Manage Risk and Enhance Performance in the 3rd Sector (Not-For-Profit)

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					                                                                                          MA NA GE ME NT & A CCOUNT ING




                   Manage Risk & Enhance
                   Performance in the 3rd Sector
                                                              Patrick Ow

    Every organisation exists to get results. This includes private, public and third sector
     organisations like non-governmental organisations (NGOs), non-profits, charities,
religious groups and voluntary organisations. Enhancing performance through systematic
  risk management processes especially within the third sector is often a challenge, which
   differs significantly from private sector risk management techniques due to the sector’s
                       lack of resources and risk management expertise.



I
         t was only until recently that the fol-   poses. They are active in a wide range of       hood education, healthcare, politics, reli-
         low-on from the risk management           areas, including the environment, humani-       gion, research and sports. It is therefore a
         hype in the private sector has im -       tarian aid, animal protection, education, the   c h alle ng e for us to obje c tive ly or ad -
         pac te d pu b lic and th ird s e c to r   arts, social issues, charities, early child-    equately measure an organisation’s long-
organisations. As we fully understand and                                                          term impact within the sector.
appreciate that performance management                                                                  To put things into perspective, third
and risk management complement each                                                                        sector organisations do play an im -
other, coupled with pressures on                                                                                por tant par t in any econom y.
third sector organisations to be                                                                                   Australia estimated in 2005
more transparent and effective                                                                                        that the giving of money,
in the utilisation of its fund-                                                                                           goods and ser vices to
ing, we can see an increase                                                                                                n o n - p r o f i t
in how we can objectively                                                                                                   o rg an is atio ns      by
m e as u r e th e pe r fo r -                                                                                                ind ivid u als       and
mance and long-term im -                                                                                                       b u s ine s s e s to tal
pac t o f th ir d s e c to r                                                                                                   AUD11.0billion per
organisations, holding                                                                                                         ye ar, wh ic h e x -
the m re s pons ible and                                                                                                       cludes giving in re-
accountable for their ac-                                                                                                      sponse to the Asian
tions (or inactions) and                                                                                                      tsunami crisis in late
with h old ing fund ing if                                                                                                    2004/early 2005. In
goals are not met, taking                                                                                                    th e US, th e r e are
them elsewhere to m ore                                                                                                    88,509 private founda-
e f fe c tive and e f fic ie n t                                                                                         tions with a total giving
organisations.                                                                                                         o f USD 27.6 b illio n in
    Third sector organisations ex -                                                                                  2000, wh ils t in th e UK,
ist with the primar y objective of                                                                               th e re are appro x im ate ly
supporting or actively engaging in ac-                                                                        10,900 private trusts with an an-
tivities of public or private interest without                                                          nual giving of approximately £2.0 bil-
any commercial or monetar y profit pur-                                                            lion.


September 2008 • ACCOUNTANTS TODAY                                                                                                                 31
Manage Risk & Enhance Performance in the 3rd Sector


Tactical Risk Elements — Third Sector Organisations
 Risk Element          Constituents                                                         Description
 Risk to Reputation,   International/L ocal Standing                                        International and local perception and standing with key
 Goodwill and          Donors; partners; beneficiaries; local and international             stakeholders drive funding and reputation.
 Branding              NGOs; governments.
                       Support In-Country                                                   Extend of support, either financial or non-financial, given
                       Public; partners; communities; governments; interest                 b y vario u s s tak e h o ld e rs fo r th e d e live r y o f th e
                       groups e.g. other NGOs/INGOs, etc.; private sector.                  programmes or activities.
                       Integrity                                                            Transparency and accountability are key areas of concern
                       Transparency; accountability; public relations; brand/               by stakeholders within the third sector, especially in the
                       marketing guidelines.                                                wake of private sector organisational scandals and collapses.

 Risk to Effective     Strategic Alignment                                                  Large number of organisations do not implement their
 and Sustainable       Programming, targeting, design; policy development,                  strategi
				
DOCUMENT INFO
Description: Every organisation exists to get results. This includes private, public and third sector organisations like non-governmental organisations (NGOs), non-profits, charities, religious groups and voluntary organisations. Enhancing performance through systematic risk management processes especially within the third sector is often a challenge, which differs significantly from private sector risk management techniques due to the sector’s lack of resources and risk management expertise.
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PARTNER Patrick Ow