News

Risk guide launched for charities going through structural changes

Finance | Jonathan Last | 23 May 2012

Charity insurance specialist Ecclesiastical has published a risk guide for charities which are undertaking structural changes or changing business models, such as those collaborating or merging.

Launched at last week’s annual CFG conference, When charity business models change, your exposure to risk does too – make sure you adapt cites NCVO research into how many charities have been affected by the economic downturn (38 per cent in September 2008 up to 59 per cent in February 2010) in direct proportion to a reduction in the government’s spending in the sector.

But Ecclesiastical further states that fewer charities are saying they will have to cease operating than did in 2010, and that organisations are instead “embracing new opportunities”. The guide is designed to aid such charities through the potential perils of their new strategies.

As well as statistics and advice, the guide provides case studies of organisations that have merged or collaborated, as well as advice on becoming a social enterprise or community interest company (CIC) and a look at the changing landscape of public service delivery that has been brought on by a more contract-orientated funding landscape in the sector.

Things to consider

The guide highlights the key things to consider in a collaborative measure so that charities can reap the benefits of such an arrangement and minimise the commercial risks.

Ecclesiastical recommends that charities look to draw up legal arrangements or contracts early on, with trustees fully aware of their duty of care responsibilities. Common risks include a lack of clarity on who exactly is insured and under what terms of cover; failing to keep adequate records; and a lack of clarity on whether liability is shared or individual.

Significant insurance implications

Of the guide, Martyn Turner, charity and community underwriting manager at Ecclesiastical, said: “There is already useful guidance available for charities from the Charity Commission, CFG, NCVO and KnowHow NonProfit. Yet little, if anything, currently exists that explores the insurance implications – which can be significant.

“This report examines the changing shape of the charity business model and highlights some of the practical ways that charities and not-for-profit organisations can successfully adapt and minimise their risks.”

The guide is available in its entirety on the Ecclesiastical website here.

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Who's Who: Martyn Turner