Not-for-profit leaders talk about how important it is for boards to be across the many facets of risk.
In the penultimate roundtable discussion of the AICD and BoardPro’s not-for- profit (NFP) governance series, the panel highlighted the necessity of a board understanding risk in all its contexts, and its implications for achieving organisational goals.
This discussion, hosted by AICD NFP sector lead Phil Butler GAICD, featured Chris Franks AM FAICD, director of Women in Aid & Development, Adam Davids of Social Ventures Australia and CareerTrackers, and Brett Herkt, CEO and co-founder of BoardPro.
Fundamental to addressing risk in not-for-profits is the identification of what risk means in the context of the particular business. Herkt singled out the importance of connecting risk to what he called the “humanness on the board” — formulations of risk can quickly spiral away from what they actually mean and into a nebulous theoretical framework that can strip them of value.
Butler noted that while on the committee of a local tennis club, it seemed like risk was never being discussed. Yet, it was constantly present, merely never discussed as “risk”.
Connecting this to ideas of risk mitigation frameworks is what Franks identified as a crucial step — identifying the practical risk and then translating that into a meaningful strategy framework.
The panel further discussed the various approaches to risk that NFPs of different sizes and styles must take. Davids noted that many NFPs are started by passionate entrepreneurs with interest in social issues and a natural understanding of social impact risk. However, this can often lead to financial issues being overlooked.
Franks posited the counter-example of a board that “knew exactly what they were doing with all of the money and they absolutely went broke because they didn’t have anyone from marketing. They had no idea how to interact with customers”.
All members of the panel identified how important it is to have a diverse board, with varied understandings of risk — whether this be financial, cultural, or reputational risk — no matter the scale of the business in question. This echoed discussions that were held in the first instalment of this series.
Stream the Six Fundamentals of NFP Governance series here.
This article first appeared under the headline 'Risk Factor' in the June 2023 issue of Company Director magazine.
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