The effective management of risk is an essential part of the responsibilities for trustees of charities and is often overlooked by those responsible for managing the smaller charity.
Risk is an event or action that may adversely affect an organisation’s ability to survive or compete in its market or to maintain its financial stability or its positive public image and the overall quality of its people and services. Risk can also arise from a failure to exploit opportunities or from a breakdown in operational controls and procedures.
The requirement to manage risk
For registered charities the Charities SORP (Statement of Recommended Practice) sets out the reporting requirements for trustees on the
1. identification of major risks
2. the review of risks
3. the systems or procedures established to manage risk
It is therefore essential for all charities that they have a sound risk management policy
The role of the trustees
The responsibility for the management and control of a charity rests with the board of trustees. The board’s involvement in the key aspects of the risk management process is essential. Trustees do not have to undertake each aspect of the process themselves. Their level of involvement should be such that the trustees can make the required statement on risk management in the statutory annual report with reasonable confidence.
