Nonprofit Risk Management: 5 Frequently Asked Questions
Risk management is vital for your nonprofit to plan for growth and avoid negative impacts. Review these five frequently asked questions before you get started.
Guest post by Jitasa
For nonprofit leaders, it’s crucial to understand what steps to take when unexpected negative situations arise, which is why risk management is a key part of successful strategic planning. While taking some risks is necessary for your organization to grow, even the risks you take on voluntarily can become harmful without careful management.
Especially when everything is going well for your nonprofit, it can be hard to know where to start with risk management. Fortunately, this guide will help you develop an actionable strategy for your organization by answering these frequently asked questions:
What is nonprofit risk management?
What effects can risky situations have on my nonprofit?
What are the most common types of nonprofit risk?
How do I conduct a risk assessment for my organization?
How can my nonprofit mitigate and prevent risks?
Keep in mind that the most effective risk management plans are proactive rather than reactive. Instead of waiting until a risky situation comes up, start while your nonprofit is in a good position, and include preventative measures in your plan as well as mitigation strategies. Let’s dive in with an overview of what risk management is in a nonprofit context.
What is nonprofit risk management?
Jitasa’s nonprofit risk management guide defines risk as “the probability that something bad might occur. This might be due to internal circumstances at the organization itself or external factors that pose a greater social risk.”
Based on that explanation, risk management is the process of identifying, assessing, and mitigating internal and external circumstances that could result in something negative happening to your nonprofit.
What effects can risky situations have on my nonprofit?
Not all risks will affect your nonprofit to the same degree or impact the same areas of your operations. However, risky situations that go unchecked can bring about a variety of negative outcomes, including:
Financial loss. Whether this takes the form of broken contracts, declining investments, or revenue shortfalls, unmanaged risks can have significant effects on your nonprofit’s budget.
Legal consequences. These can range from lawsuits against your organization to the loss of your 501(c)(3) status.
Reduced ability to fulfill your mission. Risks can inhibit your organization’s daily activities in many ways, from lowering fundraising efficiency to directly impacting the services you deliver.
Reputation damage. According to NXUnite, negative publicity and controversy surrounding your nonprofit can break supporters’ trust and cause them to stop contributing to your work.
Not only do these impacts highlight the general need for nonprofits to have risk management plans, but they also show how important it is for each organization to understand what types of risk are most likely to affect them so they can be prepared.
What are the most common types of nonprofit risk?
Just as every nonprofit is different, so are the risks that will have the greatest consequences for each organization. However, the most common nonprofit risks to be on the lookout for include:
Cybersecurity violations that can expose sensitive information about your organization, its staff, and its supporters.
Fraud, particularly financial fraud and fraud by impersonation (in which a scammer sets up a fake online donation page, collects “contributions” under your nonprofit’s name, and keeps the money for themselves).
Theft of money or technology, which is often (unfortunately) perpetrated by someone close to the organization.
Non-compliance with federal and state regulations, especially because nonprofits are subject to some rules that for-profit organizations aren’t.
Several of these risks—especially financial fraud and incidents of non-compliance—can happen either intentionally or unintentionally. Be aware of this as you identify potential risks for your nonprofit to ensure you don’t overlook issues that could occur by accident.
How do I conduct a risk assessment for my organization?
Risk assessments allow you to determine what risks could affect your nonprofit and how you should go about mitigating them. There are three basic steps to a risk assessment:
Identify the various types of risky situations that could impact your organization.
Evaluate how likely each risk is to occur and what its most probable consequences are.
Prioritize all of your nonprofit’s risks based on both likelihood and impact.
You can either conduct your risk assessment internally using one of the many checklists available online or ask a third-party nonprofit risk management professional to provide an external perspective on your organization’s situation. Both options have advantages and drawbacks—consider your nonprofit’s timeline, budget, and bandwidth as you make your decision.
How can my nonprofit mitigate and prevent risks?
After you assess your nonprofit’s situation and come up with a prioritized list of risks, it’s time to develop your management plan. Start at the top of your list and brainstorm ways to alleviate each risk if it were to occur—or better yet, prevent it from becoming an issue in the first place.
Here are some common risk mitigation strategies your nonprofit might try:
Tightening data security measures. Consider implementing two-factor authentication on all of your organization’s essential accounts, encrypting your databases, and investing in a PCI-compliant payment processor to keep donors’ information safe. Additionally, practice good nonprofit data hygiene to ensure important information isn’t accidentally misplaced and left vulnerable.
Reviewing your fiscal policies. Make sure your organization has procedures in place for requesting, accepting, and tracking various types of gifts, reimbursing expenditures on behalf of your mission, and handling conflicts of interest. This protects against all sorts of fraud and compliance issues, in addition to being essential for sound day-to-day operational and financial management.
Establishing internal controls. In addition to your major fiscal policies, internal controls are procedures specifically designed to prevent risks. For example, many nonprofits require two signatures on checks over certain amounts to reduce the risk of financial fraud.
Improving communications. Make sure all of your organization’s essential information is properly recorded and reported, from donations made to project updates. Risks can arise when nonprofit leadership, staff members, and volunteers let communication fall by the wayside, so work to prioritize communication among your team.
Once you’ve decided which strategies to incorporate into your risk management plan, share the plan with your board of directors so they can sign off on it and provide oversight as you implement your ideas. Then, hold training sessions for staff members to establish a risk-prevention mindset at your nonprofit and ensure that everyone knows how to mitigate any risks that may arise as they go about their daily activities.
Nonprofit risk management is an ongoing process. After implementation, monitor how it’s going for six months to a year to ensure your strategies are working. Then, revisit your plan at least once a year to re-evaluate your risk management priorities and develop mitigation strategies for any new risks that have come up since your last review to ensure your organization remains protected long term.
The preceding post was provided by a guest author unaffiliated with DonationMatch. The views expressed within do not directly reflect the thoughts or opinions of DonationMatch.
How to Plan a Successful Donation Drive: 6 Top Tips
Donation drives are important for quickly reallocating resources to community members who need them most. Follow these six tips to make the most of your drive.
Guest Post by Jacob Spencer, Customer Success and Account Manager at Donately.
For organizations big and small, a donation drive can be daunting. Achieving success can take months of coordinating, organizing, and soliciting financial donations and in-kind support.
To make your life easier, we’ve compiled our list of important considerations for planning a donation drive. We’ll cover why you should:
Yes, the stress a donation drive potentially can have on your organization and staff is intimidating. But with these six tips, you can spend less time and energy on your donation drive and yield higher, more impactful returns.
1. Be unafraid to ask for donations.
What’s the worst that could happen? Making a clear and direct request is the only way people and organizations will know to donate. Your request should answer these questions:
What need in your community will your donation drive address? What will be the measurable impact of the drive? What is your goal?
When will the drive take place? What are the dates when supporters can donate? Will there be an opening or culminating event?
How can supporters get involved? In addition to the donations themselves, will you need volunteers to collect, organize, and/or distribute donations?
What exactly can (and can’t) supporters donate? Are you requesting in-kind or financial donations? Are you requesting new or used items?
In addition to asking individuals for donations, plan to solicit corporate support from relevant for-profit businesses. For example, for a winter clothing drive, you could ask clothing retailers with a local presence for in-kind donations of jackets, caps, and gloves. Companies are often happy to donate to nonprofit community drives—especially when they get public recognition for their donations in return. In these asks, be explicit about how a donation will benefit their organization—often through CSR publicity.
2. Offer incentives.
Not everyone donates purely out of selflessness. In fact, people and businesses usually have multiple reasons for donating.
Yes, they’re probably donating because it’s the right thing to do. But they may also be looking to get something out of their participation. For some, it may simply be the feeling of having done something good for someone else. For others, such as businesses, it may be publicity. In general, however, these groups are donating because you’ve already done the work to establish a strong, personal relationship.
But when it comes to lapsed donors or new donors unfamiliar with your cause, they likely don’t have the personal or emotional connection to your organization that drives the core of your donations. To garner their interest, consider offering specific incentives for donating:
Events. Host events (e.g. a bowling night, gala, or online concert) specifically for active donors.
Raffles. People love games and winning. Consider holding a raffle (where it is legal to do so) for all monetary donors who give at least a certain amount.
Merchandise. Offer donors wearable merchandise as a token of your appreciation, such as hats, buttons, or tote bags. You can even customize your merch to your organization or drive’s brand.
If you offer more than one incentive, you can establish tiers with each level requiring a certain donation amount. For instance, your top donors might receive VIP access to your events and a large gift basket, while basic donors might receive a button or shirt.
3. Quickly reply with thanks when a company or person donates.
Don’t burn any bridges by ignoring the donations you receive. You never know when you might need a company or individual to support you again in the future. According to Fundraising Letters’ guide to donor thank-yous, “Only 19% of new donors will give again after their first donation.” One of the major reasons for such a large donor churn is the lack of a simple thank-you.
Send your thank-yous as quickly as possible after a donation is received. With many giving platforms, you can set up emails to automatically go out when a donation is in-put into the system. Additionally, every thank-you should include:
The donor’s name. With current technology, it’s easy to add a personal touch to every thank-you you send. Use your donor management software to input the donor’s name (plus other relevant information such as their title or address) into the blanks of a prewritten letter.
Relevant financial information. Both financial and in-kind support to 501(c)(3) charities can be tax-deductible. Make it easy for donors to claim their gifts as deductions on federal taxes by providing the date and value of their donation as well as your nonprofit’s Tax ID Number.
Impact. Your donors just made a positive impact on the world. Remind them what their donation will do for the community and who it will help. Use a combination of anecdotal stories and quantitative facts/figures to show the impact of the drive.
Recognizing even the smallest gifts with a well-written thank-you email or letter shows your gratitude and helps grow your relationship with each donor. When you reach out to them during your next drive, they’ll be more likely to give!
4. Keep a donor registry.
You also don’t want to keep asking the same donors to donate to your cause every time you have a new event. Moreover, having a large, diverse body of donors will financially protect your organization from the effects of losing any single donor.
Thus, try to mix it up and tap into different pools of donors. How do you accomplish this as efficiently as possible? We recommend you:
Monitor received donations using donation management software that allows for easy, long-term tracking and reporting.
Using filters and search tools, create specific lists of donors based on their donation history and amounts.
Depending on the specifics of your drive, focus your outreach efforts on the most relevant potential donors.
By utilizing a donor registry to track your donors and donations, you’ll retain your supporters and save money on new donor acquisitions.
5. Use different avenues to market your donor drive.
According to Donately, over 80% of Americans now own smartphones. As a result, digital marketing can be one of the most effective ways to get your donor drive in front of the right eyes.
While these days social media receives a lot of attention in digital marketing, Facebook and Twitter aren’t your only opportunities to reach existing and potential donors. Consider using a combination of digital outreach tools, including:
Text
Google Ads
Email
That being said, especially if you’re focused on addressing a local issue, try incorporating traditional outreach methods (in addition to your digital fundraising efforts) into your marketing plan, including:
Direct Mail
Local News
Local Partnerships
Phone Banking
Even as you use a variety of marketing channels, make sure you’re still focusing all of your organizational efforts and marketing for donations to one drive at a time. This will help you avoid any internal competition for donations or confusion for donors.
6. Tell your story.
As you can probably see by now, the more a donor can connect with your cause, the more likely they are to (1) donate and (2) donate in generous amounts, and (3) donate again in the future. A touching, cohesive story can solidify that connection. In general, your donation drive’s story should have a clear beginning, middle, and end:
The Beginning should introduce a compelling main character (such as a volunteer or community member) and a problem in your community.
The Middle should demonstrate the increased stakes if the problem is not addressed and propose a possible action or solution.
The End should offer your audience a way to get involved, solve the problem, and be a part of your story’s resolution.
Your story will be the heart of your outreach plan, and you should rely on it in both your physical and digital marketing. When available, such as on social media, plan to enhance it with relevant multimedia elements. For example, for a food drive, you might post interviews with donors, volunteers, and recipients alongside photo updates of incoming donations. Especially online, photos, audio, and video can break up blocks of text and lead to increased engagement and sharing.
Ultimately, there’s no one way to plan a donation drive, and fundraisers never go exactly as expected. But by using these tips to create a thorough, adaptable plan, you can be successful in your donation drive endeavors no matter the circumstance. Keep your eye on the prize and shoot for the stars!
About the Author
Jacob Spencer | Donately Customer Success and Account Manager
I strive to make every step of our customer journey as enjoyable as possible. My goal is to turn everyone who trusts Donately into a raving fan! Raising funds can be daunting, but we know that with the right tools, it can and should be easy.
Throughout my career, I've been able to help sales and success teams tackle new markets, grow and expand.
Leading with empathy, listening to actually solve problems, and remembering that we are all human are the key elements to growing any business in a meaningful way.
When I'm not working you can find me spending time with my wife, 2 boys and our Border Collie, Abbie. Family>Everything.
5 Minutes with DonationMatch Co-Founder Renee Zau
By Juliet Davenport, Nonprofit Ambassador at DonationMatch
When was the last time you experienced a pain and decided to devote your full-time effort to solving it? Co-founder Renee Zau became an accidental web entrepreneur when she wished for a product like DonationMatch and waited several years for "someone else to build it so I could be a customer." When that didn't happen, she and boyfriend Darryl took what they learned working for a VC-backed startup where they met, their savings, and advice from smart friends to get accepted into and graduate from the Founder Institute (a tech startup accelerator), which propelled DonationMatch into the premiere platform for reaching consumers through charitable events.
Here's what we learned in 5 minutes with Renee!
How did you come up with the idea for DonationMatch?
Inefficiency bothers me. I hated seeing myself and other wasting time typing the same information from the same donors over and over again for fundraising auctions. I also experienced the pain of not having an easy way to collect and track the requests my business was receiving. All the paperwork being mailed back and forth seemed wasteful, and I wanted a centralized place for both donors (companies) and receivers (nonprofits) to not just manage donation records, but make requests and seamlessly transfer necessary information easily. I waited four years before Darryl caught on to how frustrated I was and realized I wasn't alone in needing a solution.
What do you think charities can learn from the private sector?
I know that the ultimate goal of a charity isn’t to make money, but I think many fail to invest in practices early on that will help them become financially self-sustainable. When a charity can’t focus on its mission because it needs money and has to constantly fundraise, it ultimately hurts its ability to do good work. Just like a startup for-profit, I’d like to see nonprofits:
- Strive for long-term financial viability with an aligned business model,
- Identify whether their mission is unique and necessary (as opposed to initiating a project within an existing organization), and
- Plan for a bootstrapped success model based on partnerships and leveraging the help of others, in case funding doesn’t come easily.
Where would you like to be in 5 years?
In five years I’d like to be able to sign on to DonationMatch as a fundraising event chair in the U.S. or Canada, input my event details, and be able to fill my silent auction, opportunity drawings, and gift bags in an hour while having fun. This would be possible because of smart tools we're building into DonationMatch that help companies and brands want to donate goods because it's easy, cost-effective, and profitable. I can't wait for this day!
What is your weakness?
There’s always room for dessert. Even for breakfast.
What is another question you would like to ask Renee?
Capitalizing on Social Media to Expand Marketing Reach and Return
In a survey of nonprofits conducted by VerticalResponse, 80% of respondents post updates to their Facebook page multiple times a week, compared to 66% for businesses. The survey also found that for nonprofits, social media marketing has become a “preferred marketing channel because it offers free content distribution.” And according to a Brafton blog post, because of the potential to successfully maximize their reach and return using social media, even on a tight budget, businesses will invest more in updating their websites and social media presence. Did you know that DonationMatch is another excellent way for businesses and nonprofits to maximize reach and return? Through our free service, a business can get products in front of hundreds of potential customers through just one charitable event. For nonprofits we deliver companies interested in doing well by doing good, increasing the fundraising potential for your events.
According to Edelman's 2012 goodpurpose study, 72% of consumers prefer to buy from brands that are charitable. For nonprofits and businesses, using both social media and DonationMatch are ways to gain the exposure you both seek in less time.
What tips do you have for maximizing your marketing reach and results?
Using Social Media to Promote Your Event
By Juliet Davenport, Nonprofit Ambassador, DonationMatch Spring fundraising time is among us. How are you planning to promote your event? According to Socialable, one of the most powerful tools in your arsenal should be social media. Because of its wide audience reach, social media can be used to "increase registration, increase buzz, and ultimately increase attendance." However, in considering your social media platform, it's important to keep in mind who your target audience is and how they interact online. Facebook, Twitter and LinkedIn are likely your best options.
Another boost is the new Pro Event page upgrade on DonationMatch. It has built-in extra help for your event to get found by search engines like Google and Bing and Facebook sharing widgets. What makes it super convenient is automatic donor promotion and the ability to export donation details.
For details on using social media to help promote your event, and for useful tools to help you manage it, read more on Socialable's post here.
How are you using social media to promote your event?
Are You Ready for an Event?
6 steps to determine if a fundraising event is what your organization really needs
Guest Post by Krista Berry, Owner & Principal Consultant at KB Consulting
I recently had the pleasure of working with a small, energetic non-profit organization that originally contacted me to plan their first fundraising event. Like any event management professional, my first step before diving into the planning elements was to conduct a needs assessment so I could better understand the job.
After my first conversation with the board of directors it was very clear to me that the organization wasn’t ready for a big fundraising event (yet). I discovered that, like many organizations, the event was their solution to raise funds to sustain programs and operations, but they had some critical planning that needed to be addressed first, so they were uncertain how to proceed. As a non-profit consultant, I quickly adjusted my role and recommended they take the time to organize a board planning session to prioritize what they should do and what they should NOT do this year.
While an event can be a great way for non-profits to fundraise, it’s imperative that younger organizations take the time to complete a needs assessment before they start planning a big event to avoid getting in over their head.
Now it’s your turn! Answer these 6 questions to determine if a fundraising event is feasible for your organization this year:
Why? The purpose of the event – this will be the foundation for any future planning.
What? The desired outcome of the event.
Who? The scope of audience and demographic info on attendees.
When? The desired season, date, day and hour that event will take place.
Where? The desired physical location of event including destination/geographical area.
How? The plan to accomplish all of the event elements above.
After I completed these steps with my client they realized that what the organization really needed was a few “friend-raiser” events to recruit more people to serve on their board of directors and to support the organization’s programming. This was a more realistic next step and is also more in line with their 2012 goals. The needs assessment combined with a board planning session helped them create clear objectives for the organization to achieve before they start planning their first fundraising event. And the ROI (return on investment) will be a successful, sustainable event that will continue to grow every year as the organization grows!
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Krista Berry, MS is the Owner & Principal Consultant at KB Consulting specializing in innovative events, workshops and capacity building solutions for non-profits and communities. She has over 10 years of non-profit experience in both San Diego and New York City.
We Need More Efficient and Effective Nonprofits, Not More
By Renee Zau, Co-founder, DonationMatch Why compete when you can work together? "At a time when nonprofit organizations are being pushed to greater program efficiencies, mergers, and other administrative economies, why do boomer entrepreneurs seem to think that starting millions of brand-new entities is the most effective way to make a societal contribution? Why can’t they work through existing organizations to start their creative new programs, improve existing ones, or concentrate resources instead of multiplying administrative and overhead costs?"