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Topic 2: Identifying Key Risks to Financial Sustainability

Individuals seeking to effect meaningful change in their communities and beyond must understand the complexities of running a small or medium-sized non-governmental organisation. In this section, we will look at the wide range of key risks that most NGOs face, including financial planning and management, external collaboration, technological advancements, legal compliance, environmental sustainability, and social impact assessments.

These key risks all have an impact on your NGO’s stability and sustainability. By exploring these critical areas, you will gain valuable insights into the multifaceted nature of NGO operations and equip yourself with the knowledge and skills required to overcome obstacles and increase your impact in future endeavors.

Risks you can control

Risks that you can control are risks that your organisation can manage and mitigate effectively. By identifying and addressing these controllable risks, you can enhance your NGOs resilience, stability, and long-term sustainability. 

Let’s explore some examples of risks that your NGO can control by looking at the graphic below.

Identifying and addressing risks under your NGO’s control is critical to ensuring its stability and sustainability. NGOs can mitigate potential threats while also seizing opportunities for growth and impact by proactively managing factors such as financial planning, internal processes, stakeholder relationships, and operational efficiency.

By implementing strong risk management practices and cultivating a culture of continuous improvement, your organisation can face challenges with confidence and resilience, ultimately maximising its potential to achieve its mission and make a positive difference in the world.

Risks you can manage

The term “risks you can manage” refers to those risks over which organisations have control and can actively manage or mitigate through proactive measures. Internal processes, operational procedures, financial management practices, human resource policies, and stakeholder relationships are common examples of such risks. 

External risks are influenced by factors beyond the organisation’s control, whereas manageable risks are within the organisation’s sphere of influence.

By identifying, assessing, and addressing these risks, organisations can reduce potential threats to their stability, sustainability, and effectiveness, thereby improving their ability to achieve their mission and objectives. 

Let’s look at some examples of risks that your NGO can manage by looking at the graphic below.

Additional Risks Arising from Partnerships

Partnerships are essential in the ever-changing landscape of nonprofit operations for advancing organisational missions and increasing impact. However, while collaborations have numerous advantages, they also introduce new risks that organisations must effectively mitigate.

Additional risks associated with partnerships illuminates the potential challenges and vulnerabilities that can arise when participating in collaborative ventures. Partnerships present a distinct set of challenges that necessitate careful attention and proactive management, ranging from governance and decision-making concerns to financial accountability and reputational risk.

The risks don’t end there, take a look at additional risks below.

Additional Risks

Technological Risks

  • Cybersecurity threats, such as data breaches or malware attacks, compromising sensitive information or disrupting operations.
  • Inadequate investment in technology infrastructure or digital literacy, limiting the effectiveness of online fundraising efforts or program delivery.
  • Dependence on outdated or incompatible software systems, hindering efficiency and integration with external stakeholders or donors.

Environmental Risks

  • Impact of climate change on project sites or communities served by the NGO, requiring adaptation measures or changes in program approaches.
  • Environmental degradation or resource depletion affecting the sustainability of projects focused on natural resource management or conservation.
  • Lack of environmental sustainability practices within the organisation, leading to negative environmental impacts or missed opportunities for sustainable development.

Social Risks:

  • Social unrest or community resistance to NGO activities, resulting in project delays, disruptions, or opposition from local stakeholders.
  • Failure to adequately address social inequalities or marginalised groups & needs in program design and implementation, perpetuating exclusion and discrimination.
  • Reputational risks stemming from allegations of misconduct, ethical lapses, or controversies related to the NGO’s mission, values, or operations.

Addressing these risks comprehensively requires proactive planning, robust policies and procedures, and ongoing monitoring and evaluation to ensure the resilience and effectiveness of small and medium-sized NGOs in pursuing their missions.

Watch the video below to learn more on how to identify and manage the Key Risks to your NGO’s financial sustainability!

In the next section, we break down just how to assess your organisation’s risks.