3 Reasons Not-for-Profits Should Make ERM a Higher Priority This Year

Your not-for-profit organization’s internal and external stakeholders are growing more sophisticated. They want to know that your not-for-profit is managed responsibly, meets its mission and that it is both efficient and resilient to its risks. Board members, employees, donors—and even to an extent, the public and the media—want to see how well your organization is being run.

One of the best ways management teams can ensure their not-for-profit meets all of its expectations is by taking a holistic approach to the various risks that face the organization. Risk that goes undetected can derail even the best-laid set of goals. Organizations that understand the events that may affect their strategy, mission reach, or program services delivery and that have a grasp on the intelligence that could affect growth, market share, and organizational health are better equipped to anticipate and react to risk events.

An enterprise risk management (ERM) program is designed to enable management to understand the organization’s risk environment and make intelligent decisions to optimize performance within that environment. The following are just a few reasons why refining your ERM program should be a top priority in 2019.

Preventing the Downside of Risk

By developing, prioritizing, and managing your risk landscape, you can proactively identify and respond to events before they occur. Each segment of your organization, from human resources to operations and donor giving should be represented in the risk assessment process. Members of the broader team may be able to identify potentially significant issues before they occur.

Minimize the Downside of Risk to Increase Competitive Advantage

Being prepared to quickly respond to events that can alter your strategy, influence program delivery, and affect growth, can better enable you to improve competitive advantage, increase market share, and protect your organization’s long term viability. In a 2018 study by North Carolina State University and the American Institute of Certified Public Accountants (AICPA), fewer than 20 percent of organizations said they successfully integrated their ERM function with their strategic planning. Early adopters have an opportunity to maximize the value proposition for their ERM program to senior leadership, their board, and their not-for-profit’s donors.

A Holistic ERM Approach Can Save You Money

Knowing the top risks to your organization and the controls in place to mitigate them is beneficial when it comes to insurance coverage. A robust ERM system could be a guide in making sure that you have the right level and types of coverage for your various sources of risk to your physical location. An ERM-optimized insurance approach helps your organization be more confident that when the time comes to make a property insurance claim, your organization is adequately protected to cover its losses.

ERM can also help your organization save money by operating a more effective internal controls environment. A holistic approach to risk may identify potential human resources issues that could put your organization at risk of employment law noncompliance. It may also identify critical gaps in your information security protocol that if not addressed, could create reputational harm if an information security breach were to occur.

For More Information

An experienced ERM provider can help your organization organize fine-tune your ERM efforts. For specific comments, questions or concerns about ERM, please contact us. 

Published on April 26, 2019