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Why risk management matters

I am often asked when I carry out governance reviews why I place so much emphasis on the charity's attitude to and assessment of risk.


The reason is that charities in the UK, like all organisations are exposed to various risks that could threaten their ability to achieve their mission and objectives.

These could arise from various sources including financial, legal, operational, and reputational risks. It is therefore absolutely crucial for charities to assess these risks and implement appropriate measures to mitigate them.


Here are just four reasons why managing risk matters.


1 Protecting the Charity's Assets: Charities have a responsibility to protect their assets including their funds, property, and other resources from potential risks. By assessing and managing risks, charities can safeguard assets to ensure that they are used for their intended purposes. It is an area in which a charity can easily fail.


2 Maintaining Public Trust: Charities rely on public support and trust to operate effectively. Any negative events such as financial irregularity, fraud or scandal can damage the charity's reputation and erode public trust. Sadly, the newspapers too often contain articles with examples of such failures which reflect badly not only on the charity itself but also on the wider charity sector. Risk assessment helps charities identify and mitigate these risks thereby ensuring that they remain accountable and transparent to the public


3 Compliance with Regulation: Charities are subject to various legal and regulatory requirements such as charity law, data protection and accounting standards .Failure to comply with these requirements can result in fines, legal action or even the loss of charitable status .Risk assessment helps charities identify areas where they may be at risk of non-compliance and implement appropriate measures to address them


4 Ensuring Continuity of Operations: Charities need to ensure that that operations can continue even in the face of unexpected events such as natural disasters, cyber-attacks or as recently a pandemic. Risk assessment helps charities identify and mitigate risks that could disrupt the operations ensuring continuity of services to their beneficiaries.

In summary ,risk assessment is an essential process that enables charities to identify evaluate and manage risks that could affect their ability to achieve their mission and objectives. By implementing appropriate risk management strategies, charities can protect their assets, maintain public trust, comply with regulations and ensure continuity of operations


At In The Round Advisors, we not only help charities by reviewing their exposure to risk but also provide extensive training for both Trustees and the Senior Leadership Team

For more information, please telephone 0116 478 2871 and speak to one of our advisors



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