Risk Management Plan

The board bears the responsibility for the safety of the organization. The board must be sensitive to the existence of risk, set the tone for dealing with it, and demand proper processes and tools are in place to keep the organization safe and ready to act when a situation demands it.

Planning ahead — being ready to act under different circumstances — develops a proactive framework. It protects the organization from losses due to pressured business decisions and positions it to grasp opportunities when they knock on the door.

Managing risk is a structured process. The following steps keep the organization focused and determined to choose the best options at each phase.

• Acknowledge and identify risk — Analyze and thoroughly audit all of your activities. Examine prior claims to map out potential weak spots in the organization. Consider unexpected events that would require a quick response.
• Evaluate and prioritize risk — Create criteria to help determine which risks your organization should address. One method is to prioritize risks by determining their likelihood, their frequency, their financial impact, and, in some cases, the public’s reaction to adverse effects.
• Select and implement the appropriate risk management techniques — Once risks have been identified and prioritized, decide the best approach to deal with them. Here are common approaches and examples.
  • Avoidance eliminates the source of risk — replacing a damaged hand railing or refusing a questionable real estate gift.
  • Modification adjusts a risk to lessen its impact or to make it acceptable — installing a high-tech security system in a food bank or carefully checking the backgrounds of volunteers.
  • Retention leaves a risk as is and accepts the consequences — keeping the pony rides at the annual festival or choosing a high deductible for auto insurance.
  • Sharing or transferring finds another party to assume part or all of the risk — purchasing general property insurance to cover on-site accidents or forming a supporting organization to house liability-sensitive activities.
  • Planning prepares and guides the board and managers to make smart, less risky decisions. Scenario planning outlines multiple options when a decision needs to be made on a short notice.
• Monitor and update your strategy as needed — Keep abreast of any changes in the organization or external environment that may affect or require updates to the risk management approach. Your strategic plan is the overall guide here. Continuous monitoring assesses the relevance and timeliness of all the details included in a solid risk management plan: contracts, insurance policies, renewal dates, and claims-reporting procedures. It ensures chosen strategies stay valid and the individuals responsible for carrying out the details remain accountable.

The Nonprofit Risk Management Center provides a template for planning your own risk management plan