How do we better identify and manage risk?

We live in a more complex and sophisticated world than just a few years ago, and legislation is becoming more onerous. The willingness to take legal action potentially impacting on your organisation’s financial security and reputation is growing, and an independent review of risk is recommended at least every three years.

The AS/NZS ISO 31000:2009 Risk Management – Principles and Guide offers an excellent perspective on how to manage risk including:

Making risk identification and management an integral part of your organisation’s processes
• Designing and implementing a framework for managing risk.

Practical measures that organisations can take to help identify and manage risk include:

• Developing a risk advisory committee (potentially as part of your finance/audit committee)
• Appointing someone within the organisation with relevant skills and authority to fully integrate risk management into the fabric of the organisation.

What’s the starting point for a building and property review?

Property is usually the largest asset on a not-for-profit’s balance sheet and understandably the Board will want to exercise caution. The starting point is being clear on your objectives which may take some time to establish.

Some of the key questions consider:

• How will a proposed change impact our supporters, staff, balance sheet and cash flow?
• What are our long-term corporate objectives?
• What are the drivers for the review?
• Do we want, or need, to own or lease a building?
• Is strata title acceptable or do you need to stand alone?
• Which locations suit your organisation, practically and financially?
• Do we seek passive income from rent?
• Have we reinvested sufficiently in our building and is it compliant?
• Are maintenance costs and revenue rental comparable with the current market rates?

How do we take our organisation to the next level?

First of all, check that the drivers for change are more compelling than those that keep your organisation in its current groove, or you may not achieve sufficient traction.

Develop a firm understanding of the current and future opportunities for your organisation, agree on what an appropriate future model for your organisation would be and develop a plan to help you transition your organisation.

Your future model needs to be based on a sound understanding of the marketplace, with rigorous financial forecasting underpinned by market research. Evidence is needed that future members or donors will access your services and products via specific channels for a particular price before an investment is made.

A plan to work with key stakeholders leading to Board endorsement is critical, as are the following:

• An assessment of drivers of change, risk and the marketplace
• Stakeholders, including management, staff, members/donors, suppliers, the Board and Council
• The future of your industry
• Strength of balance sheet
• The level of investment and return needed to develop and transition your organisation
• A review of governance, structure, products and services, IT, business systems, staff skill set, etc.
• Legal and tax implications of the proposed change.

About the expert

Frank Spranger works with not-for-profit organisations including transitioning them into the future, harnessing opportunities in changing marketing, performing 360 degree revenue reviews, developing feasibilities and business cases, executing risk reviews, creating commercial ventures and partnerships,and asses building and property options. He has worked with not-for-profits including The Australasian Fire and Emergency Service Authorities Council, the Australian Dental Association, the Australian Medical Association and Oxfam. To enquire about these services email frankspranger@gmail.com or call 0408 336 363