Saturday, September 21, 2013

CN Rating System Helps in Risk Management

In materials provided to the AICPA Not-for-Profit Industry Conference, Melanie Lockwood Herman, executive director of the Nonprofit Risk Management Center, presented a list of the Top 10 Risks Facing Nonprofits. Those risks are:


  • Uncertainty regarding financial sustainability. The less cash on hand, the greater the danger when revenue is late or unreliable;
  • Ineffective fiscal and risk oversight;
  • Incomplete appreciation of fraud risk. There are three general kinds: against the nonprofit, by the nonprofit and through the nonprofit;
  • Allowing a leader/staff member/volunteer to be “above suspicion.” A casual glance through the news should be enough to put this one to rest;
  • Lack of succession planning. On average, boards spend two hours a year on CEO succession planning;
  • Ineffective departure planning and execution. Nothing lasts forever;
  • Na├»ve crisis planning. People don’t get to choose the source or cause of their next crisis;
  • Dissatisfied donors (poorly understood/managed donor relationships);
  • Unmanaged conflict on the board; and,
  • Lack of practical (well-understood) governance practices. This can cover every conceivable item, from conflict of interest through gift acceptance, and anything in between.


  • The majority of these risks can be curtailed by simply following the practices and standards set by Charity Navigator. Read more about how we rate charities here.

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