Potential Risk Areas
Introduction
The following Governance, Organisational and Financial risks have been identified as potential areas to be reviewed on a regular basis. Not all of these areas will be relevant at any particular time but all are of potential relevance. This document will be reviewed on an annual basis to identify any particular areas that require attention at that time.
Governance Risks
| Potential Risk | Potential Impact | Steps to mitigate risk |
| The Charity lacks direction, strategy and forward planning | The Charity drifts with no clear objectives, priorities or plansIssues are addressed piecemeal with no strategic reference.Needs of beneficiaries not fully addressedFinancial management difficultiesLoss of reputation | Create a strategic plan which sets out the key aims, objectives and policiesCreate financial plans and budgetsUse job plans and targetso Monitor financial and operational performanceGet feedback from beneficiaries and fundersAnnual Planning MeetingRegular Committee meetings (quarterly at least) used for activity planning in line with the Charity’s aims. |
| Trustee body lacks relevant skills or commitment | o Charity becomes morbund or fails to achieve its purposeo Decisions are made bypassing the Trusteeso Resentment or apathy amongst staffo Poor decision making reflected in poor value for money or service delivery | o Review and agree skills requiredo Draw up competence framework and job descriptionso Implement Trustee training and inductiono Review and agree recruitment process |
| Trustee body dominated by one or two individuals, or by connected individuals | o Trustee body cannot operate effectively as a strategic body Decisions made outside of Trustee bodyo Conflicts of interesto Pursuit of personanl agendao Culture of secrecy or deferenceo Artitrary over-riding of control mechanisms | o Consider the structure of the Trustee body and it’s independenceo Agree mechanisms to manage potential conflicts of interesto Review and agree recruitment and appointment processes in line with governing documento Agree procedural framework for meetings and recording decisions |
| Trustees are benefiting from Charity (e.g. remuneration) | o Poor reputation, morale and ethoso Adverse impact on overall control environmento Conflicts of Interesto Possiblity of regulatory action | o Ensure legal authority for payment or benefito Consider alternative staffing arrangementso Implement terms and procedures to authorise/approve expenses and paymentso Agree procedures and methods to establish fair renumeration conducted separately from “interested” Trustee (remuneration committee/benchmarking exercise etc.) |
| Conflicts of Interest | o Charity unable to pursue its own interests and agendao Decisions may not be based on relevant considerationso Impact on reputationo Private benefit | o Agree protocol for disclosure of potential conflicts of interesto Put in place procedures for standing down on certain decisionso Review recruitment and selection processes |
Governance Risks cont….
| Potential Risk | Potential Impact | Steps to mitigate risk |
| Ineffective organisational structure | o Lack of information flow and poor decision making procedureso Remoteness from operational activitieso Uncertainty as to roles and dutieso Decisions made at inappropriate level or excessive bureaucracy | o Use organisation chart to create a clear understanding of roles and dutieso Delegation and monitoring should be consistent with good practice and constitutional or legal requirementso Review structure and the need for constitutiono Define Trustee roles with clarity of responsibilities e.g. Fundraising, Safeguarding, Events etc.o Agree clear decision making protocol |
| Activities potentially outside objects, powers or terms of gift (restricted funds) | o Loss of funds available for beneficiary classo Liabilities to repay Funderso Loss of funder confidenceo Potential breach of trust and regulatory actiono Loss of beneficiary confidenceo Taxation implications (if non qualifying expenditure) | o Agree protocol for reviewing new projects to ensure consistency with objects, powers and terms of fundingo Create financial systems to identify restricted funds and their application |
| Loss of key staff, volunteers | o Experience or skills losto Operational impact on key projects and prioritieso Loss of contact base and corporate knowledge | o Succession planningo Document systems, plans and projectso Implement training programmeso Agree notice periods and hand overso Review and agree recruitment processeso Ensure key volunteers and staff are given the opportunity to develop skills, stay motivated and thus maximise retention |
Environmental Factors
| Potential Risk | Potential Impact | Steps to mitigate risk |
| Public perception | o Impact on voluntary incomeo Impact on use of services by beneficiarieso Ability to access grants or contract funding | o Communication with supporters and beneficiarieso Ensure good quality of reporting of the charity’s activities and financial situationo Implement public relations training/procedures |
| Adverse publicity | o Loss of donor confidence or fundingo Loss of influenceo Impact on morale of staffo Loss of beneficiary confidence | o Implement complaints procedures (both internal and external)o Agree proper review procedure for complaintso Agree crisis management strategy for handling – including consistency of key messages and a nominated spokesperson |
Operational Risks
| Potential Risk | Potential Impact | Steps to mitigate risk |
| Poor Service provision – low customer satisfaction | o Beneficiary complaintso Loss of fee incomeo Loss of significant contracts or claims under contracto Negligence claimso Reputational risks | o Agree quality control procedureso Implement complaints procedureso Benchmark services and implement complaints review procedureso Consult with, listen to and involve those with ideas on how to address need, develop and build on successo Learn from and respond to complaints – be prepared to change |
| Project or service development | o Compatibility with objects, plans and prioritieso Funding and financial viabilityo Project viabilityo Skills availability | o Appraise project, budgeting and costing procedureso Review authorisation procedureso Review monitoring and reporting procedureso Clarity of responsibility for projects and services or aspects of them |
| Lack of clarity on what we are fundraising for and our medium/long term objectives | o Unsatisfactory returnso Reputational risks of campaign or methods usedo Actions of agents and commercial fund raiserso Compliance with law and regulationo Fund raising reduces or does not meet charity’s needs or aspirationso Supporters are reluctant to fundraise on our behalf | o Implement appraisal, budgeting and authorisation procedureso Review regulatory complianceo Monitor the adequacy of financial returns achieved (benchmarking comparisons)o Stewardship reporting in annual reporto Encourage and enable individual supporters (including non-members) to fundraise on our behalfo Improve transparency on how we spend funds we raise to benefit people affected by RTS |
| Inability to recruit and retain volunteers | o Lack of competences, training and supporto Poor service for beneficiarieso Inadequate vetting and reference procedureso Recruitment and dependencyo Responsibilities and extent of activities fall to a few | o Review an agree role, competencieso Review and agree vetting procedureso Review and agree training and supervision procedureso Agree development and motivation initiativeo Agree awareness raising and motivation initiativeo Agree awareness raising and recruitment strategyo Agree how volunteers would be supported, recognised and retained |
| Health & Safety environment | o Volunteer/staff injuryo Product or service liabilityo Ability to operate (see Compliance Risks)o Injury to beneficiaries and the public | o Comply with law and regulationo Train staff and volunteers in Health & Safety responsibilities and complianceo Raise awareness of Health & Safety issues and riskso Put in place monitoring and reporting procedureso Regularly review and assess required insurance cover |
Operational Risks cont …
| Potential Risk | Potential Impact | Steps to mitigate risk |
| Procedural and systems documentation inadequately managed | o Lack of awareness of procedures and policieso Actions taken without proper authorityo Outdated policies and procedures in circulationo Confusion re document management/version control | o Property document policies and procedureso Audit and review of systemso Allocate responsiblity for document management and version controlo Establish system for agreeing and changing policies |
| Inadequate knowledge and use of information technology | o Systems fail to meet operational needo Failure to innovate or update systemso Loss/corruption of data e.g. donor basedo Lack of technical supporto Breach of GDPR lawo Waste of staff/volunteer time and effort in trying to use systems | o Appraise system needs and optionso Appraise security and authorisation procedureso Implement measures to secure and protect datao Agree implementation and development procedureso Use service and support contractso Create disaster recovery procedureso Consider outsourcingo Review insurance cover for any insurable losso Buy in expertise when needed to maximise use and efficiency |
Compliance Risk
| Potential Risk | Potential Impact | Steps to mitigate risk |
| Compliance with legislation and regulations appropriate to the activities, size and structure of the Charity | o Fines, penalties or censure from licensing or activity regulatorso Loss of licence to undertake particular activity (see operational risks)o Employee or consumer action for negligenceo Reputational risks | o Identify key legal and regulatory requriementsAllocate responsibility for key compliance procedureso Put in place compliance monitoring and reportingo Prepare for compliance visitso Obtain compliance reports from regulators (where appropriate) auditors and staff to consider and action at appropriate level |
Financial Risks
| Potential Risk | Potential Impact | Steps to mitigate risk |
| Poor/inadequate budgetary control and financial reporting | o Budget does not match key objectives and prioritieso Decisions made on inaccurate financial projections or reportingo Decisions made based on unreliable costing data or income projectionso Inability to meet commitments or key objectiveso Poor credit controlo Poor cash flow and treasury mangemento Ability to function as going concerno Not meeting legal compliance | o Link budgets to business planning and objectiveso Monitor and report in a timely and accurate wayo Use proper costing procedures for product or service deliveryo Ensure adequate skills base to produce and interpret budgetary and financial reportso Agree procedures to review and action budget/cash flow variances and monitor and control costso Regularly review reserves and investmentso Ensure reporting in an accessible way to enable full understanding of those receiving reports |
| Inadequate reserves policies | o Lack of funds or liquidity to respond to new needs or requirementso Inability to meet commitments or planned objectiveso Reputational risks if policy cannot be justifiedo Failure to comply with Charity Regulations | o Link reserves policy to business plans, activities and identified financial and operating risko Regularly review reserves policy and reserve levelso Use reserves for the benefit of people with and affected by RTS as required |
| Cashflow does not meet needs | o Inability to meet commitmentso Lack of liquidity to cover variance in costso Impact on operational activities | o Ensure adequate cash flow projections (prudence of assumptionso Identify major sensitivitieso Ensure adequate information flow from operational managerso Monitor arrangements and reporting |
| Failure to comply with donor imposed restrictions | o Funds applied outside restrictiono Repayment of granto Adverse effect on future relationship with donors and beneficiarieso Regulatory actiono Reputational damage | o Implement systems to identify restricted receiptso Agree budget control, monitoring and reporting arrangementso Allocate responsibility for contract management |
| Fraud or error | o Financial losso Reputational risko Loss of volunteer/staff moraleo Regulatory actiono Impact on funding | o Review financial control procedureso Segregate dutieso Set authorisation limitso Agree whistle-blowing anti-fraud policyo Review security of assetso Identify insurable risks/take legal action as appropriateo Involve external agencies as required |