NPL 473  Nonprofit Leadership

Risk Management

I.                   Benefits of Risk Management

a.      Intangible

                                                              i.      Increased confidence

                                                            ii.      Resources to cover risk assured

                                                          iii.      Improved morale

                                                         iv.      Additional resources available for core activities

                                                           v.      Support from key stakeholders

                                                         vi.      Funder confidence

b.     Tangible

                                                              i.      Fewer accidents/incidents

                                                            ii.      Lower insurance costs (fewer claims, greater organizational sophistication)

                                                          iii.      Increased program enrollment

                                                         iv.      Less effort to market insurance program

II.                Starting a Risk Management Program

a.      Assigning responsibility for risk management

                                                              i.      Single point of contact (paid or volunteer)

                                                            ii.      Risk management team

1.     people with working knowledge of the risks

2.     outside advisers

3.     volunteers who have expressed concerns

b.     Risk management goals (narrow goals increase chance of success)

c.     Finding risk management in current programs

III.             The Risk Management Process

a.      Consider the context (personnel, financial, past experience, reuirements)

b.     Identify risks

                                                              i.      Be specific

                                                            ii.      May identify categories of risk, or analyze by organizational structure

c.     Evaluate risks

                                                              i.      Single out recurring downside risks that can be avoided through simple or inexpensive means

                                                            ii.      Identify risks that rarely occur but would seriously threaten the mission and sustainability of the organization

                                                          iii.      Assign scores, based on frequency and severity

d.     Decide what to do and take action (Risk/Rank/Action Steps/Due Date/Responsible Party)

e.      Monitor and adjust

                                                              i.      widely accepted

                                                            ii.      inconsistently followed

                                                          iii.      unintended policy violations

                                                         iv.      too costly in light of risk

                                                           v.      neutral effect

IV.            Applying the Risk Management Framework

a.      Protect vulnerable clients from harm

b.     Avoid theft of financial resources by insiders

c.     Minimize wrongful employment practices

d.     Ability to cope with crises (natural or human-caused)

e.      Minimize potential liability of volunteers

V.               Volunteer Liability and Risk Management

a.      Volunteer negligence

                                                              i.      Respondeat superior—the corporation is responsible for acts and omissions of its agents

                                                            ii.      Exceptions:  acting outside scope of authority or in direct violation of organization’s rules

b.     Claims by volunteers

                                                              i.      Injuries suffered by paid staff are insured under mandatory workers’ compensation coverage

                                                            ii.      Accident policy—or at least consider how to react when volunteer is injured.

                                                          iii.      Volunteers do not have standing to sue for wrongful employment action

                                                         iv.      Claims alleging defamation may be addressed on the merits (information portraying a volunteer in a negative light should be shared only with persons who need to know it).

c.     Fear of Liability among Volunteers

                                                              i.      VPA—Volunteer Protection Act of 1997

                                                            ii.      Nonprofit, and not its volunteers, is responsible for negligent acts stemming from operations

d.     State Volunteer Protection Laws—each state has own standards

                                                              i.      Will not cover willful or wanton conduct, gross negligence, or wrongful acts while operating a motor vehicle

                                                            ii.      Volunteers who are serving smaller, more informal organizations are at greater risk

e.      Risk Management for Volunteer Programs

                                                              i.      Apply common sense before dollars and cents

                                                            ii.      Involve volunteers in risk management planning

                                                          iii.      Provide explicit direction

                                                         iv.      Maintain standards

                                                           v.      Discuss responsibilities openly with partners

                                                         vi.      Establish and monitor policies

                                                       vii.      Guard client privacy

                                                     viii.      Put expectations and duties in writing

                                                         ix.      Cast a wide net by making risk management a shared responsibility

VI.            Role of Insurance in a Risk Management Program

a.      Insurance market cycles and developments

b.     Insurance Dos and Don’ts

c.     What is appropriate insurance coverage?

                                                              i.      Costs that can be readily predicted on the basis of past experience should be finance internally

                                                            ii.      Ultimate goal is to obtain appropriate coverage at an affordable premium

                                                          iii.      CGL (Commercial General Liability) coverage

                                                         iv.      Commercial auto liability and physical damage

                                                           v.      D&O (Directors & Officers) liability

                                                         vi.      Professional liability

                                                       vii.      Improper sexual conduct/sexual abuse coverage

                                                     viii.      Nonowned or hired auto

                                                         ix.      Property insurance

                                                           x.      Business interruption and extra expense

                                                         xi.      Fidelity & crime insurance

                                                       xii.      Umbrella insurance

                                                     xiii.      Workers’ compensation coverage

                                                     xiv.      Accident insurance

                                                       xv.      BOP (Business owners’ policy)



© 2004 A.J.Filipovitch
Revised 2 October 2005