

- Risk management is a strong factor in investment decisions and major changes by more than 70% of charities.

- Less than half of charities have a business continuity plan to cope with technical, natural or financial disasters

- Less than 20% have a fraud response plan

- Only a third have a media response plan, leaving their reputation vulnerable to attack.

25 September 2003: UK charities are increasingly using risk management in the day to day running of their organisations, according to the second annual risk survey by accountants and business advisors PKF, in association with the Charity Finance Directors' Group*. But the progress made is offset by vital gaps that are continuing to put the sector at risk.

The survey covers more than 300 charities and found that while the number of organisations not using risk management had halved from 10% to 6%, fundamental issues were still being overlooked.

· Dealing with fraud Only 14% of smaller charities and 35% of larger charities have a fraud response plan.

· Coping with a crisis 43% of smaller charities and 58% of larger charities have a business continuity planfor technical, financial or practical crises such as a fire or flood.

· Handling the media Only 62% of larger charities and 25% of smaller charities have a media response plan,despite the importance of reputation with funders, beneficiaries and staff.

· Trusting the trustees Trustees set the risk policy for only 47% of charities and are perceived as responsible for the annual risk management statement under SORP 2000 in just 41% of cases.

However, the overall importance of risk management has increased, with 94% citing risk as a factor in at least some part of their decision-making and 62% expecting it to play a bigger role in the future.

Although 82% of charities are confident they are complying with SORP 2000 in respect of risk, the responses to other questions in the survey suggest that more than 25% of them still have more to do in order to make the required statement in their accounts.

Charles Cox, head of the charities group at PKF, said: "There has been an overall increase in the number of charities incorporating risk management into the way their organisations are run and this is excellent news.

"However, there are significant gaps to be filled, including preparation for handling fraud, negative media coverage and deciding how the business is run in the event of major problems - whether it's computers breaking down, floods or fires, or the loss of a major financial source. These are fundamental concerns that charities, just like any other business, must do more to address. Issues such as fraud must stop being a taboo subject for not-for-profit organisations - it does happen and the better informed and prepared they are, the less they are likely to suffer."

Shirley Scott, chief executive of the CFDG, said: "We are very pleased to see that more charities are further getting to grips with risk management. Whilst there are areas that still need to be addressed, most organisations are expecting risk management to play a greater role in decision-making in the future and almost all have seen the benefits of it in the past year. However, it is worrying that trustees are not seen to be responsible for risk statements and risk policies in more than half of cases and this is one point that we would particularly like to change by next year's survey."

Key findings from the charities risk management survey 2003:

1. 73% said they took risk management into account in their investment decisions, 72% for major organisational changes, 69% for reserves policies, 65% for corporate planning and 61% for project appraisals.

2. The top four risks identified were loss of income, staff/skills shortage, ineffective management and increased costs.

3. Trustees set risk policy for only 47% charities and are perceived as responsible for the annual risk management statement (under SORP 2000) in just 41% of cases, despite putting their name to it.

4. Reporting to trustees was less frequent than in 2002, with 51% of trustees receiving annual risk reports and 5% not receiving any at all. Management received risk reports at least quarterly for 44%, whilst 25% received them annually.

5. 93% saw benefits from risk management in planning, decision-making, avoiding problems or responding to problems.

*Reaping the rewards - is risk management proving its worth?, the PKF charities risk management survey 2003 in association with the Charity Finance Directors' Group, is available free, by emailing janette.o'


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