Businesses and nonprofits have a lot of the same risks in common, but there are some areas of exposure that nonprofits need to cover that a for-profit business would not need to address. Because of these liabilities, the advisors at VIS recommend a comprehensive insurance policy, but they also advise on forming a strategy that deals with risk management for nonprofits.
Areas of Concern
In order to establish a risk management strategy, an accurate and detailed understanding of the existing and potential risks needs to be established. These risks include the following:
- Fundraising fraud. People might take your logo or brand and create a fraudulent event where they keep the proceeds for themselves. Such actions can ruin your donor’s trust and create a need for your out-of-pocket replacement of funds.
- Whether it comes from clients, employees, or vendors, the threat of theft is very real. Any size company that experiences such a loss can be severely crippled financially.
- Regulatory Compliance. There are many regulations set forth by the IRS that help a nonprofit maintain its tax exemption. Proper documentation and a demonstration that funds are being used properly are necessary to avoid paying steep fines and other legal consequences.
These three areas are common liability concerns for the nonprofit sector. Combining a strong risk management approach and insurance protection policy are the best ways to avoid any negative impact on your company.