Becoming Aware of the Benefits of Nonprofit Risk Management

Most nonprofits know their business models are challenging. Many don’t know what to do about that, and spend their time in a fog of anxiety. If you have been reading our series on Lean Risk Management™, though, you’re different. You are alert to your vulnerabilities, and you aspire to change your nonprofit for the better. But how do you become AWARE of the real benefits of nonprofit risk management? As described below, the AWARE stage is your next stop on the Lean Risk Management™ journey.

Stage 3 – Aware

As a nonprofit leader adopting a Lean Risk Management™ process, you’ll recognize you are in the AWARE stage when you exhibit four characteristics:

1. Your nonprofit has performed an initial “risk inventory” – a structured brainstorming of threats and opportunities in every functional area of your organization.
2. You have prioritized the results of that initial risk assessment and developed a “risk register,” which is a prioritized punch list capturing the your most important risks. You have assigned someone within the organization as the champion or owner of each top risk. You have decided what the next step will be to address each top risk and listed the date by which that step will be taken.
3. You have moved beyond the initial risk inventory and risk register to begin testing a “risk cycle” – the routine of identifying risks as they arise, modifying the priority of risks as they are addressed or newly identified, responding to your highest priority threats and opportunities, assessing and improving, and doing this over and over again in a virtuous risk cycle.
4. You have begun to feel the benefits of what we call The 5 C’s^TM of risk management:

• • You feel greater clarity, since team members are participating in the process that urges them to raise issues when they are emerging, before they become crises.
  • You have greater context for making decisions, since you and your team see trade-offs among different nonprofit challenges.
  • Team and board members feel greater contribution, because they are specifically asked to identify what worries and intrigues them, and they see action being taken on the issues they present.
  • Decisions are made with greater confidence, because the team knows it is taking action on the most important issues facing the nonprofit.
  • Finally, the nonprofit is capturing value, by reducing downside consequences and increasing upside potential.

If you’re taking a Lean Risk Management™ approach, the organization is improving, step by step. At each step, you pause to assess progress, make any necessary course corrections, and determine whether an investment in nonprofit management strategies continues to pay dividends.

TOLLGATE OUT OF “AWARE” STAGE: A successful nonprofit leader moves beyond the “AWARE” stage when she makes the decision to formalize the nonprofit’s informal risk process. At that point, you move to the next stage of your journey – ADEPT – which we will cover in our next post.