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Don't be afraid of taking risks, urges Hickey

Finance | Vibeka Mair | 30 Sep 2008

Charities should improve their risk management to enable them to take more risks, according to Charity Finance Directors’ Group (CFDG) chief executive Keith Hickey.

Speaking at the launch of the seventh joint CFDG/PKF annual risk management survey, Hickey (pictured) said: “This year’s survey showed us that many charities have a low or moderate appetite for risk, only 10 per cent consider that their appetite is high.

“Although the areas where charities feel most comfortable taking risks are in respect of taking on new initiatives, in the current economic climate where funding and support will be harder to come by, such comfort zones need to be addressed.

“Charities need to strengthen their risk management so that more risk can be taken without increasing real exposure.”

Working with government the riskiest business

The survey found that risk exposure exceeded risk appetite for 75 per cent of charities. For 45 per cent this was on an ongoing basis. Charities found it hardest to manage risk related to government, particularly changes in government or local government policy, action of overseas governments and reductions in contract income.

“Working with government agencies is uncomfortable and brings uncertainty for most charities,” warned Hickey. “It also impacts the ability of charities to take a strategic approach which can affect the delivery of services.”

Hickey added that the credit crunch would drive a greater demand for services, but government funds would be under pressure. “Charities must respond and reassess risk,” he urged. “We must now raise our heads above the parapets and campaign for the beneficiaries we support. This will mean taking a balanced approach to risk.”

An issue for the chief executive

Although the appetite for risk was low, the survey found risk governance had developed considerably. Survey author Richard Weighell from PKF said risk management had moved on from being seen as an accounting issue for the finance director to a key responsibility for a chief executive.

“The recognition that it’s not just financial is positive,” he said. “Around 40 per cent of chief executives are now recognised as the lead person on risk management, with 18 per cent recognising another director as having this role.”

The survey also found that 80 per cent of respondents felt that the risk appetite was similar for both trustees and managers in most areas. Around half of charities have a committee dedicated to risk management procedures, internal control and governance issues.

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