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Oct 24

What Can Go Wrong?

Posted on October 24, 2017 at 3:14 PM by Josh Yaworski

Several cogs to illustrate the steps of risk management
What Can Go Wrong?

Risk management is about identifying risks and deciding what to do about them. All non-profits have a responsibility to protect its people, property, finances, and reputation. Ultimately, it is the volunteer board of directors who ensure that risks are assessed and dealt with. Make risk management a standing item on the agenda.

There are legal principles that hold a volunteer board of directors accountable for its actions or inactions. Three overarching duties of a board member are duty of care, duty of loyalty, and duty of obedience.

Generally, a duty of care means that an individual should act in the way that a reasonably prudent person would in a similar position and under similar circumstances. A duty of loyalty means that an individual should place the organization’s financial health as its primary responsibility. A duty of obedience means that an individual should try to further the organization’s mission.

Most bylaws contain an indemnification clause, but many non-profits could not truly afford to cover a board members legal expenses should a lawsuit ensue. Make sure other layers of protection are in place.

Insurance can help, but it is only part of a risk management strategy. Non-profits can carry commercial general liability (bodily injury and property damage), personal liability (personal protection from third party claims), worker’s compensation (injured on the job), automobile liability (driving on behalf of the non-profit), and/or directors’ and officer’s liability insurance (protect a board member’s personal assets in the event of litigation).

Specifically, D&O insurance is recommended to protect board members from being held personally liable for alleged wrongful acts in their capacity as board members (except if the acts were intentional).

Identifying risk is everyone’s responsibility. Involve all stakeholders from the front line to the Executive Director to volunteers to clients and anyone in between who can offer insight. Everyone asks the question, “what can go wrong”?

Risk management should be a lens for every decision. It is always best to prevent an incident rather than deal with the aftermath. Risk management is the preservation of people, property, finances, and reputation.

Non-profit Risk Management Centre (American resource)
Risk Strategy CICA