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EVERY BOARD MEMBER NEEDS TO KNOW Risk Management

10 THINGSEVERYBOARD MEMBERNEEDSTO KNOWBy Kelli Spencer with Vincent HymanRiskManagementYour Role as aBoard MemberRevised September 2012 MissionOur mission is to foster effective risk Management practices and the overall development andadvancement of nonprofits through unique, creative Things series for nonprofit boardsWelcome to this series of short briefing papers for BOARD members of nonprofit series was developed to help both seasoned and beginning BOARD members improve their skills at steering, supporting, and safeguarding nonprofit organizations.

EVERY BOARD MEMBER NEEDS TO KNOW By Kelli Spencer with Vincent Hyman Risk Management Your Role as a ... act of starting a nonprofit is a risk. However, as organizations grow and succeed, ... Expect a risk management plan 4. Conduct a risk assessment 5. Reduce risk in hiring and volunteer policies 6. Ensure staff, client, and visitor safety

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Transcription of EVERY BOARD MEMBER NEEDS TO KNOW Risk Management

1 10 THINGSEVERYBOARD MEMBERNEEDSTO KNOWBy Kelli Spencer with Vincent HymanRiskManagementYour Role as aBoard MemberRevised September 2012 MissionOur mission is to foster effective risk Management practices and the overall development andadvancement of nonprofits through unique, creative Things series for nonprofit boardsWelcome to this series of short briefing papers for BOARD members of nonprofit series was developed to help both seasoned and beginning BOARD members improve their skills at steering, supporting, and safeguarding nonprofit organizations.

2 Through this series, First nonprofit Foundation seeks to stimulate BOARD discussions on topics essential to quality governance. Other booklets in this series include the following: A Winning BOARD : Steps That Bring Out the BestAdvancing Together: The Role of the nonprofit BOARD in Successful Strategic AlliancesChampions with a Cause: The nonprofit BOARD MEMBER s Role in Marketing Essential Keys to nonprofit FinanceEvaluating the Executive Director: Your Role as a BOARD MemberFinding the Opportunity in Economic ChaosFundraising: A Partnership between BOARD and StaffShaping the Future.

3 The BOARD MEMBER s Role in nonprofit Strategic PlanningStrong Partners: Building an Excellent Working Relationship between the nonprofit Boardand its Chief ExecutiveSustaining Great Leadership: Succession Planning for nonprofit OrganizationsVolunteers: The Heart and Soul of Your nonprofit Copyright 2009, 2012 by First nonprofit Foundation. All rights reserved. No part of this work may be reproduced without the prior written permission of First nonprofit Foundation, except for the inclusion of briefquotations in a review.

4 For more information, please contact:First nonprofit Foundation1 South Wacker Drive, Suite 2380 Chicago, Illinois 60606 Phone: 800-526-4352 Fax: organization would not be where it is today if it had not taken risks . The very act of starting a nonprofit is a risk. However, as organizations grow and succeed, they tend to grow more fearful of risks . There is simply more to lose. It makes sense to be cautious. And yet, to paraphrase poet Robert Frost, doing your best means taking risks . This is where the BOARD comes in. Your duty is to guide and reassure the organization that risk is a part of EVERY exciting new challenge.

5 You set the risk threshold for the organization, educating it about how much risk is acceptable, your expectations for plans to mitigate risk, and the importance of taking risks in pursuit of better service for your organization s mission. This is what we mean when we say risk is everyone s business. You will see that through your actions, you can create a culture of risk Management , a culture that is flexible and helps the organization match its level of risk to the aspirations of its mission. While the organization that overreaches may fail, the organization that fails to reach will certainly fail.

6 This booklet outlines ten things your BOARD can do to help ensure that its staff is balancing risks against rewards in a way that best achieves the mission while managing the level of risk the organization encounters. These ten things are listed below:1. Understand risk management2. know the BOARD s role3. Expect a risk Management plan4. Conduct a risk assessment5. Reduce risk in hiring and volunteer policies6. Ensure staff, client, and visitor safety7. Assess risk in facilities, property, and insurance 8. plan for records and business continuity9.

7 Require backup staffing plans 10. Create a culture of risk management1We saw the risk we took in doing good,But dared not spare to do the best. Robert Frost2 Understand risk nonprofits take risks many risks EVERY day. Such organizations are creative,inventive, and continue to succeed despite the changing environment. These orga-nizations know that success demands risk-taking, and they create an organizational culture that regularly assesses risk, favors intelligent risks , and mitigates the impactof known organizations share one other quality: they know that risk is everyone s busi-ness.

8 From the occasional volunteer to the long-tenured BOARD MEMBER , everyone knows what they are accountable for and has a sense of which risks are acceptable and what are beyond the organization s s look at what risk Management means and then explore how it appears at dif-ferent levels of Management is a process by which the organization assesses its exposure to types of harm, evaluates their impact, develops Management strategies, and imple-ments actions that manage risk to the level desired by the Management is a way of dealing with uncertainty, a framework by which or-ganizations predict potential liability and plan for it strategically.

9 At the heart of risk Management are some simple questions: What can go wrong? What do you worry about? What will you do to diminish the worry? How will you pay for that?For the BOARD , these questions can be thought of more systematically as What risks are inherent in the actions we take to fulfill our mission? Given that context, by which process will our organization strategically identify risks , set priorities for what risks to address, create a plan to deal with them, and then implement and monitor the plan ?Risk itself can be organized into five categories, which are described Financial risks .

10 These include fraud, theft, internal fiscal hygiene, cash handling, grants Management , investments, and diversification of financial Operations risks . These include business continuity (the ability to keep servicesrunning), disaster, property, technology, emergency succession, and similar opera-tional Understand risk management31. Understand risk management3. Workforce risks . These relate to obvious factors such as staff and volunteer safety,discrimination, harassment, and other legal issues, as well as less tangible factors such as retention and Client risks .


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