1. Elder Care of the North
Nonprofit Risk Management
The Role of the Board

2. Elder Care of the North
Points to Cover
– Defining Risk Management
– Why is it Important to a Nonprofit
– What is the Role of the Board
– Connection to Governance
– Conclusion

3. Elder Care of the North
Defining Risk Management
– Risk is defined in the dictionary as “exposure to
the chance of injury or loss; a hazard or
dangerous chance”
– Management is defined as “the act or manner of
managing; handling, direction, or control.”
– Putting the two terms together and you have the
definition of risk management – basically
handling or controlling the exposure that an
organization has to loss.

4. Elder Care of the North
Risk management is extremely important to a
nonprofit organization because any type of loss could
have a significant impact on the ability of the nonprofit
to meet its mission and its financial stability. Financial
resources need to be protected and a key way to do
this is to identify and manage the possible risk that the
organization may face.

5. Elder Care of the North
● The different types of risk that may impact a
nonprofit include:
– Financial Risk
– IT Risk
– Insurance Risk
– Employment Risk
– Vendor Risk
– Collaboration Risk

6. Elder Care of the North
The Board of Directors and management need
to be involved in identifying the potential risks
linked to each of these areas.
Once the risks have been identified it is up to
management and the Board to create a plan to
manage that risk so it does not have an impact
on the mission of the organization.

7. Elder Care of the North
● Financial Risk
– Fraud and Embezzlement
– Financial Losses Due to Poor Decision Making
– Misstatement of Financial Reports
– Cuts in Primary Funding
– Lack of Proper Controls over Resources

8. Elder Care of the North
● IT Risk
– Virus Infection
– Computer Hackers
– Lack of Security Controls
– Theft of Hardware
– Loss of Personal Information

9. Elder Care of the North
● Insurance Risk
– Insufficient Coverage
– Incorrect Types of Insurance
– Lack of Periodic Reviews
– Lapse in Coverage

10. Elder Care of the North
● Employment Risk
– No Background Check
– Lack of Proper Hiring Policies and Procedures
– Lack of Safety and Training Program
– No Controls in Place to Protect Personal Data
– Lack of Formal Review Procedures

11. Elder Care of the North
● Vendor Risk
– Lack of Credit Check
– No Procedure for Reviewing References
– No Policy for Completing Annual Vendor Audit
– Lack of Process for Contracting
– Lack of Input from Users

12. Elder Care of the North
● Collaboration Risk
– Lack of Review of Potential Partners
– Lack of Formal Agreements
– Lack of Understanding of Resource Allocation
– Lack of Understanding of Duties of Partners

13. Elder Care of the North
● Role of the Board
– Board Members need to be trained to identify
potential risk and how to put in place policies
and procedures to manage it.
– Board Members need to work with management
to insure that a risk management plan has
been developed and is continually updated to
address potential risk

14. Elder Care of the North
● Role of the Board (continued)
– Board Members need to create an environment
of accountability and transparency to support
this undertaking
– Board Members need to understand how poor
governance practices can lead to a high risk
situation
– Sitting on the sidelines is not an option when it
comes to risk

15. Elder Care of the North
● Role of the Board (continued)
– The Board needs to create a culture where risk
management is part of the normal activities
addressed by Board Members and
Management
– The Board needs to establish a Risk
Management Committee to direct, advise, and
report to the full Board. This would be
structured similar to the Audit or Personnel
Committee.

16. Elder Care of the North
● Risk Management and Governance
– Risk Management is about identifying and
managing those issues that could become
problems for the nonprofit to continue to meet
its mission.
– Board Governance is about creating an
environment that supports the nonprofit in
meeting its mission.

17. Elder Care of the North
● Risk Management and Governance (continued)
Boards need to make sure that the nonprofit is
in compliance with its Articles of Organization
and By-Laws. This could create a serious issue
with Federal and State organizations and have
a significant impact on the nonprofit having the
ability to remain operating.

18. Elder Care of the North
● Risk Management and Governance (continued)
Board Members need to make sure that they
are in compliance with the new requirements of
the IRS Form 990. There are several new
policies that need to be in place such as
Whistleblower, Conflict of Interest, and
Executive Compensation. Non-compliance
could risks the organizations 501(c)(3) status.

19. Elder Care of the North
● Risk Management and Governance (continued)
Board Members need to assume a more active
role in the operations of the nonprofit so that
they are able to identify potential risks more
easily because they will have a much better
understanding of the nonprofit.
Recommendations can be made to
management when risks are identified.

20. Elder Care of the North Shore
● Risk Management and Governance (continued)
The Board needs to make sure it has
appropriate committees established that meet
on a regular basis, such as Finance, Audit,
Personnel, Compensation, and Risk
Management that report back to the Board on
the different areas of the organization that can
be areas of risk.

21. Elder Care of the North
● Conclusion
It is important for the Board of Directors as part
of governance to be more aware of risk and its
impact on the nonprofit agency. Setting the tone
at the top and working with management to put
in place policies and procedures to help identify
and manage risk needs to be a top priority.

22. Elder Care of the North
● Conclusion (continued)
With the new Federal and State regulations that
have been put into place and nonprofit
agencies coming under closer scrutiny the
Board needs to make sure the organization is
protected. The first thing to do is for Board
Members to get active and become part of the
risk management process.

23. Elder Care of the North
● Conclusion (continued)
The Board of Directors are charged with
helping the nonprofit meet its mission by
providing appropriate governance. With the
world changing rapidly and potential exposure
popping up everywhere, risk management has
to take more of a role in how things are looked
at.

24. Elder Care of the North
● References
Nonprofit Risk Management Center Website –
www.nonprofitrisk.org
Taylor, B., Chait, R., & Holland, T. (1996,
Sept/Oct). The New Work of the Nonprofit
Board. Harvard Business Review, 36-46.
Benjamin, L. (2008). Bearing More Risks for
Results. Administration & Society, 959-983.