Managing Risk & Enhance Performance in the 3rd Sector

Key Thoughts:

A different twist on the concept of Enterprise Risk Management which has become mainstream in the last few years. To enhance performance by implementing an effective Enterprise Risk management strategy, is interesting.

Summaries:

The author quoted AS/NZ 4360 which defines risk as 'the chance of something happening that will have an impact upon objectives', when put in this context, it makes a lot of sense. More so for NGOs and not-for-profit organization.

6 common risks were identified:

1. Strategic Management - non-alignment of performance vs strategy, ineffective communication, coordination and teamwork, insufficient collaboration, weak succession and business continuity planning, lack of diversity and depth in revenue sources, adverse impact from external forces and publicity, ineffective organizational structure with unclear roles and responsibilities, lack of 'signature' products or services-especially in overcrowded market, advocacy opportunities missed or poorly responded to, brand awareness declining, lack of measurable and sustainable outcomes.

2. Fund raising, marketing and communication - static donor base, donor retention declining (donor fatigue), ineffective donor communication and marketing, poor reputation, branding and publicity

3. Programming or service delivery - poor program design, inadequate capacity and capability to manage, non-compliance with donor requirement and government regulations

4. Financial management - poor cost management, inadequate cash flow management, suppression or overriding of internal controls, untimely and inaccurate reporting, lack of multi-year planning and budgeting

5. Human resource management - unable to attract competent and/or skilled staff, poor people management skills, insufficient resources to manage activities and priorities, unable to develop and enhance staff capability and capacity, lack of clarity in roles, responsibilities and accountabilities

6. Information management - ineffective Information Management System (no timely and accurate information produced), needs of users and biz requirements not met, erroneous, inappropriate or untimely decisions made, confidential/secure information leaked

3 Level of risks affect organizations

1. Strategic Risk

2. Tactical Risk

3. Operation Risk

The author also presented a table for tactical risk with possible ideas to perform a risk assessment exercise.

My Comments:

A common struggle we had was how to get started. The many specific pointers for NGOs is a great starter for us to do the risk assessment and take action based on the result of the exercise and go forward.

Reference: Manage Risk & Enhance Performance in the 3rd Sector by Patrick Ow, Accountants Today, page 31-33, September 2008.