Risk Management for Non-Profit Organizations: Your Role as a Board Member.

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Smart nonprofits take risks—many risks—every day. Such organizations are creative, inventive, and continue to succeed despite the changing environment. These orga­nizations know that success demands risk-taking, and they create an organizational culture that regularly assesses risk, favors intelligent risks, and mitigates the impact of known risks.

These organizations share one other quality: they know that risk is everyone’s busi­ness. 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 tolerance.

Risk management is a way of dealing with uncertainty, a framework by which or­ganizations predict potential liability and plan for it strategically. 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?

The Board’s Most Important Role

The most important role of the board, regarding risk management, is to set high ethical standards for itself and for staff. This means that people are alert for and deal with ethical questions and conflicts of interest (or the appearance thereof), are diligent about ethical behavior both organizationally and personally, and report and resolve issues quickly and transparently.

Boards should keep in mind that the public generally holds nonprofit organizations to a high standard. It is not enough for your organization to behave within the bounds of regulation; your nonprofit status creates a sense of public trust that must be upheld through high ethical standards. Problems of fraud or self-dealing can do much greater damage to a nonprofit than to other types of organizations.

Insurance is Only ONE Part of Risk Managment

Insurance is one part of an overall risk management plan. It is a part of where organizations can attach measurable costs to the risks they face. The decisions about which insurances to buy flow from the risk assess­ment process, as insurance is a risk management and mitigation tool. This is an area where an insurance broker can help.

Directors’ and officers’ liability insurance protects the organization, its directors, officers, employees, and volunteers for “wrongful acts” in governing and managing the organization. The policy will indemnify the defense costs to the organization as well as the personal liabilities for the directors and officers. Some coverage can extend to defense costs arising out of criminal and regulatory investigations as well. Intentional illegal acts, however, are typically not covered under D&O policies.

(Content from this article credited to firstnonprofit.org

Providing Peace of Mind Through Proactive Service

Deland, Gibson: a Trusted Choice, Five Star Accredited independent insurance agency. Established in Massachusetts in 1900, Deland, Gibson is a 4th generation family-run insurance agency that has thrived working as a trusted advisor for its client base. We work with individuals and businesses to lower their Total Cost of Risk. We analyze a client’s direct and indirect costs and implement risk reduction plans to address areas of business, hazard, or strategic risk.

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