Adopting a risk-based approach to charity fund compliance
If you don’t currently employ risk-based compliance strategies, you might be taking a risk yourself.
“The starting point is: the greater the risks, the more charity trustees need to do to mitigate them.”
The Charity Commission for England and Wales
Charities often conduct their work in physically risk-prone locations, but the risks to charities don’t stop there. For example, have you considered the hazards of corruption or illegal funding? These risks have to be prioritised for every not-for-profit organisation.
Compliance isn’t just a box-ticking exercise; it should be approached as an opportunity to improve your processes and foster accountability in your organisation. To help you, we’ve summarised some of the main points from the Charity Commission for England and Wales Compliance Toolkit, so you can make a headstart on adopting a risk-based approach.
The importance of risk assessment
First and foremost, you should assess the risks that apply to your specific organisation. These will differ for every charity, and can’t be approached with a one-size-fits-all mindset.
Depending on the environment your organisation operates in, you might be exposed to corruption, violence or even organised crime. In recent times, there have been high-profile cases of charitable organisations failing to take these risks into account, leading to huge damage to their reputation.
In other words, just because it works for another organisation doesn’t mean it will work for yours. Consider local factors and any risks specific to your charity’s main goals and the people that you work with. Are they in danger? If so, you need to put procedures in place to minimise it.
You have to protect all of your charity’s assets
According to the Charity Commission, any risk-based approach should be geared towards stopping and preventing the abuse of charity funds and assets.
This includes your organisation’s reputation, which is an important intangible asset. If risks aren’t properly assessed and the appropriate measures taken, this represents a huge threat to a charity’s reputation.
In other words, a risk-based approach to compliance doesn’t just consider the risks to people – it also considers the risk of damage to your organisation and its resources, which could also be viewed as damage inflicted on donor’s donations and goodwill.
This approach has myriad benefits – not least the fact that it improves public perception, therefore increasing the likelihood of donations. If you can show that you genuinely care about safeguarding donations, people will trust your organisation.
Consider the monetary value when taking risks
Charities have a legal obligation to make the best use of their funding to meet their stated purpose(s). This is no different when taking risks; the more money at risk, the more important it is to safeguard the resources at stake.
While this is broadly true and you should take every measure possible to ensure you don’t waste significant amounts of charity funding, bear in mind that the opposite will sometimes be true; if the risks are great, you should still take measures to safeguard smaller amounts of funding.
Streamline the asset management process
The best way to manage your charity’s risks is to keep a thorough inventory of your assets across the organisation. IRIS Assets has been designed to track not-for-profit organisations’ tangible and intangible assets, ensuring compliance at every stage. It can manage assets at one or hundreds of locations, so it’s ideal for risk management projects. To find out more, contact us for a free demonstration.