Nonprofit managers face risk, both in day-to-day operations and over the long term. The types of risks are many and varied.
In her book “Mission Control, How Nonprofits and Governments Can Focus, Achieve More, and Change the World,” Liana Downey breaks nonprofit risk down into three main types.
* Generic nonprofit risk. All nonprofits and social enterprises face risk of losing key employees, problems with partnerships, funding sources drying up, fraud/financial mismanagement, compliance with relevant laws. The best way to prepare for such problems is to have robust governance structures, clear role descriptions, a good auditing practice and access to sage legal advice.
* Activity risk. Consider what could negatively impact clients or the organization’s reputation. Consider all the possible issues and have a plan to address them. During planning, be sure to build in measurement and review, to observe what is and is not working and ameliorate any unintended consequences.
* Focus risk. Focus is good, but too strong a focus on a goal can lead to unethical behavior, a “whatever it takes” approach. This can lead to losing sight of critical personal or organizational values.
Downey suggests three ways to deal with focus risk:
* Anticipate it. Track the goal, but reward individual effort.
* Measure adjunct areas. Gauge not just the main goal but related measures to prevent unwanted spillover effects.
* Track quality, not just quantity. Look for results that are effective and long-lasting.