Steps to Becoming A Risk-Savvy Non-Profit
by Bob Scullin, ARM, Vice President of Sales
Some of society’s most important work is performed by non-profit organizations. During these difficult economic times, the work of non-profits has never been more needed. The stakes are high, and most non-profits cannot afford a surprise occurrence that could put their organization’s ability to fulfill their mission in jeopardy. It’s critical that non-profits take proactive steps to reduce the likelihood or severity of risks that can threaten their mission.
Non-profits need to understand their exposures and take thoughtful planned steps to mitigate risks. When non-profits don’t have a plan in place or have a gap in their insurance coverage, they open themselves up to unplanned financial burden that can prevent them from fulfilling their mission. Successful non-profit leaders know that they need to focus on addressing risks as a key step in fulfilling their mission. For non-profits, reputation is everything. It makes sense then that a non-profit leader should focus on dangers that could negatively impact the organization’s reputation. When good risk management practices are executed, a non-profit appears credible and stable in the eyes of stakeholders, making the experience of raising capital simpler.
What does it look like then when a non-profit has its risk management processes in order? It looks like a well-run for profit business. A hiring manager at a senior living facility screens potential new employees, performs background checks and trains new employees. A zoo puts a program in place that requires all contracts with outside vendors to adhere to strict insurance and indemnification provisions. A homeless shelter requires all volunteers to sign a waiver and release form. Lastly, a spiritual organization has a crisis plan in place to deal with unforeseen accusations and charges.
In the non-profit business it’s easy to be solely focused on the mission and let the day-to-day work of risk management fall to the wayside. A qualified insurance broker can help non-profits take the necessary steps to navigate risks and eliminate hazards.
Step 1: Identify Loss Exposures
Identifying risks and exposures is where this all starts. There are hundreds of exposures inherent in any business, including but not limited to property, business interruption, auto, personal injury and cyber losses. Some of them can be transferred through a well-thought-out insurance program. Others can be better addressed through operational changes.
A broker with expertise in non-profit risk management can help identify areas for potential losses, such as volunteers, outside contractors, hiring practices, claims management and others. At this phase, non-profits should also evaluate the effectiveness of their insurance program. This involves determining which exposures have been transferred to their insurance company and which exposures are self-insured or uninsured. It’s important for non-profits to make sure that they fully understand how insurance policies react to different loss scenarios.
Step 2: Design Program
After a non-profit identifies potential areas for loss, they should work with their broker to design insurance coverages and implement programs that avoid or reduce risks. This may include a safety and wellness program, a crisis or contingency plan, tight contractual requirements and well-thought-out hiring practices. Designing and purchasing General Liability, Workers’ Compensation and other types of insurance will be considered during this step. The right broker should work closely with the non-profit to determine whether they should consider higher deductibles, self-insurance or captive alternatives. They can help them strike the right balance between how much insurance the organization can afford and how much risk the non-profit can assume on its own.
Step 3: Implement Program
Good intentions and plans are not enough. The hard part is putting this all to work. Organizations need to review responsibilities and priorities and consider the impact new processes have at the highest and lowest levels of the organization. The non-profit should ask: What specific steps need to get done? When? By whom? What measurements will tell that our plan is having an impact? Senior management should make sure that someone in the organization clearly owns this process and that its importance is understood.
Step 4: Review, Evaluate and Update Program
A non-profit’s reason for existing is to fulfill its mission, but it won’t stay around long enough to do that without taking a page from the for-profit world. Unfortunately, many non-profits attempt to manage exposures without measurements and reviews. A non-profit should evaluate its risk management program on a regular basis and adjust as appropriate. While metrics will vary by operations, a routine quarterly review of claim activity and key performance data is critical to a Risk Management program’s success. Before any measurement occurs, however, senior management and the affected managers should settle on goals and specific steps that are clear, understood, a bit of a stretch but attainable. Just like fulfilling the non-profit’s mission, it won’t be easy. But it’s worth it – for the organization and for those it serves.
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