Why Risk Management

Every activity has inherent risks, potential liability and opportunities. Our laws make every person/organization liable for acts or omissions that cause damage to other’s property or injury to persons. Those who undertake an enterprise are required to take all reasonable means to reduce the risk of loss by others, demonstrate an ability and attempt to manage risks (due diligence).

The Greatest Risk of All: DO NOTHING

• Risk management is a proactive, continuous process that identifies, measures and manages those risks
• Enables decision making as to whether a risk is acceptable or requires further action
• Process leads to effective decision making, allowing projects and programs to achieve better results
• Assists in clearly defined insurance needs
• Enhances regulatory compliance requirements
• Assists in audit preparation
• Reducing risk creates greater confidence in your activities - encourages people to participate
• Gives managers the confidence to make decisions about how to manage risk to an acceptable level
• Creates effective planning and preparation with appropriate and adequate resource allocation
• Enables contingency plans to deal with the consequences

Benefits

Managing the uncertainty of risk causes decision makers to:

• Think more carefully about all issues
• Identify the most important risks, then set priorities to manage them
• Prepare for contingencies with plans and training
• Overall: It saves time, effort and financial resources

Risk Management Decisions

Lead, support and enable:

• Achievement of organizational objectives
• Due diligence issues
• Management of the uncertainty and consequences of future events
• A continuous, proactive and systematic process to understand, manage and communicate risk
• Cost-effective procedures to prepare for and finance the consequences of a loss

How It Starts

With a Risk Management Statement

“To ensure ongoing, unimpeded capacity of _______ to fulfill its mission, perform its key functions and meet its objectives by:

• Protecting (Your Nonprofit) from adverse incidents by reducing its exposures to loss, preparing to mitigate and control loss should it occur, and thereby reduce the cost of risk.
• Adopting Risk Management practices throughout and ensure all members are aware of the need to manage risk and promote participation in that process.”

Main Principles

• Commitment of senior management to a formal, documented, integrated risk management process
• Clear, defined responsibility & accountability for functions, activities and associated risks
• Use of common risk language
• A process for identification and treatment of risk integrated with existing management
• Commitment reinforced by training
• Outcomes monitored by senior management

Strategic Objectives of Risk Management

• Risk Identification and Mitigation
• Ready to take advantage of opportunities
• Reducing uncertainty, increases confidence
• Be a good citizen
• Fulfilling legal and ethical issues - reduces chances of being sued
• Fosters favorable public image - improves public support, attracts members and funds

• Insurance is risk management
• Insurance takes care of everything
• If I don’t know about it, it can’t hurt me so I am not responsible
• Buildings won’t burn
• Computers won’t crash
• Executive Director will never leave, get sick
• Staff would never…!!
• We can’t control our volunteers' actions, so we can’t be held liable for what they do

Basic Risk Management

1. Identify possible risks – external/internal - consider what problems/possibilities do they contain?
2. Assess the probability of each risk, consider the potential frequency and severity of it happening
3. Create a plan that treats the critical risks - how they can be avoided, accepted, or transferred
4. Implement the plan, train personnel to understand how and why they are involved
5. Monitor and evaluate the success of the risk management plan, adjust when and where needed
6. Communicate the results to stakeholders

Other Risk Management Topics:

SPORT4ONTARIO would like to thank Volunteer Alberta for the information contained in this section.