This summer I drove a jet ski for the very first time and it made me think about nonprofit risk.
My family rented a couple of jet skis for a 30-minute ride at a Mexico vacation spot. My daughter was perched on the back of my vehicle, egging me on to go faster and faster to catch up to my husband who was lapping us many times over. The problem was, I was scared out of my skull—eyes laser-focused on the water, knuckles white on the handle grips, and I could barely speak a word. It felt as though we were flying across the water at a nightmarish speed, seconds away from a fatal crash. I found all the courage I had to take my eyes off “the road” to check the speedometer. So how fast was I going?
13 miles per hour. Slower than the max speed in a California parking lot.
Risk can be very personal—based on how we’re raised, our genes and our experiences—but an organizational risk assessment needs much more analysis. It requires internal and external inputs to arrive at the best course of action, not necessarily just one’s FEELING of risk.
Let’s take the example of the community service organization. Leadership relies on one board member—the “money guy”— to provide advice on all things financial because he works in the IT department of a bank.
What this board member doesn’t tell his fellow board members is that a couple years ago he lost a lot of money in an investment deal that he’s still reeling from. As a result, he has serious reservations about any investment the nonprofit considers making. He fights hard to convince the organization to keep a pool of unrestricted funds, meant to pay for new facilities, in a savings account—an investment that will in no way keep up with general price increases.
Well-governed nonprofits take the time to collect the point of view from every board member as well from experts outside the organization. They will also look to educate themselves on the risks and opportunities of the financial situation ahead of them. This allows for collaborative decision making.
So before your organization decides how to address a financial challenge, take a comprehensive assessment of your organization’s financial risks from many sources—inside and out—so you don’t find yourself underwater.
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