Effective risk management is an essential element of charitable trustees' responsibilities and often ignores the responsibility of smaller charity leaders.
Risk is an event or action that may adversely affect the survival or competitiveness of an organization or its financial stability or positive public opinion and the general quality of people and services. Risks may result from failure to take advantage of opportunities or to break down operational controls and procedures.
Risk Management Requirement
Charities SORP (Recommended Practice Statement) states that charitable organizations have:
- Risk Review
- Risk Management Systems or Procedures
It is therefore important for every charity to have a sound risk management policy
The charitable organization is responsible for the management and management of the charitable organization. It is essential for the board to take part in the most important aspects of the risk management process. Trustees do not have to take all of the process themselves. Their level of acceptance must be such that the trustees, based on their reasonable reliability, formulate a risk management statement in the mandatory annual report.
- Risk Management
- risk assessment
- assessment risk
- should be taken
for periodic inspection and
Although these elements are "or" sections, it is likely that the board of trustees will need to review each stage for their knowledge of their charity risk profile
Risk management The policy must conform to:
- integrated and appropriate
Risk Management of All Activities specificity and inactivity and new initiatives. Charity organizations have different risks to their risks and have different abilities to endure or absorb the risks. A charity system with sound storage can probably start a new project with a higher risk profile, such as the ability to pay for solvency.
The risk policy process includes taking into account:
- charity goals, philosophy and strategy;
- the nature and extent of the charitable activities; the success factors that need to be achieved;
- are external factors that may affect charitable organizations, such as legislation and regulation, and charity goodwill with big financiers and sponsors;
- past mistakes and problems that love faced;
- the operating structure – e.g. Use of branch offices, subsidiaries or joint ventures;
- Comparison with other charitable organizations operating in similar fields or comparable size; and
- checklist of risk factors created by other charities or other organizations.
It is essential that curators and management must commit themselves to this process. Curators should engage in extensive consultation with key leaders and staff members, and may include supporters and benefits where the reputational risk or the provision of services to the beneficiaries are considered.
Identifying risk is an integral part of strategic planning and budgeting process. The most important issues include:
- What external and operational risks may hinder our charitable activity in achieving its core objectives?
- What could happen and what would happen to us?
- What steps can you take to mitigate or reduce these risks? External risks usually fall into one of the following categories:
- and generally outside the control of love .
Internal risks come from the day-to-day charity, and their identification requires all aspects of charitable operations.
This is not the only way to categorize risks and the following alternative classification can be used, for example:
- Management Risks – e.g. Inorganic organizational structure, difficulties with asset managers with appropriate expertise, incompatibility;
- Operational risks – eg. Service quality and development, contract pricing, employment issues; health and safety issues; fraud and illicit treatment; the loss of key personnel;
- Financial Risks – for example, the accuracy and timeliness of financial information, the adequacy of reserves and cash flow, the diversity of sources of income and the management of investments;
- External Risks – e.g. Public perception and unfavorable publicity, demographic change, government policy;
- Compliance with laws and regulations – eg. Violation of trust laws, labor law and regulatory requirements for certain activities, such as fundraising or care facilities. Although the risk identification process has to be carried out cautiously, the analysis involves some subjective judgment and a process is unlikely to identify any potential risks that may arise. The process provides only reasonable (non-absolute) assurance to the curators that all relevant risks have been identified.
The Risk Assessment
The first stage of the assessment process is the prioritization of risks by using impact analysis, so the significance of the risk is real. Its importance must be taken into account both financially and reputationally. Risks take precedence to ensure that those with high signs and high probabilities receive primary attention. The risks of high significance and low probability score require the contingency planning, while low-risk, but likely-to-be, risks can often be solved by improving internal control procedures.
All risks should be taken into account in the light of the charity threshold. which is determined by the reserve level, planned surplus, etc. affecting
Evaluating and implementing the actions required
Trustees should ensure that major risks are identified to ensure that they are mitigated. This review includes the establishment of the adequacy of existing controls. For each major risk, trustees should consider further risk mitigation measures either by reducing or reducing the likelihood of an incident, if any.
Four basic strategies can be applied to an identified risk:
- the transfer or sharing of financial consequences to third parties (eg Insurance, Outsourcing);
- avoiding risk performing activities (eg Potential Grant or Contract Not Taken);
- Risk Management or Risk Reduction; Egypt
- accepts it (eg evaluates it as an inherent risk that should not be avoided if the activity continues).
The purpose of this risk reduction is to identify the "gross level" risk identified as a net level after the appropriate measures are taken to identify the "gross risk" (see pro-forma below) The trustees must examine the acceptability of the residual or "net risk" which remains after the mitigation. It is possible that the process also identifies the areas where the risk is identified, current control processes are disproportionately costly or flexible against emerging risks
It may be useful to use a scoring system to assess which risks need further work The severity of the collision 1 (least serious ) Out of 5 (weight sabb) and likewise the likelihood of occurrence can be derived from 1 (distant) and 5 (very likely) points. The collision score is usually multiplied by the probable score and product of the results obtained to rank the risks that the asset managers consider the most serious.
It is important not to ignore the risks that are not very likely / very effective. They have a potentially serious effect but probability of occurrence is unlikely to be revised annually and will need measures to ensure that these problems can be solved. Likewise, low-grade events that are most likely to occur may gradually reduce charitable finances or reputation. Risks that are both of low gravity and low probability can be unilaterally worthwhile, and attention and effort may be more concentrated elsewhere.
Risk management goes far beyond simple systems and procedures. The process must be dynamic in order to emerge when dealing with new risks and become cyclical in order to determine how the previously identified risks have changed. For all, but larger and more complex charities, annual audits are likely to be sufficient if they are accompanied by update reports and an evaluation of new activities or proposed projects.
A charity organization that identified the most important risks and created systems that alleviate such risks, Annual Report. This will help charity accountability to citizens (beneficiaries, donors and other financiers, employees and the general public). An effective risk management strategy can help ensure that charity goals are more effectively achieved and significant risks can be identified and monitored, enabling trustees to further develop forward planning.
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