Managing Your Nonprofit for Resilience E-Book

Ted Bilich

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 250

Veröffentlichungsjahr: 2022

Beschreibung

A hands-on risk management playbook for nonprofit leaders, funders, and advisors In Managing Your Nonprofit for Resilience: Use Lean Risk Management to Improve Performance and Increase Engagement, experienced nonprofit risk management expert Ted Bilich delivers a comprehensive and engaging exploration of how to keep your nonprofit vibrant, proactive, and out of trouble. In the book, you'll learn how the world's best charitable organizations employ lean risk management to prioritize, mitigate, and eliminate the most significant risks facing nonprofits today. The author teaches you how to develop a risk management cycle and work with risks at the board level, implementing lean risk management tactics incrementally. You'll also discover: * Discussions of fundamental risk management elements * Sample compliance checklists, example questions to ask during risk inventories, and common challenges faced by nonprofits in a wide variety of sectors * Strategies for confronting nascent risk and issues with radical candor and taking reasonable steps to address them before they spiral out of control An engaging and essential resource for the managers and directors of nonprofits of all sizes, Managing Your Nonprofit for Resilience belongs on the bookshelves of anyone tasked with shepherding a charitable organization through an increasingly challenging and volatile environment.

Leseprobe

Table of Contents

Cover

Praise for Managing Your Nonprofit for Resilience

Title Page

Copyright

Dedication

Preface

Acknowledgments

Introduction

1 You and Your Nonprofit Deserve Risk Management

Read the Book Straight Through

Nonprofits Are Vulnerable

Heeding Experts, Nonprofits Are Beginning to Explore Risk Management

Nonprofit Risk Management Standards Are Tightening Because of Increased Social Distrust

New Technologies Mean New Threats—Especially for Nonprofits

The Hidden Jobs of Nonprofit Leadership Drive Leaders to Distraction

This Book Provides Relief—and a Way Forward

Insight and Exploration

Notes

2 Learn the Language of Lean Risk Management

Risk Involves Threats and Opportunities

Risk Management Involves Commitment, Process, Information, and Action

Comparisons and Contrasts Help Clarify Risk Management

Three Powerful Tools Drive Risk Management: The Inventory, Register, and Cycle

Now Add Lean to Risk Management

Insight and Exploration

Notes

PART I: Identify

3 Perform a Risk Inventory

You Cannot Figure Out How or Where to Go Until You Know Where You Are Now

A Risk Inventory Is a Simple Orienteering Tool—Here's Your Rule Book

Insight and Exploration

Notes

PART II: Prioritize

4 Prioritize Your Risks

Prioritization Is a Dialectic

Use a Simple Method of Prioritization with Your Team

The Leader's Supplemental Prioritization Rubric Provides Additional Input

Do Not Use Complex Risk Priority Calculations When Starting Out

Insight and Exploration

Notes

5 Create Your Risk Register

The Risk Register Is the Key Tool of Lean Risk Management

Build Your First Risk Register

FAQs About Your Risk Register

Insight and Exploration

Note

PART III: Respond

6 Respond to Your Risks

Insight and Exploration

Notes

PART IV: Assess and Improve

7 Develop a Risk Management Cycle

Review Your Risk Register Regularly

Develop a Cadence for Risk Management Discussions

Use the Risk Register as the Basis for Meetings About Risk Management

Make a Copy of the Risk Register at Least Once a Month

Use “No‐Vote” Risks as the Basis for Functional Work Sessions

Add New Risks as They Arise

Reprioritize Existing Risks as Circumstances Change

Hold Champions Accountable

Add Additional Perspectives

Name, Claim, Record, and Celebrate Value

Emphasize WIIFT with Your Team

Develop Support Networks

Insight and Exploration

8 Work with Risks at the Board Level

The Board Should Ensure That Staff Is Performing Its Critical Risk Management Work

The Board Should Weigh In on the Most Important Risks Facing the Organization

The Board Should Set the Tone at the Top of the Organization

Insight and Exploration

Notes

9 Implement Lean Risk Management Incrementally

Dip a Toe in the Water

Take the Plunge

Learn to Swim

Do Your Laps

Insight and Exploration

Conclusion

APPENDIX 1: 50 Reasons Why It Is Hard to Run a Nonprofit

Money Worries

Technology Concerns

Staffing and Motivation Challenges

Board Issues

Volunteer Challenges

Challenges Related to Service Populations

Competition

Political Worries

Compliance Issues

“Market” Failures

Planning and Visioning Issues

Notes

APPENDIX 2: Questions to Use During Risk Inventories

Operations

Information Technology

Finance

Talent Management

Reputation Management

Sales of Goods and Services

Sales to Donors (Development)

Risk Management

Compliance

Planning and Visioning

Governance

Diversity, Equity, and Inclusion

Questions for External Context

APPENDIX 3: Nonprofit Risk Management Policy Templates

Example 1

Example 2

APPENDIX 4: Fundamental Risk Management Elements (FRaMEs)

Official Documents and Policies

Core Procedural Documents

Core Planning Documents

Core Metrics

Smooth Sailing Documents

Feedback Mechanisms and Records

IT Safeguards

Insurance

APPENDIX 5: A Simple Compliance Checklist

Definition of Nonprofit Compliance

Nonprofit Compliance Checklist

What Should You Do Now?

Notes

Sources and Methodology

Books on Risk and Risk Management

Books on Lean Management

Books on Systems Thinking

Books on Design Thinking

Other Cited Materials

About the Author

Index

End User License Agreement

List of Illustrations

Chapter 2

Figure 2.1 Core Vocabulary

Figure 2.2 The Risk Cycle

Chapter 3

Figure 3.1 Functional Areas of a Nonprofit

Chapter 4

Figure 4.1 The Risk Dialectic

Chapter 6

Figure 6.1 What Can You Do to a Risk?

Figure 6.2 How to Address Risks

Figure 6.3 Mitigation Objectives

Figure 6.4 How Do You Mitigate a Risk?

Chapter 7

Figure 7.1 Risk Management Cycle

Guide

Cover

Table of Contents

Praise for Managing Your Nonprofit for Resilience

Title Page

Copyright

Dedication

Preface

Acknowledgments

Begin Reading

Conclusion

APPENDIX 1 50 Reasons Why It Is Hard to Run a Nonprofit

APPENDIX 2 Questions to Use During Risk Inventories

APPENDIX 3 Nonprofit Risk Management Policy Templates

APPENDIX 4 Fundamental Risk Management Elements (FRaMEs)

APPENDIX 5 A Simple Compliance Checklist

Sources and Methodology

About the Author

Index

End User License Agreement

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Praise for Managing Your Nonprofit for Resilience

“Running a nonprofit can be exhilarating, messy, and sometimes overwhelming. This well‐researched book demystifies the practice of lean risk management. The clear approach allows you to gain an understanding of how simple risk management techniques will move you and your team from reactive to proactive, worried to confident, and make your strategic plan achievable. You and your team can use the provided templates and idea cues to identify the threats and opportunities your nonprofit faces in every functional area of your nonprofit. Ted Bilich makes a compelling case that managing risks acts as an accelerant to achieving your strategic plan.”

—Linda Lenrow Lopez, Enterprise Risk Management Principal, Wikimedia Foundation

“Ted hits the mark of 21st century “duty of care” thinking for nonprofit leaders! This dynamic, holistic approach for nonprofits embracing risk through a careful process, a path, a journey with calculating milestones is practical, engaging and sustainable.”

—Peter A. Persuitti, Global Managing Director, Nonprofit, AIG Insurance

“Ted Bilich has written the ultimate guide for nonprofits to build their resilience and bounce back from difficult situations and embrace new opportunities, something the nonprofit sector desperately needs at this moment. A must‐read for every nonprofit leader.”

—Beth Kanter, Author, Facilitator, and Trainer

“Ted's book is a must‐read for any nonprofit executive or board member, whether veteran or newbie. In uncommonly plain English, Ted dismantles key risk management concepts and makes them accessible and practicable. This primer provides inspiration to those caught in “analysis paralysis” or who've considered enterprise‐wide risk management too daunting a prospect for resource‐challenged persons or organizations. Commercial insurers will love applicants that embrace Ted's methods.”

—Scott R. Konrad, North American Nonprofit Practice Leader, HUB International Limited

“Great pragmatic resource for nonprofit professionals, board members, donors, and volunteers. Applicable to organizations at any stage of their evolution, from newly formed to well established. We all deserve to be able to identify and know how to effectively address our “heffenwoofers”.”

—Dr. Jan Young, Executive Director, Assisi Foundation of Memphis, Inc.

“Tackling risk management is critical to the success of nonprofits. Ted's book provides a road map for this effort, and more importantly provides readers with confidence that they will succeed at anticipating, mitigating, and managing risk.”

—Jenny Palazio, Senior Director of a Global Nonprofit

“In today's changing world, running a nonprofit is harder than ever. For a strategy to be effective, it needs to be adaptive, which means leaders need to identify, assess, and respond to risks. Ted offers a useful, accessible framework for doing so allowing any size nonprofit to build resilience and thrive.”

—Steve Zimmerman, Principal, Spectrum Nonprofit Services

“The pressure for nonprofits to be resilient is perhaps greater now than ever. How fortunate for the nonprofit sector to have this book, a gift to nonprofit leaders and future leaders alike brimming with practical advice and helpful tools.”

—Amy Coates Madsen, Vice President of Programs, Maryland Nonprofits, and Director of the Standards for Excellence Institute

TED BILICH

MANAGING YOUR NONPROFIT FOR RESILIENCE

USE LEAN RISK MANAGEMENT TO IMPROVE PERFORMANCE AND INCREASE EMPLOYEE ENGAGEMENT

Copyright © 2023 by Ted Bilich. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Further, readers should be aware that websites listed in this work may have changed or disappeared between when this work was written and when it is read. Neither the publisher nor authors shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Library of Congress Cataloging‐in‐Publication Data:

Names: Bilich, Ted, author.

Title: Managing your nonprofit for resilience : use lean risk management to improve performance and increase employee engagement / Ted Bilich.

Description: Hoboken, New Jersey : John Wiley & Sons, Inc., [2023] | Includes bibliographical references and index.

Identifiers: LCCN 2022032945 (print) | LCCN 2022032946 (ebook) | ISBN 9781394153824 (cloth) | ISBN 9781394153848 (adobe pdf) | ISBN 9781394153831 (epub)

Subjects: LCSH: Nonprofit organizations—Management. | Risk management.

Classification: LCC HD62.6 .B566 2023 (print) | LCC HD62.6 (ebook) | DDC 658/.048—dc23/eng/20220826

LC record available at https://lccn.loc.gov/2022032945

LC ebook record available at https://lccn.loc.gov/2022032946

Cover Design: Wiley

Cover Image: © Retouch man/Shutterstock

To Jennifer, my love and my best friend. With Coqui, we make a great pack.

Preface

WHAT IF NONPROFITS could avoid crises and devote more resources to the causes they want to advance?

What if instead of being merely reactive, nonprofits could be proactive—confronting issues with radical candor, then taking reasonable steps to address their most important challenges?

What if nonprofits could create virtuous cycles of action, leading team members to think like owners and strive for continuous improvement?

What if, instead of being fragile (susceptible to reversals) or merely robust (strong, but unyielding), nonprofits could actually become resilient: able to bounce back from challenges and spring forward to create and take advantage of opportunities?

I have spent decades exploring these questions. I have trained hundreds of nonprofits and gathered data every step of the way. This book is the result of those efforts.

Acknowledgments

THIS BOOK WOULD not have happened without the support and encouragement of Linda Lenrow Lopez. She has been a thought partner on these concepts and, just as important, one of my dearest friends. Risk Alternatives may have lost her to the Wikimedia Foundation, but the world is a better place for her being the risk management principal at that critical bastion defending the accumulation and sharing of information.

In addition to Linda, I want to thank everyone who reviewed and commented on earlier drafts of this work, especially Jennifer Adams, Amy Coates Madsen, Jan Young, Jenny Palazio, and John Ottenhoff. Scott Schaefer, Greg Wolfson, Michael Brown, and Miriam Cleeman were instrumental in helping me choose the right way to package these concepts in evocative ways. Thanks, as well, to Heather Angel and Laura Hurt, who do so much to keep Risk Alternatives running at peak performance. At Wiley, thanks to Brian Neill, Debbie Schindlar, and Susan Geraghty, who have made production of this book a fun experience.

I also want to thank the hundreds of nonprofits who contributed data to our survey database, participated in our workshops and webinars, and permitted us to serve them as advisors. I want to thank all the members of Nonprofits Build Strength Together (BeST). I stand in awe of the work you do every day. I want to thank the scores of funders who have supported our work in communities around the United States. Finally, special thanks to Fred Brown, Hannah Karolak, and Emma Yourd from The Forbes Funds; Kevin Dean, Andrea Hill, and Annie Schmitz from Momentum Nonprofit Partners; Amy Coates Madsen and Kate Hull from Maryland Nonprofits; and Keith Timko and Xander Subashi from The Support Center for Nonprofit Management. You have been thought partners in helping to develop resources that make nonprofits better. Together we can make the nonprofit sector so much stronger.

Introduction

THIS BOOK AIMS to help nonprofits not only survive but also thrive. The aim is not just to avoid fragility, where uncertainty can shake a nonprofit to its core. It is not even mere robustness, where the nonprofit can survive shocks because it is cautious, solid, and stable.

This book instead aims to build nonprofit resilience—an ability to bounce back from setbacks and spring forward toward opportunities. To that end, this book provides nonprofits with a blueprint for creating an early warning system to help a team see downside and upside risks and take reasonable steps to address them.

1You and Your Nonprofit Deserve Risk Management

Nonprofits play a vital role in communities around the world.

In the developing world, nonprofits often serve as the only barrier between life and death. Even in highly developed economies, however, nonprofits provide enormous impact. In the United States, for instance, nonprofits provide nearly 6 percent of the gross domestic product. They provide just under one out of every ten US jobs, and they comprise half the nation's hospitals, almost half the institutions of higher education, close to 80 percent of vocational rehabilitation facilities, and approximately 80 percent of daycares. Furthermore, they account for almost all operas and orchestras, one out of every five nursing homes, and about one third of private clinics and home health care facilities.1

Impressive as those figures are, they understate the importance of nonprofits in our communities. Nonprofits often provide essential goods and services for those who are most vulnerable. They address the needs of those who, because of age, health, socioeconomic status, or power dynamics, cannot operate effectively on their own in our economy. If the US economy is an engine, nonprofits are its vital lubricant. Nonprofits reduce friction, helping the otherwise sharp edges of society function more safely, productively, and humanely.

Nonprofits strive for sustainability, growth, and responsiveness to meet their important roles in society. But the harsh truth is that running a nonprofit is hard and getting harder. When addressing most risks, many nonprofit leaders have a limited and linear thought process:

Risk is bad.

I should avoid risk when I can.

I should insure against the risks I can't avoid.

I should worry about all the rest.

This book aims to help. The framework for improvement set out in this book is based on effective risk management—a structured process for identifying and dealing with risks before threats become crises and opportunities pass the organization by. By implementing this methodology, nonprofits can increase clarity and peace of mind and find untapped sources of value.

You should read this book if you are a nonprofit leader or team member, a student, a nonprofit funder, or a nonprofit advisor

This book is written principally for nonprofit leaders. When you see this book refer to you, this book is speaking directly to you. You are being held to increasingly unpredictable standards of care, and you need to understand how to use risk management principles to protect and advance your operations and meet your mission.

This book is also aimed at students learning about nonprofit practice. Nonprofit risk management has long been overlooked in undergraduate and advanced degree programs. This book helps fill that void.

The book is also for funders. When funders place their resources in the hands of a nonprofit, they need to be confident that their investment is sound. A nonprofit without effective risk management is flying blind. Funders have no assurance that nonprofits without effective risk management understand their true capabilities or will perform effectively with donated resources. This is not to say funders know better than nonprofits about what nonprofits should be doing. Instead, funders should understand the language and value proposition of risk management so that they can explore and support this capacity with the grantees they fund.

Finally, this book is written for nonprofit advisors. Attorneys, accountants, and bankers need to be aware of whether their clients are protecting themselves from emerging threats and preparing themselves to seize on potential opportunities. Consultants providing organizational development, leadership training, strategic planning services, or other advice need to consider how those efforts interact with the risk management function. Advisors and consultants can achieve substantial synergies by becoming more aware of what risk management is, why it is important, how it improves operations, and how it is implemented effectively.

Read the Book Straight Through

This book is designed to be read from start to finish—at least the first time. The Contents recommends a step‐by‐step approach, and that approach is most effective for nonprofits who are interested in resilience and sustainability. (In fact, the chapter titles and subheadings of this book are designed to tell a story about your success.)

The book begins by explaining why risk management is important (this chapter) and identifying core vocabulary (Chapter 2). It then describes how you can perform a risk inventory to identify threats and opportunities throughout your nonprofit (Chapter 3). The book then explains how to prioritize your risks (Chapter 4) and develop your first risk register—the prioritized punch list of the most important issues facing your organization (Chapter 5). Chapter 6 then notes the basic ways you can respond to a risk (a much broader repertoire than merely avoiding, insuring, and worrying). The book then explains how to expand your resilience efforts by developing a risk cycle (Chapter 7), getting your board involved (Chapter 8), and building out a powerful process over time (Chapter 9).

At the conclusion of each chapter, you will find an “Insight and Exploration” section. These optional materials can help you reflect on what you read, apply it to your own experience, and find resources that would provide further practical guidance.

In addition to the text, the book provides several useful appendixes. Appendix 1 helps you persuade skeptics that nonprofits need risk management by noting many of the challenges that nonprofits face. Appendix 2 provides hundreds of questions you and your team can use to uncover risks in each functional area of your nonprofit and the context in which it operates. Appendix 3 sets out two examples of risk management policies that you can use as templates. Appendix 4 supplies a list of policies and processes that support risk management efforts. And Appendix 5 provides a simple compliance checklist that you can use when evaluating that function.

Finally, this book includes an extensive bibliography. The intent is to provide you with the source materials that shaped this book and additional materials that may guide your resilience journey.

Nonprofits Are Vulnerable

Even in the best of times, the nonprofit business model is extremely challenging. Imagine this story. A friend of yours comes to you with a business proposition. She says she wants you to invest your retirement money in her new business. It will have a few notable characteristics:

To perform some of its basic services (including much of its marketing and customer service), the business will often rely on volunteers.

The business will be criticized if it ever consistently makes more money than it spends annually.

No matter how effective its operations may be, many people will judge the business based on how much overhead it has—in other words, how much money it spends on its people and other assets rather than directly providing services.

The business will have no access to capital markets. It will be unable to sell stock to fund long‐term initiatives. Instead, it will have to rely on government grants and the kindness of strangers to provide donations to make ends meet.

If it sells products or services, it will sell them at below‐market rates.

The business will hire at below‐market rates and put its employees in challenging circumstances, where they deal with customers who may be under substantial stress or hardship.

No one would invest their retirement savings in this kind of a business. But this book just described the average social services nonprofit in the United States. You might object that this is a caricature, but most nonprofits have at least some of those characteristics, any one of which creates imminent peril and unique challenges.

In fact, the nonprofit business model is so ridiculously challenging that an early draft of this chapter used 25 pages describing 50 different reasons why it is tough to run a nonprofit. Early readers loved the material but were overwhelmed by the reality of these frustrations. They knew the model is demanding, and so do you. In a compromise with your sanity, this book moves those reasons to Appendix 1. If anybody ever doubts that nonprofits need to focus on resilience and sustainability, refer them to that appendix.

In short, nonprofits have a wacky business model. Pandemics, political and social unrest, racial reckoning, and a host of other issues only compound the difficulties.

Heeding Experts, Nonprofits Are Beginning to Explore Risk Management

Nonprofit risk management is a consensus best practice. One leading nonprofit support organization, Independent Sector, speaks of a nonprofit board's obligation “to review regularly the [nonprofit's] need for general liability and directors' and officers' liability insurance, as well as take other actions necessary to mitigate risks.”2 The notes accompanying this standard are even more explicit: “board members of a charitable organization are responsible for understanding the major risks to which the organization is exposed, reviewing those risks on a periodic basis, and ensuring that systems have been established to manage them.”3

Other authorities agree. The Standards for Excellence Institute, whose benchmarks have been adopted for use in many states and national organizations, similarly states that “organizations should make every effort to manage risk and periodically assess the need for insurance coverage in light of the organization's activities and its financial capacity.”4The Principles & Practices for Nonprofit Excellence (originally adopted by the Minnesota Council of Nonprofits and since by many other states) echo that “nonprofits should periodically assess their risks, take appropriate actions to minimize those risks and purchase appropriate levels of insurance to wisely manage their liabilities.”5

The District of Columbia Bar advises that “every nonprofit organization needs to create a risk management plan and review it annually.”6 And the Human Services Council of New York states that nonprofit “boards, in conjunction with staff, must be engaged in risk assessment and implement financial and programmatic reporting systems that enable them to better predict, quantify, understand, and respond appropriately to financial, operational, and administrative risks.”7

Most nonprofits have gotten the message to one extent or another. Risk Alternatives LLC has asked hundreds of nonprofits the following survey question: “Is risk management a regular topic of conversation at your staff meetings?” Here are the responses:

18% respond “Yes, we raise and address risk management issues specifically and regularly.”

32% respond “We don't have a formal process but raising and discussing risks is a normal part of our staff meeting agendas.”

34% respond “Sometimes. We discuss risks when we see them.”

14% respond “Rarely. We tend to focus on the immediate needs of our service population(s).”

Finally,

3% respond “Never. We do not discuss risks.”

8

These responses show that most nonprofits are beginning to heed the call to implement risk management into their operations. Those that do not are increasingly out of step with their peers.

Nonprofit Risk Management Standards Are Tightening Because of Increased Social Distrust

Larger organizations in the private sector have adopted risk management on the heels of 20 years of financial gyrations and allegations of corporate mismanagement. The Basel II accords, adopted by the Basel Committee on Banking Supervision in 2001, provided banks with specific guidance about operational risk practices, supervision of those practices, and necessary disclosures about risk.9 In 2004, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released the EnterpriseRisk Management—Integrated Framework, which provided a thorough framework for helping corporate management understand and apply risk management principles.10 In 2009, the International Organization for Standardization adopted ISO 31000, another framework for dealing with risk management.11 In 2010, the US Securities Exchange Commission adopted regulations requiring disclosures by publicly traded companies about risk management.12

This push for risk management and compliance in the private sector stems from worries about accountability and management of “other people's money.” Corporations use shareholder proceeds to do things that they could not do without such investments. As a result, regulators reasoned, corporations need to take precautions about what they do with that money and need to provide transparency about those efforts.

Nonprofits also use “other people's money.” Nonprofits persuade donors to provide resources that can be funneled toward people or causes in need of attention. Unsurprisingly, they too have faced greater scrutiny in the wake of scandal:

In March 2016, the Wounded Warrior Project fired its CEO and COO after news reports alleged wasteful spending.

13

In January 2016, Goodwill Industries of Toronto declared bankruptcy after facing an “acute cash crunch,” leading its CEO and board of directors to “resign … en masse.”

14

In late 2014, the largest social services agency in New York, the Federation Employment and Guidance Service (FEGS), failed suddenly, leading to substantial public soul‐searching by regulators and observers.

15

In January 2020, New York City filed suit against Childrens Community Services alleging a “massive fraud” in the provision of homeless services.

16

The threat to nonprofits is real. In a 2015 survey, the second highest concentration of employee thefts occurred in the nonprofit sector (trailing only the financial sector).17 According to an investigative report published in the Washington Post