Blog

Governance, regulation and compliance

22 February 2013, 11:56

How hungry are you? Re-thinking your charity’s risk appetite might be a chance worth taking

Post byDoug Hull

Where next?

Events »

Thursday, 16 July 2020
Overseas Special Interest Group Online Meeting Series More »

News »

Wednesday, 24 June 2020
Our commitment to diversity, equality and inclusion More »

Does your charity have a fully-functioning ‘risk strategy’? Is it integrated into the decision-making process at all levels throughout your organisation? No? Fear not, for you’re not alone – in fact, you’re far from it. When a similar question was asked at Crowe Clark Whitehill’s 2013 INGO Conference last week, not a single hand was raised. However, an informative session by Pesh Framjee of CCW and Gaynor Miller of Christian Aid, highlighted why, at a time when charities are having to innovate to survive and the one constant is change, rethinking approach to risk is arguably more important than ever before. ‘Risk’ certainly has a bad reputation – commonly associated with danger, losses and negative events, it’s often seen as something to simply avoid. Yet the threats arising from uncertainty offer us only one side of the coin; on the other side we may have opportunity – financial, reputational, and mission-related. Excessive risk aversion can therefore lead to missed opportunities, under-investment in potential growth areas, and spending to mitigate potentially tolerable risks. The risk of not doing something can be severe, and with a changing external environment, simply continuing existing practices could be just as risky a strategy as implementing new ones. Embedding risk management in your charity can help in tackling these issues, enabling staff to make confident, informed decisions based on the charity’s risk appetite – the risks your charity is willing to take to survive and deliver on its mission. However, embedding risk in this way is clearly a complex undertaking, owing in part to the difficulty of defining organisational risk appetite and then supporting staff cross-organisationally to incorporate this into decision making. On a basic level, appetite for risk varies between charities for a wide variety of reasons. It could be influenced, for example, by a range of mission and resource-related factors. Take the example one of one of the more extreme risks that international charities may face- whether to operate or not in a war -zone – some may seek these out in order to fulfil their mission, whilst others may pull out if conflict begins. It may also be too simplistic to suggest a charity has either a high or low risk appetite. For example, many charities invest heavily in fully training, preparing and equipping their staff, and then deploy them in highly volatile locations; and as circumstances change over time, so may a charity’s risk appetite. So where to begin in developing a risk strategy? Far from being simply another set of spreadsheets, once formed, your charity’s risk strategy should eventually become embedded within the decision-making process throughout your organisation. This is commonly the element of risk strategy development that charity’s struggle with, with even highly evolved risk management processes operating largely in silo. Usability across teams should also be kept in mind throughout the development process. Risk management often sits within the finance function, but forming a risk committee which includes other departments too can be worthwhile. This Institute for Risk Management guide is a great starting point for developing a risk strategy, and assessing how existing operations may fit with risk appetite can be useful. With resource and time at a premium, developing a risk approach may seem like a tedious or unnecessary process. However, given time it can become an invaluable tool for driving your charity forward; a wide-reaching framework providing direction and guidance, helping your charity achieve on its mission in the most efficient and effective way possible. With thanks to Pesh Framjee (Crowe Clark Whitehill) and Gaynor Miller (Christian Aid).

Post by Douglas Hull, policy and membership officer at CFG « Back to all blog posts

Blog

How hungry are you? Re-thinking your charity’s risk appetite might be a chance worth taking

Related Content

Charity Commission guidance on Serious Incident Reporting during the coronavirus pandemic

How to guide: Covid 19 Charities SORP Committee Guidance

Charities and insolvency

Top ten tips for how to handle the year end in a pandemic

Caron Bradshaw appointed as a member of new SORP Committee

Has the Charity Commission has taken the wrong tone in its election guidance

Why does the narrative around public 'trust' makes me feel so uncomfortable?

Civil society asks of the Spending Review 2019

Five takeaways from August’s Inflation Report

The lessons for Oxfam and the wider sector

Finance Focus July 2019

BEIS Review of the Financial Reporting Council

CFG Annual Handbook 2019

How the best boards do it, from preparation to meeting execution

Seeing the wood for the trees

CFG responds to the Charity Commission’s consultation on the SORP-making process

What the recent SCOTUS judge controversy can teach us about the Charities’ SORP

Annual Report 2017-18: Empowering Your People

Changes to the CFG Board of Trustees

Finance Focus May 2018

The key to good governance - truly understanding the business

Essential Charity Finance for Trustees Guide

Does your charity follow serious incident reporting guidelines?

Charity finance professionals need to be aware of new automatic disqualification rules

How big a threat is property to your charity?

Money is not the issue when it comes to charging for Charity Commission

How can charity investors perform better in a volatile market?

A stairway to heaven on business rates for the charity sector?

Investing in financial governance is one of the most cost effective ways to help your charity

Sarah Atkinson - Have your say on the annual return for charities

New report raises concerns about complacency on financial governance

Trustee Survey Report

Time to review your risks? An update from the experts...

Where are the ‘automatic stabilisers’ for charities income?

6 simple steps your charity can take to help protect themselves from fundraising fraud

Do I need a fraud response plan?

Fraud and the 3 C's

Three new Charity Finance Group trustees elected

How can charities ensure they work towards gender equality in their organisation?

What can charities learn from the recent fraud cases?

CFG launches Counter Fraud Campaign

Record Management Toolkit Launch Roundup

What can charities learn from the international cyber attack?

NCVO Almanac points to fundamental shifts in the charity operating environment

Better partnerships needed between finance and fundraising teams

Annual Report 2016-17

We must not see a rush to charging charities for regulation – House of Lords report

IFS 2017 Green Budget – the good, the bad, and the worrying?

Responsible Record Keeping: what do voluntary organisations need to know?

Trustee Week: Working to inspire good leadership

Charging charities for regulation isn’t inevitable but it is risky and inefficient

Let's talk about the F-word

Tony Armstrong looks at Devolution: working with local organisations to transform public services

Devolution is our chance to advocate for the most vulnerable

How will the 'devolution revolution' be financed?

Caron asks: 'Why does the voluntary sector need a devolution summit?'

Do charities need to become social enterprises to survive?

Ten things you should know about the new power to make social investments

New report should prompt major re-evaluation of social investment

EU Referendum: Keep watching this space…

CFG's SORP Survey

Guest blog: Stamp duty increase reinforces case for charity investors to invest in stamp-exempt funds

Guest blog: SAVE Financial Planning

Guest blog: Insights into charity investment practices

EU Referendum: What could this mean for charities?

You don’t need to be a charity to do good…but it helps!

Another day, another opportunity for charities to engage in a consultation

Friday Afternoon Fraud

Is the SORP FRS 102 working for you?

ACF, CFG and NCVO raise concerns on draft guidance for funding non-charities

Annual Report 2015-16

Employment Status 2016

Rethinking Risk: Beyond the tick box

Charities need to do the walk, not just the talk and invest in financial leadership

Hunting for the silver lining; the IFS, the economy and charities.

Charging charities for their regulation: A fait accompli?

Affinity Deals: What do you need to know?