The funder-recipient relationship in the charity sector can present a “structural barrier to genuine risk management”, according to a new report.
This week, Charity Finance Group (CFG) and the Risk Collaborative published a joint report which shows how charities across England and Wales are managing risk in practice.
Rethinking Risk: Recommendations for a CC26 Refresh sets out recommendations for updating the Charity Commission’s risk management guidance published in 2010.
The report says CC26 “hasn’t kept pace with 15 years of significant change in the sector’s size, operating environment, regulatory complexity, or understanding of what effective risk management looks like in practice”.
It comes a year after David Holdsworth, the regulator’s chief executive, announced that his organisation was working with CFG and others on updating CC26.
Funder risk requirements on the rise
CFG and the Risk Collaborative surveyed 309 people representing various charities and held nine roundtable discussions with 46 charity leaders between January and March 2026.
Three-quarters of grant-funded respondents reported that funder risk requirements were increasing.
However, just under half said they had regular and constructive conversations with funders about risk thresholds and approaches (14% among respondents with income over £100m).
“These aren’t small charities intimidated by a power imbalance with a grant-making foundation,” the report says.
“These are large, professional organisations with seasoned negotiating capacity.
“Their silence with funders about risk is structural, with sector norms making it feel inappropriate to raise these issues, even where the capability to do so exists.”
The report gives the example of anti-terrorism screening checks by funders, which can feel “discriminatory against staff and trustees with Arabic or Muslim names”.
It says compliance requirements that cause harm, including to the people within charities, “are a dimension of the funder relationship that current sector guidance doesn’t address”.
“The sector isn’t asking funders to stop taking risks seriously,” it says.
“It’s asking for a different model. One where the risks of a programme are discussed and shared between the funder and the charity as partners, rather than being transferred down the delivery chain as compliance obligations from one party to the other.”
From compliance tool to decision-making aid
According to the report, CC26 has been more influential in producing outputs such as risk registers than improving the quality of decision-making.
Over half of respondents who use a risk register said its role in decision-making is limited, with decisions “made through a separate process that rarely references what’s on the register”.
“Risk register use correlates very strongly with grant-funding status: 75% of grant-funded charities use a register, compared with 35% of non-grant-funded ones,” the report says.
“The simplest explanation is that the register is primarily a funder compliance document rather than an embedded governance tool.
“Charities that need to demonstrate risk management to secure a grant produce a register to do so. Charities that don’t face that requirement do not.
“This isn’t risk management by any meaningful definition; it’s ‘risk theatre’.”
Some respondents said risk registers often provide a tick-box mentality which do not enable meaningful conversations about strategic risk.
Regulator: Managing risks well ‘vital to public trust’
Rachel Wenstone, assistant director of policy at the commission, said: “Charities are showing huge resilience in navigating challenges that have arisen in recent years, alongside the risks that arise from the charitable work they do, often operating in places where others cannot and supporting some of the most vulnerable in our communities.
“Managing these risks well is vital to public trust and confidence in a sector, so we’re grateful to CFG for the insights it’s shared in this report.
“We’ll consider the report carefully as we review our guidance, which we recognise is due for an update and refresh.
“As well as our guidance, to support trustees with their decision-making we’ve published insights on the biggest risks the charity sector is facing.
“Our suite of guidance is an essential resource for every trustee, so we review and update it regularly to help all trustees fulfil their responsibilities.”
