Like all organisations, charities and not for profit organisations handle risk daily whether it is organisational planning to meet objectives, operational matters such as running shops, online activities and the like, safeguarding the charity and its beneficiaries from harm, or organising and running fundraising events.
With risk being an everyday part of charitable activity, managing it is essential if the trustees are to achieve their key objectives and safeguard their charity’s assets. In the simplest terms, it comes down to a matter of protecting the trust that has been built up with beneficiaries, funders and donors in order to protect its future.
If you’re struggling to articulate to employees and volunteers the importance of having risk management embedded into the culture and operation of the charity, it may help to remind them of the age-old adage – reputation is everything. Once tarnished, a charity’s reputation is difficult to recover. A charity’s ethics and values can often be under the greater scrutiny than, say, a private sector business.
Embedding a Risk Management culture
By managing risk and embedding this approach effectively, trustees can help to ensure that significant risks are identified early, escalated and monitored, enabling the charity to make informed decisions and take appropriate action. A good way to start the process is by considering the following three steps:
- Mandate and commitment: a mandate from the Board for risk management to be embedded across an organisation. Then a framework for risk management can be designed, which involves identifying what the risks are and what gaps there are in protection.
- Implementation: This should be followed by the implementation and execution of the strategy, focusing on whether a risk should be terminated or stopped; tolerated and managed; treated or mitigated; and finally transferred by insurance, contract or some other means. Very often more than one of the above can be used to address risk once you’ve assessed the scale of impact and likelihood that the risk is likely to have on your strategy.
- Monitor and review: Finally, it is important continuous monitoring and improvement processes are embedded to ensure that the approach remains effective and is updated regularly. The risks that charities face are always changing and regular reviews are an essential part of the process keeping pace with change.
Even before the COVID-19 pandemic period, the insurance market was becoming more challenging due to a range of environmental, economic and political events and the charity and not-for-profit sector is no exception to this. Insurers and insurance markets respond to a tougher commercial environment by becoming more selective on the types of risks they choose to write and are increasingly asking that charities of all shapes and sizes demonstrate good risk management when presenting their risk to them.
The importance of a specialist broker
If you’re unsure of the steps to take, a specialist charity risk and insurance broker can support you by working collaboratively with you and your insurers, using specialist risk management teams to deliver the protection to meet your needs.
The advantage of using a specialist in this area is the experience of working with other similar organisations that they can bring to you and the focus will be on ensuring that both your strategic risk management and insurance programme design and purchasing strategy will be aligned to your organisational objectives.
If Gallagher is already your broker, be assured we will continue to provide the expertise and advice to help you demonstrate to insurers that you have a strong internal risk management framework and a solid understanding of market developments in order to achieve a satisfactory outcome at renewal.
If you don’t yet have a relationship with Gallagher, we can conduct a confidential review of your current insurance programme arrangements and organisation’s exposures. We can then work alongside you to help ensure you secure cover that is sufficient for your needs in this challenging market.
CONDITIONS AND LIMITATIONS
This article is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. It reflects our understanding as at 27/09/21, but you will recognise that matters concerning COVID-19 are fast changing across the world. You should not act upon information in this email or the articles referred nor determine not to act, without first seeking specific legal and/or specialist advice. Gallagher accepts no liability for any inaccuracy, omission or mistake in these, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein. No third party to whom this is passed can rely on it. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with your Gallagher representative.