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Managing risks and creating value for Not-For-Profit organisations

The Shane Warne Foundation and White Ribbon Australia played a critical role in the communities that they were established to serve. The Shane Warne Foundation gave a helping hand to underprivileged and seriously ill Australian children while White Ribbon Australia was a leading voice against domestic violence. There was no shortage of well-intentioned people at these organisations who wanted to make a positive impact in the community. Unfortunately, both organisations collapsed in a fast moving and dynamic environment.

A key question is why did these leading and high-profiled not-for-profit organisations fail? A glance at media publications will suggest that there was financial mismanagement. However, a deeper analysis below the surface indicates that there may have been inadequate risk management systems to ensure that the organisations’ risks were managed effectively and efficiently.

The environment in which not-for-profit organisations operate has become dynamic and fluid. The Australian Charities & Not-For-Profit Commission (ACNC) was established to regulate charities’ activities. Not-for-profit organisations are competing against other similar organisations for fundraising dollars. Internally, the skills required within a not-for-profit have become specialised and the cost of labour has subsequently increased. Not-for-profit directors come from a range of areas including those people who have had highly successful corporate careers and have expertise in the areas that the not-for-profit serves such as academics. Not-for-profit organisations need to design their operations effectively to ensure that they can deliver the services they are set up to provide. External factors need to be considered such as a downward in the Australian and global economy, something this country hasn’t experienced in a long time. The effect of this is that there is less donations to go around. Today, more is at stake for not-for-profits and they need to be smarter about how they embrace this new environment. Adapting to change is critical.

Effective risk management in not-for-profit organisations has never been more important. It encourages an organisation to identify those factors that may impact its ability to survive. Through engagement and collaboration, risk management will also help identify those measures that can be deployed to overcome such obstacles. Risk management will also help create value in the organisation. For example, effective risk management systems will identify systemic issues, whether they be complaints or breaches. Identification of such issues will help to remediate these areas through the diversion of greater resources or additional guidance and training to staff members. An effective risk management framework will also help pinpoint those matters that can cause reputational damage to directors and the not-for-profit. Reputations that have taken years to build can be destroyed in hours with the onset of the social media age. Risk management will identify measures such as a crisis management plan to mitigate the likelihood and consequence of an adverse event. These examples demonstrate how risk management can protect a not-for-profit from demise and in fact help it to flourish.

Boards and senior managers at Australia’s not-for-profits need to start thinking seriously about risk management and its importance to their organisations and the communities they serve. Not only can it protect them from reputational risks but it will also add value to their organisations to avoid some of the issues experienced by The Shane Warne Foundation and White Ribbon Australia. A good starting point might be a rapid assessment of the current risk management arrangements.

Vito Guidice is a highly regarded governance, risk and compliance professional who has demonstrable experience in developing and implementing sustainable solutions for a range of institutions in government and the private sector. Vito also has extensive experience working in the not-for-profit sector as a Chairperson for an arts organisation and a research association for children born with esophageal abnormalities. Vito has also extensively advised the executive and Boards of a range of not-for-profits in the care and education sectors. Vito‘s professional experience has included an Executive Director role at global audit and advisory firm Ernst & Young (EY) and as a Chief Risk Officer at an Australian insurer which served the not-for-profit sector.