New Charity Commission guidelines require charity trustees to implement procedures to identify the major risks to which their charity is exposed and to establish systems to mitigate those risks. In fact this is a task that every well-run organisation should undertake. It gives added focus to the responsibilities of trustees. Those who have undertaken this review end up with a much better understanding of the charity under their control.
The risk assessment procedure is mandatory for all charities with income exceeding £250,000 and a statement confirming compliance must be included in the trustees’ annual report. For smaller charities the risk assessment is recommended as good practice.
Charities face some level of risk in most things that they do. Trustees need to identify the major risks to which the charity is exposed within the following categories:
The reviews must be properly documented and will be ongoing with trustees having to update the assessment on an annual basis. Rather than reviewing all five areas in an annual risk assessment, trustees could consider taking one of the five elements in turn at trustees’ meetings. Risk assessment would then be reviewed continually.
Risks can be measured by various means but it is best to choose a simple method. This could be a scoring system which combines the likelihood of the risk arising and the impact it might have.
Risks can be ranked to determine which need to be addressed before others and an action plan developed.