A toolkit for effective risk management

Many charitable organisations face uncertainties in attracting regular income and in maintaining service provision, particularly in times of economic difficulty.

Those charities that manage through a downturn most effectively are those that take the opportunity to reappraise working practices, to understand their strengths and weaknesses and to make positive changes that will support their operations, whilst strongly promoting the value they contribute to society.

Effective risk management is of utmost importance to every organisation and is fundamental to sustaining business development, as it serves to:

• Protect existing value in the charity - by reducing the chance of loss or error that might otherwise occur through poor decision making.
• Support effective evaluation of significant decisions - by clarifying risks, which in turn minimises the chance of unexpected or unwanted consequences of decisions.
• Facilitate good governance - by providing trustees with the means to control risk within the charity’s strategic planning process.

In the 2010 Charities Risk Survey, undertaken jointly by CFDG and PKF, only 46% of charities felt that their risk management strategies successfully identified their risks and related scale. In other words over half of all charities do not feel they are managing risk effectively.

This toolkit aims to provide practical support for charities in improving the way they manage risk. It sets out five key benchmarks that will form the basis of an effective risk management framework and provides a checklist of questions to match against your own charity’s operations.

Throughout this guidance we introduce example templates to support the development of your own risk management practices. These templates can be found on the right hand side of this page.