Updated March 28 at 10:39am

Nonprofit summit highlights need for diligence in managing risk

At the PBN Summit on Nonprofit Best Practices, held Wednesday morning at the Crowne Plaza Providence-Warwick, panelists told more than 160 attendees that recognizing vulnerabilities is a key step in managing risk in a nonprofit organization. More

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Nonprofit summit highlights need for diligence in managing risk

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WARWICK – At the PBN Summit on Nonprofit Best Practices, held Wednesday morning at the Crowne Plaza Providence-Warwick, panelists told more than 160 attendees that recognizing vulnerabilities is a key step in managing risk in a nonprofit organization.

“Many nonprofits’ missions lead them into high-risk areas,” said Andrew Spacone, counsel for Adler Pollock & Sheehan P.C., a co-sponsor of the summit with Providence Business News. “Levels vary from nonprofit to nonprofit. Focus on your particular risk and tailor solutions. A major cause is [that] they don’t recognize the problems.”

While nonprofits differ from for-profit businesses because they don’t have shareholders and tend to focus on social missions, that’s where the differences end, Spacone said.

“Think more about running a nonprofit as a business,” he advised, “without sacrificing the mission.”

Panelists at the event offered both general and specific tips for preventing troubling issues like the misappropriation of funds, dealing with cyber threats, and coping with liability. More than 160 representatives of nonprofits and companies in insurance, accounting and other sectors that work regularly with nonprofits attended the summit.

In addition to Spacone, the panel included his company’s managing partner, Robert Brooks; Jill Pfitzenmayer, vice president of the Initiative for Nonprofit Excellence with the Rhode Island Foundation; and Michael Houlden, regional vice president of the Global Claims Relationship Group with AIG in Boston.

In identifying the need for a forum like this one, PBN Editor Mark S. Murphy, who moderated the summit, highlighted some telling statistics. The 6,823 nonprofits registered in Rhode Island represent more than 10 percent of all businesses in the state. Half of those are public charities, he said. They employ more than 18 percent of the state’s labor force, and 64 percent have annual budgets of less than $100,000.

Having a strong, fully engaged board of directors that recognizes the importance of risk management is critical in a world where, according to the nonprofit-sector publication Chronicle of Philanthropy, nonprofits lose 13 percent of their donations through misappropriations of funds, Spacone said. That percentage is likely even higher due to undetected and under-reported incidences, he added.

Pfitzenmayer noted that a board that is either too social or too formal in conducting its meetings might miss the opportunity to “ask the tough questions” in managing restricted and unrestricted funds, for instance.

Nonprofit boards that take professional development seriously, conduct annual performance reviews and create approaches to succession planning not only of staff but also of board members, even including term limits, will function in a healthier way than boards that don’t do these things, she said.

Take-aways offered prior to a question-and-answer period included:

  • Houlden: Think about procedures and protocols for risk management, and make sure you have insurance adequate to cover risks you may be exposed to.

  • Spacone: Regularly review gaps and deficiencies and take prudent, cost-effective measures to reduce risk.

  • Pfitzenmayer: Be willing to fail but learn quickly from that failure.

  • Brooks: Invest in education and training for staff and from a legal standpoint.

Best Practices for Nonprofits,

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