Generally, when we talk about risk management for nonprofits, there is a note of panic in the conversation, as we hold the image of organizations teetering with the uncertainties of government policies and funding, philanthropists changing the focus of their giving, and increasing demand for services. In fact, grantspace.org quoted the Alliance for Nonprofit Management as defining risk management as a discipline intended to identify and protect against any threat to an organization’s ability to deliver on its mission. It is a definition based on fear: fear of loss. A report covered by NPQ in 2016 represents another example of this approach.
In 2017, NPQ devoted an entire issue of its print journal to the subject of risk management in the nonprofit sector. The focus was on how to move from risk management to risk leadership, with an interview with David Renz providing focus for what that actually means. Not only do nonprofits live in a world of risk, but at times it is important to acknowledge that risk fully and even use it as a way to move forward.
A recent article in the Greenwich Sentinel by Michele Braun builds on this idea and proves some very simple how-to’s for nonprofit boards and leaders. Braun, director of the Institute for Managing Risk at the Manhattanville School of Business, argues that if nonprofits do not take any risks at all, they cannot grow, adapt, or respond to the needs of their clients. The question, instead, is how to be intentional about which risks to take on and how to avoid ones that could be detrimental to the organization’s survival.
Nonprofit leaders should ask a few key questions:
- What risks do we face that can derail our mission?
- What risks can we take that would help us accomplish our mission?
- What processes do we have in place for assessing and managing risk?
- Why haven’t we committed to be a risk-aware and risk-savvy organization?
Two easy steps to take, according to Braun, involve annually having a look at risk and your organization. A conversation among staff and representatives throughout all strata of the organization could lead to clearer understanding of what has changed internally and externally that might alter the risk landscape. Are there new threats or opportunities the organization should be aware of and act on? People from outside the organization should be included in this discussion, as they may see things from a different angle and set of experiences.
In addition, also on an annual basis, the organization’s insurance carrier should be asked to review coverage and services. Periodically, the organization should ask an insurance provider that is not their current carrier what they would propose as coverage. There may be something that the current provider is overlooking.
Inherent in what Braun is saying is that although we need to be aware of and prepared for risks, we need not always live in fear of them. A risk management policy can include more than simply how not to be devastated by a negative risk. It can also include ways to be aware of and take advantage of risks that will help us grow. By managing the process of taking a strategic risk, and with some forethought, your nonprofit can have the courage to do something new while minimizing the potential downside.
Source: Nonprofit Quarterly
Author: Rob Meiksins
What would you do if your nonprofit had over 500 W2 tax forms stolen electronically and put up for sale on the dark web?
This nightmare happened to one unnamed nonprofit, and their solution was to contact the National Cybersecurity Center, a nonprofit founded in 2016 by Colorado Governor John Hickenlooper. The NCC’s mission is to provide collaborative cybersecurity services and training. Their goals are to provide education, training, and response services. According to CEO Ed Rios, almost 90 percent of the attacks reported to the center have been mitigated.
What happened to those W2s? The NCC determined that the records were obtained via an email scam. To help with prevention, the NCC offered training to the nonprofit on identifying and avoiding such attacks in the future.
Rios stated that approximately 75 percent of attacks result from user error. Commonly known as PICNIC: Problem In Chair, Not In Computer, this term is popular with IT help desk employees to describe the non-IT workforce’s propensity to click first and ask questions later.
There are three pillars of the NCC’s work:
- The Rapid Response Center is a dedicated facility with experts, vendors, and partners to serve as a trusted resource during a time of security breaches. Their plan is to be the “one-stop shop” when immediate assistance is needed to solve an attack. The RRC is reached via 877-90-CYBER. Currently only available during business hours, the plan is to offer 24/7 assistance in the future.
- The Cyber Institute takes a think-tank approach to exploring emerging tactics and trends, encryption, and protocols available to better protect our electronic assets. Examples include cyber law, cyber budgeting, cyber communications, and other activities that a small or medium nonprofit or business needs to understand, both now and as technology evolves.
- The Cyber Research, Education and Training Center partners with K-12 and higher education to drive research and development and to provide cyber workforce preparation and education.
Statistics reveal that a single breach can cost up to $9 million for complete resolution, says Rios. Referring to the management level, he said, “50 percent don’t really know enough to even have a discussion.”
Regarding the cybersecurity workforce shortages, Rios further explained that cybersecurity skills can often be taught at the “tactical level” as opposed to the formal education perspective with degrees in computer science. As nonprofits face an increase in cybersecurity and other online threats, it behooves them to be aware of the dangers and the resources available to mitigate them.
Source: The Nonprofit Quarterly
Author: Jeanne Allen
For nonprofits, reputation — theirs and their private-sector partners’ — is everything. Managing it has become a key strategic goal.
When an organization’s mission and message are about “doing good” — helping those in need or tackling an important social or environmental problem — it may be hard to imagine any reputational risk associated with their enterprise. Isn’t reputational risk management something that only private-sector, for-profit corporations need to be concerned with?
Although it might come as a surprise, the reality is that nonprofits — whether they’re development organizations, charitable bodies, or advocacy groups — have started to build fully-fledged reputational risk management systems similar to those employed in the private sector. Why? Because they meet challenges to their missions very similar to those faced by private-sector companies. First and foremost, they want to avoid a relationship with a controversial donor that might jeopardize their reputation.
Reputation as an Asset
A friend who advises the nonprofit sector recently explained it like this: “Companies have products and services. Even if a company is criticized, selling products and services will continue to generate revenues. Nonprofits, on the other hand, depend on donations that are primarily given on the basis of the organization being an honorable and effective one. Put simply, their reputation is really all they have.”
Here’s an example of the harm that comes from an attack on a nonprofit’s reputation. In 2011, the World Wildlife Fund (WWF) was criticized for its partnerships with industry in a German documentary with the audacious title, Der Pakt mit dem Panda — Was uns der WWF verschweigt. This roughly translates as “The Pact with the Panda: What WWF isn’t telling us,” but it was recast in English as The Silence of the Pandas, a reference to the thriller The Silence of the Lambs, insinuating that WWF was involved in an awful crime. The title alone was damaging in either language because it cast WWF as manipulative and dishonest; the film’s content itself, which according to WWF contained a number of significant factual errors, was even more so.
In its press release addressing the issue,WWF was able to prove that most of the claims made in the documentary were unfounded. However — and this is again similar to the situation of private-sector companies — dealing with the controversies absorbed valuable time and money. WWF Germany also lost members and donations. The drama of a message often overshadows a rational, point-by-point refutation; WWF may have had the last word, but it didn’t necessarily reach the ears of donors (or potential donors).
Furthermore, the Internet is an unforgiving archive of allegations, regardless of whether they are true or false. The undesirable effects not only last over time, but also spread across borders. Incidents that occur in a specific region can affect other countries’ offices and the organization’s headquarters as well. WWF Switzerland, for example, felt the ripple effects of the controversies in Germany.
Managing Risk in Corporate Partnerships
Completely avoiding partnerships with private-sector companies would be an effective way of mitigating the corresponding reputational risks. Some nonprofit organizations do exactly that. Think of Greenpeace, an organization active on the very front line of corporate criticism. The last thing it wants is to be accused of taking money from controversial companies or supporting “greenwashing” by partnering with them.
But this strategy comes at a price. First, private-sector companies are an important source of revenue. Donations from private individuals have not grown for many years, but there is still an untapped potential among corporates. “Although only 5% of donations come from companies, the volume of corporate income among Swiss nonprofits grew by 7% last year. However, the more funding nonprofits receive from companies, the more tough questions they will have to answer. The best way for them to avoid controversies is to agree with the partner on a truly transformational agenda. The positive impact of the partnership should be the primary reason to engage with the private sector,” says Michael Arnold, head of corporate partnerships at WWF Switzerland.
Second, as highlighted by Arnold, private-sector companies can play an important role in projects themselves. They have much-needed knowledge and resources. Many subject matter experts at nonprofit organizations believe that it will not be possible to solve today’s challenges without the involvement of the private sector. From the opposite perspective, private-sector companies are more often seeking partnerships with nonprofit organizations as part of their corporate responsibility and sustainability strategies.
With this in mind, donor organizations have also started to think about how they can manage the corresponding reputational issues. Jean-Christophe Favre, in charge of private-sector partnerships at the Swiss Agency for Development and Cooperation (SDC), says that the SDC needed a system “that allowed them to have a good enough understanding of the potential partner so that they could feel comfortable about the partnership.
Not having a reputational-risk framework and clear criteria also made it very difficult to discuss partnerships in a productive manner and to ensure institutional coherence. Every office would make decisions differently. And, in the worst case, SDC would not be able to explain how the partnership was assessed and why SDC came to the conclusion that this partnership was beneficial to SDC’s mission.”
Christian Görg, responsible for the reputational risk process used to assess private-sector partnerships at Germany’s largest development organization GIZ, has had similar experiences: “At GIZ, we wanted to avoid inconsistent decisions in different areas of the organization. The most important benefit of our reputational risk process is that we think about ways to mitigate risk from day one. The process sharpens our senses and makes sure that we don’t enter into partnerships hastily.”
Looking at potential partners, nonprofit organizations need to be able to answer the same questions as private-sector companies in the same situation: with which companies do you want to work? Or, in other words: with which companies is it better not to have a business relationship — and if you embark on a partnership anyway, what should be your terms?
While businesspeople tend to see reputational risk management as an obstacle to business, it is an enabler of business in the world of nonprofits. Understanding the issues a potential partner is exposed to and identifying risk-mitigating measures are essential to doing business. This enables nonprofit organizations to frame the discussion, to evaluate risks and options, and to overcome internal concerns.
Author: Olivier Jaeggi
In the era of 24-hour news coverage, and in the aftermath of highly publicized catastrophic events including hurricanes, earthquakes and terrorist attacks, insurance policyholders have very little patience for a protracted claims process.
At the risk of alienating customers, especially younger policyholders who grew up in a digital age, the insurance industry must adapt to keep up with the speed of business and increased expectations regarding how companies administer claims.
Consumer expectations aside, there’s also pressure from internal stakeholders who expect up-to-date evaluations of risk and more efficient business practices that drive down costs and create competitive advantages.
So, how can insurance companies redesign their business models, particularly the claims administration process?
Leveraging the wisdom of crowds
With these challenges in mind, innovative insurance companies increasingly see a reason to incorporate alternative data sources as an element of their insurance contracts. Given the prevalence of smartphones and the general public’s willingness to use their social media accounts to share events as they happen, real-time social media posts are often the fastest indications of a breaking event. In fact, governments, news agencies, and businesses commonly rely on social media to keep track of breaking news stories.
The real-time nature of social media dovetails with the need for insurance companies to pick up the pace when processing claims. When analyzed correctly, social media data can inform a parametrics insurance contract, triggering the payment of a predetermined amount when conditions exceed certain metrics, such as the wind speed associated with a hurricane or tremors accompanying an earthquake. In addition to natural disasters, alerts derived from social media could justify payouts of a parametric insurance policy covering a man-made event, such as a terrorist attack.
In short, when a significant incident impacts policyholders, a parametric contract that relies on social media alerts can generate a payment. And there’s an added bonus: After an event, the real-time information from social media becomes historical information that helps underwriters assess future policy risks.
A front-row seat to insured events as they unfold
As the recent hurricane in Puerto Rico or the 2017 terror attack in the Parson Green Underground station in London demonstrate, a spike in volume of real-time social media posts is a leading indicator of breaking news. In the simplest terms, social media posts emanating from Puerto Rico or in the vicinity of the Parson Green station provided compelling evidence of an incident. Over time, as the volume of posts grows, the evidence of a covered event becomes incontrovertible.
Nonetheless, insurance companies don’t need to wait until there’s a vast amount of social media posts to initiate the claims process. With the right tools in place to mine social media, insurance companies can be alerted to an event before the volume of posts surges exponentially.
Whether an insurance company relies on the first post to act or decides to wait until the volume of social media posts mushrooms, the corroborative nature of social media, including the analysis of geolocated posts, offers an up-to-date portrayal of events.
While incorporating alternative data as part of parametric insurance contracts may face organizational resistance, making use of social media data benefits those covered by policies, as well as the insurers themselves — removing the burden of assessing a loss solely off insurance adjusters and shortening the time needed to assess a loss and issue a payment. Customers who are helped quickly are also less likely to complain about service and may support the insurance company publicly, contributing to brand strength.
The rush to leverage social media alerts
Up until recently, the insurance industry has resisted the pressure to jump on the technology bandwagon. However, in the midst of unrelenting changes in consumer expectations, and the proliferation of online insurance upstarts determined to disrupt the industry, many insurance companies are in the process of overhauling their business models and embracing the latest technology.
In particular, the claims process is ripe for change. While the industry’s staid approach to claims used to suffice, today’s policyholders no longer deem it acceptable for insurance companies to take months to evaluate and pay out claims. In order to attract and retain customers, while reducing claims processing costs and creating competitive advantages over less refined competitors, insurance companies must build business models that allow for a faster, more agile response. That means looking beyond the traditional tools and approaches for a nimble solution with the potential to support the accelerated payouts policyholders expect.
Using alerts derived from social media provides claims processors with real-time, actionable alerts, including images and video that offer third-party evidence of an event and the extent of the damage, and consequently, the ability to expedite and automate policy payments. Insurance companies that tap into social media data to speed the claims process may impress policyholders by avoiding typical operational challenges and may help the strength of public brand perception.
The competitive landscape of shifting business models may propel many insurance companies to use social media data as an indispensable linchpin in their revamped claims administration process.
Source: Property Casualty 360
Author: Dillon Twombly