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Top 10 nonprofit risks

by The NonProfit Times - August 19, 2013

Speaking of known knowns and unknown knowns and all the possible combinations thereof, it is also worth considering the risks nonprofits face.

In some cases the risks are known, but in many cases they are not. Either way, they pose a danger.

In materials provided to the AICPA Not-for-Profit Industry Conference, Melanie Lockwood Herman, executive director of the Nonprofit Risk Management Center, presented a list of the Top 10 Risks Facing Nonprofits. Those risks are:

  • Uncertainty regarding financial sustainability. The less cash on hand, the greater the danger when revenue is late or unreliable;
  • Ineffective fiscal and risk oversight;
  • Incomplete appreciation of fraud risk. There are three general kinds: against the nonprofit, by the nonprofit and through the nonprofit;
  • Allowing a leader/staff member/volunteer to be “above suspicion.” A casual glance through the news should be enough to put this one to rest;
  • Lack of succession planning. On average, boards spend two hours a year on CEO succession planning;
  • Ineffective departure planning and execution. Nothing lasts forever;
  • Naïve crisis planning. People don’t get to choose the source or cause of their next crisis;
  • Dissatisfied donors (poorly understood/managed donor relationships);
  • Unmanaged conflict on the board; and,
  • Lack of practical (well-understood) governance practices. This can cover every conceivable item, from conflict of interest through gift acceptance, and anything in between.

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