Risk Management and Insurance

Managing and controlling a charity means Managing Officials have a key role in identifying and managing risks. Poor risk management can leave both the charity and its Managing Officials vulnerable. Following a simple process can help minimise problems and protect everyone involved.

Step 1: Allocate responsibilities

Different charities face different risks depending on their size, funding, and activities. No single Managing Official can know all the risks. It’s helpful to assign responsibility for identifying and managing risks to individuals with specialist knowledge in different areas of the charity.

Even small charities can face significant risks, so this step is important regardless of size.

Step 2: Identify the risks

A risk is anything that might prevent your charity from achieving its aims. Common risks include:

  • Damage to the charity’s reputation

  • Reduced funding or donations

  • Financial loss through poor investments

  • Risks arising from events or activities, such as accidents or mismanagement

Consider both everyday risks (e.g., maintaining a safe environment for staff and visitors) and more serious scenarios (e.g., data breaches, floods, or fires). Identify risks that could prevent your charity from supporting its beneficiaries, and put processes in place to manage them.

Step 3: Insure against the unforeseen

Some risks can be reduced or transferred through insurance. Common types include:

  • Professional indemnity insurance – protects against allegations of negligent advice

  • Trustee liability insurance – protects Managing Officials against claims of wrongdoing

  • Public liability insurance – covers injuries or illness to members of the public

  • Employers’ liability insurance – covers employees and usually volunteers

  • Fidelity cover – protects against fraud or theft by staff

  • Data/cyber insurance – covers costs from data loss, network damage, or breaches

Not all risks are insurable, but the “obvious” ones can usually be covered.

Managing risks effectively

While you are not legally required to have a formal risk management process, Managing Officials are expected to actively identify, assess and manage risks. A clear process helps you identify, manage, and reduce risks, and makes risk management part of your charity’s normal operations.

The UK Charity Commission’s guidance on risk management recommends:

  1. Establish a risk policy

  2. Identify risks

  3. Assess risks

  4. Decide what action to take

  5. Review and monitor risks regularly

A guide on Risk Management

Risk Assessment template

Support and advice

Network Insurance provides a tailored charity insurance package. For more information check www.network.gg