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Needs/Benefits of Doing Risk Assessment

Needs/Benefits of Doing Risk Assessment

In the light of changing economic and political conditions, it is imperative for charities to always have a functioning risk strategy that helps them to effectively manage threats. With an enterprise risk management policy in place, day-to-day activities are supported and organisations are able to adapt to business changes.[1] The risk assessment process involves understanding the risk appetite and risk tolerance of the organisation, and keeping a risk register that documents the risks that they may face. With that, the identified risked are assessed and placed on a risk matrix in accordance with likelihood of occurrence and impact.[2] Measures are then devised to cope with these risks so that when they do occur, the organisation would not be caught unprepared. Doing this will also enable the organisation to direct resources to areas that require more imminent attention, leading to greater efficiency in the usage of resources.

A good enterprise risk management system provides a systematic method for handling risk incidents. It should be repeatable, objective and consistent[3]. Organisations should be familiar in handling a risk event when it occurs, and take corrective and preventive measures to minimise the occurrence of such risk event in future.  They can devise investigative measures to detect the risk before it happens. This would provide greater visibility into the possible risk incidents that could happen, and increase response time to risks. Thereafter, regular review of the risks will help to ensure smooth running of the charities.

Another benefits of conducting risk assessments for charities, is to promote the right culture throughout the organisation and safeguard the interests of its stakeholders which includes beneficiaries, staff and volunteers[4]. A stable organisation will be able to meet the expectations of its stakeholders and protect the reputation of the organization.

Enterprise risk management can also help charities to safeguard their assets and prevent incidents such as the misuse of funds. It ensures that the fund income and expenditure are properly managed. With strong governance arrangements, strong internal controls over its policies and procedures, and appropriate records in place, organisation will know how to cope with the risks when it happens.[5]

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[1] Developing a Mature Risk Strategy;

[2]Risk Management for Charities (Getting started: supplementary guidance);

[3] Benefits of Implementing Risk Management in EHS Organizations (18 Feb 2015);

[4] Charities on the road to more robust risk management (6 June 2017);

[5] Risk Management, Internal Controls, Internal Audit;