The NonProfit Times - May 15, 2008 - (Page 17)

RISK MANAGEMENT GEORGE L. HEAD, PH.D. Good And Bad Sustaining nonprofits during economic downturns A s economic downturns reduce household incomes and lower investors’ and consumers’ confidence in the economy, nonprofits face especially troubling times. Squeezed between rising demands and falling resources, nonprofits become unusually vulnerable to two major classes of surprising, unexpected events. The first class encompasses threats of unanticipated losses, either from accidents (such as fires, floods, lawsuits, staff injuries or resignations and adverse publicity) or from unfavorable economic or regulatory events (such as the public’s rejection of a nonprofit’s new publicity campaign, tightened regulations, or the launching of a new regional or national nonprofit that invades the client,donor and territorial bases of many smaller nonprofits). The second class encompasses unexpected opportunities for gain, which often bring new uncertainties into a nonprofit’s future. For example, an economic downturn might bring to a nonprofit’s door a very talented, motivated, college-graduating job applicant who in more prosperous times might have channeled his or her career into the generally more lucrative pri- vate sector. To reach its full potential, a nonprofit must be prepared to grasp opportunities whenever they arise, whether from sudden changes in the nonprofit’s outside world or from innovations that originate within the nonprofit. THREATS/OPPORTUNITIES Risk management is both a way of thinking and a way of acting. It allows management to both anticipate and respond to surprises so that a nonprofit can preserve from surprising threats all that it has already achieved and also capitalize on surprising opportunities to reach its full future potential. A nonprofit is particularly vulnerable to unanticipated or other losses, as well as missed opportunities for gain, during economic downturns because it is at these times that a nonprofit’s financial and human resources often are especially low. At these times, nonprofits have little cushion with which to absorb unanticipated losses or into which to dig for extra funds, or spare people to grasp any golden rings of growth opportunity that may suddenly appear. Hard economic times make good risk management especially important for short-term survival and ongoing mission fulfillment. Prevailing in the long run requires surviving -- and hopefully thriving -in the short run, despite its many uncertainties. Within this process, risk is a measure of the possibility that the future might be surprisingly different, much worse or much better than the management of a nonprofit expects. Surprise can be measured by four characteristics: • Direction • Magnitude • Probability • Variability Direction, positive or negative, indicates whether the outcome is surprisingly better (as when a deceased volunteer’s bequest is much greater than anticipated, but comes with major strings attached) or surprisingly worse than expected (as when attendance at a fund-raiser is disappointingly sparse). Magnitude indicates size or extent. Given that any fire damage to your building is a loss, is the amount of damage likely to be quite small or very Risk Management, page 18 INTRODUCING NPT DESKTOP DELIVERY SERVICE A New Way To Receive The Latest Nonprofit News THE NONPROFIT TIMES is excited to announce a new way to receive breaking nonprofit news, fundraising tips, job postings, information on upcoming events and more, without opening your email! Introducing NPT DESKTOP DELIVERY, a communication tool which sends subscribers daily nonprofit updates directly to their desktops. How Does It Work? • Download NPT DESKTOP DELIVERY, a free service provided by THINK360. • Choose what time of the day you would like to receive your message. Don’t have time to read it? Click it, it goes away and you can bring it back up later by clicking on the NPT DESKTOP DELIVERY icon that will be placed on your desktop. You’ll get just one message per day. • Sign up today, get your first update tomorrow! Top Reasons To Use NPT DESKTOP DELIVERY: • NPT updates delivered straight to your desktop • You control when messages are delivered • No more blocked emails, so you won’t miss important nonprofit news! • Completely hacker-proof Visit www.nptimes.com/desktop for more information and to download. MAY 15, 2008 THE NONPROFIT TIMES www.nptimes.com 17 http://www.nptimes.com/desktop http://www.nptimes.com/desktop http://www.nptimes.com

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The NonProfit Times - May 15, 2008 Tying Multiple Sub-Brands To The Primary Idea Executive Session: Giving The Donor The Chance To Say Yes Blogging From The Top Contents Striking The Best Deal Don't Be Fooled Immigrants And Philanthropy Bringing In The Dough Good And Bad Organizational Evaluation Design Your Message You’ve Got Mail? Hybrid Power Calendar NPT Jobs Resource Directory

The NonProfit Times - May 15, 2008

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