New Survey: Most Nonprofits Ill-Prepared to Identify and Manage Risk
Survey of Nonprofit Risk ManagementIncluded in the survey were 116 U.S. nonprofit organizations from all sectors with annual revenues ranging from $20 million to more than $500 million. Based on the organizations responses, the survey identified three main findings.
1. Disconnect Between Strategies and Coverage
Fundraising is necessary for the success of most nonprofits. Perhaps because of this, diversifying revenue streams emerged as the most-cited current and future strategic challenge of the surveyed organizations. As the nature of philanthropy changes towards an increased reliance on social media, nonprofit organizations must apply more concerted efforts to attract donations across multiple platforms.
Additionally, the survey noted a strong disconnect between organizations strategic challenges and their insurance coverage. While organizations see the need to diversify revenue streams, which will surely involve enhanced fundraising efforts with online media, they do not recognize the need to safeguard themselves against additional risk in that area. For example, network security and privacy liability (cyber risk) and media liability are ranked in the bottom five types of insurance currently in nonprofits portfolios.
2. Absence of Dedicated Risk Managers
One reason for this disconnect could be that 78% of surveyed organizations do not employ a dedicated risk manager. Most organizations responded that risk management is handled by their finance team, which may not have the necessary expertise or experience to competently address and manage risk.
Although 80% of surveyed organizations reported undertaking an independent assessment of their corporate risk and insurance programs in the last three years, without a dedicated employee continually assessing risk, a three-year-old assessment has little bearing on current risks.
If you dont plan on employing a dedicated risk manager, consider additional training for the department that handles risk management. Identifying your organizations risks is futile unless you have employees who can craft a solid plan to manage and mitigate risk in the long-term.
3. Failure to Purchase Adequate Coverage
The majority of survey respondents are underinsured, dedicating only 0.25% of annual revenue to corporate insurance. Ideally organizations should be spending about 1%. This trend is most prevalent in the smaller surveyed organizations, which need the most coverage due to lack of resources.
The failure to purchase adequate coverage has the potential to stunt an organizations growth. Because they typically obtain only the most basic coverage, organizations are underprepared to tackle current risks. This means that risks on the horizon, spurred by organizational growth, are not being mitigated in advance. These unmitigated risks have the potential to halt an organizations growth with a single incidentan incident which could be easily alleviated with adequate coverage.
Make sure your organization is not unintentionally hindered by insufficient insurance coverage.
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