Risk Assessment for Nonprofits

As stewards for charitable organizations, nonprofit boards must be able to assess and reduce risk. Risk assessments enable you to evaluate and rank the risks your organization faces in terms of their likelihood of occurrence and their impact on the operations. You can create an inventory of risks or scenario planning to prioritize your risks, and then make an informed decision on how to reduce, prevent or eliminate them.

Nonprofits face unique difficulties in assessing and managing risk. Nonprofits face unique challenges when is assessing and managing risks. For-profit companies share similar concerns, such as employee training and liability reduction, however nonprofits also have to safeguard the time and money of donors. Data breaches, funding shortages and political turmoil are more relevant for nonprofits as for for-profit companies.

This article outlines a 3-step process that will assist your nonprofit in transitioning from reactive to proactive, ensuring your mission in the long run. Whatever the size of your nonprofit or level of expertise, the basic steps are the same.

Start by identifying the threats your organization is facing. This includes everything from a decreasing reserve ratio to how your staff handles passwords. At this point make sure that no department go unnoticed: accounting and finance IT, donor relations, engineering, human resources, and public relations. Consider how a negative event could impact each of these areas. This includes costs, schedules and projects as well as long-term campaigns. Assess the probability of each risk and figure out how much damage it could cause if it occurs.

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Written by Roberto Contreras