NPO Insurance and Risk Management and Assessment

Most for-profit companies should conduct a comprehensive risk assessment as a critical part of their overall risk management process. The fact remains, however, that many non-profit organizations (NPO) do not take the time to perform a risk assessment for a variety of reasons, none of which is particularly feasible, given the downside of not having one in place.


For some it is a matter of not understanding or appreciating the benefits of such an exercise. In some instances, they believe they adequately understand their risk profile, while some others may feel they lack the resources to adequately perform the job. This illustrates the need for all not for profit companies to carry NPO insurance.


Taking steps to mitigate and control the risks


Because of the many exposures that they may face, non-profit organizations need to introduce risk assessment as a way of mitigating, and perhaps eliminating some risks altogether. The goals of a sound risk assessment program is to identify the nature of the broad array of risks facing many non-profits, and suggest a viable approach to finding some solutions to help allay those fears and concerns.


The role of the board of executives in understanding, evaluating, and assessing risk is essential to its success. It is the executive leadership that must set the appropriate tone, understand the dynamics of risk for any given organization, and come up with a clear philosophy on the organization’s approach to risk.


Goals of risk assessment


Nonprofit organizations face different types of risks than for-profit companies, but the goals of risk assessment should be similar and include the following:


  • To identify, analyze and prioritize legal/ethical misconduct and compliance risks specific to the operations and culture of the organization


  • To provide a basis for training and ethics programs, and for possible compliance


  • To develop risk mitigation and monitoring strategies


  • To identify areas where deeper internal reviews would be warranted


  • To develop a benchmark for ongoing risk assessment and measurement of the effectiveness of mitigation steps that have to be taken


Who is best suited to undertake risk assessment?


There is value to having an outside element involved in alleviating risk. This assures a fresh perspective is brought to risk evaluation and allows everyone in the organization to be evaluated without any potential for the self-interest of staff to color the assessment. NPO insurance is a vital component of any good risk management program.

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