In light of the Olive Cooke scandal and a recent court case over legacies Dorothy Dalton reminds trustees that they must always be considering potential risks to their charities, even when they seem unlikely.
Everything we do as individuals and as charities involves an element of risk. Risk is part of life and should be a natural part of a board’s and senior management’s deliberations. Effective risk management needs to be proportionate to the size and complexity of an organisation.
For most boards there needs to be a clear understanding of the nature of the risks that their charity faces or might face. The executive should have some understanding of the board’s risk appetite in the various business areas.
Boards need to consider not just significant risks but also several small risks coming together and the charity’s response to likely (as well as unlikely) scenarios. However unlikely an event can be, it is worth thinking about which possible events can break the charity.
For example who could have forecast that the media backlash following the suicide of Olive Cooke, a retired poppy seller, would result in several forms of fundraising becoming almost unacceptable to the public. Some charities, especially those dependent on telephone fundraising or direct mail, have suffered. Yet others have used it very cleverly to their advantage.
Similarly, a recent surprise ruling by the Court of Appeal awarded a significant share of a mother’s estate to her estranged daughter even though the mother had bequeathed her entire estate to three animal charities. In light of this decision, charities which normally receive significant legacy income could have to spend greater sums on legal fees to defend their inheritance, and could see a drop in this income stream.
Legal advice should be sought by boards on what their charities should do in order to protect their legacy income. For example, when bequests are known, should the charity encourage testators to talk to the family about their wish to give to the charity and should the charity keep records of discussions with the benefactor and the benefactor’s reasons for mentioning the charity in their will?
Boards should think the unthinkable and put in place steps to minimise impact, while not becoming risk-averse.
Risk identification and management is covered in Civil Society Media and Governance magazines' Charity Governance Training Courses. For more information on the courses on offer click here.
