Top Charity Risks to be Aware Of

Charity Risks

Charities and not-for-profits are seen to be the most sensitive when it comes to threats and risks. Here are our five top tips to keep your organisation protected:

Damaging Reputation
Any mention of a charity’s wrongdoings can cause serious damage to their reputation. Accusations of foul play by a charity boss or stolen funds by c-level executives can wreak havoc on the trust of the charity. Ultimately, this could lead to breakdown in public confidence and trust in the sector. Therefore, it is essential that accounts are kept up–to-date and good governance is demonstrated at all times.

Charity Loans
Loan funding is often sought by charities as it can often be easier to access than grants. Even though it may feel like you have a lot of money to work with, in reality, this all has to be paid back with interest, and may require assets to be offered as security. Before you take out any large loans, always seek advice from your accountant who will be able to assess whether you can afford to take this risk and guide you on the most appropriate funding for your organisation.

Fraud
Fraud is a huge risk, particularly for small charities that operate with high levels of cash income and have no risk management procedures in place. It is important to remember that fraud can happen both internally and externally for any size charity and will result in damaging the charity’s reputation, affect public confidence and cause financial loss. As a result, it is important to have processes and protocols in place which protect the charity, the employees and the public.

Broken Contracts
Having a contract between two parties means that each party has accepted and agreed to a set of terms and conditions. If either of the parties fail to follow the contract, then the other party is covered by the terms on the contract and by contract law. However, in some cases, the terms of the contract do not reflect the best interests of the charity, which can have very expensive and troublesome repercussions for the organisation. Always get a professional to read the terms of any contract or agreement your charity enters into.

Loss of data
Data security has been heavily discussed in the charity and not-for-profit sector. Larger charities hold a greater volume of sensitive information than smaller charities, but have more sophisticated controls. Human error, lost or misplaced information can put significant amounts of confidential information at risk. C-level charity executives should know what type of confidential information is kept, who has access to it and how it is stored. The best way to protect sensitive information is by using encrypted passwords, keeping backups in case of damages or loses and installing ‘remote-wiping’ software on charity owned devices.