CFDG and PKF Accountants & business advisers have today published their tenth annual risk report, titled, Managing Risk: Operating in the new world.

This year’s report looks at how charities are dealing with policy, social and financial changes.

It gives an insight into the depth of change in the external environment, with financial uncertainty and high income risks emerging as prominent themes affecting most charities.

The demands placed on charities in the current environment are growing.

Most respondents (73%) report greater competition in service provision.

54% said the need for their services has increased, 50% that their costs have increased as a direct result of changes in public policy and 53% have experienced increased demand from stakeholders to demonstrate performance.

Against this backdrop, 41% of charities have not been able to maintain the required levels of investment this year to sustain them into the future and 49% have utilised their reserves to some extent. Worryingly, there are mixed perceptions of how well equipped trustee boards are to manage new risks.

Nonetheless, most charities are taking some action in order to mitigate the impact of the challenges they face - although few are taking most or all of the steps needed to put themselves in the best strategic position.

Collaborative working is significantly increasing and 67% of participants expect employment of this strategy to expand further.

Technology also appears to be providing potential solutions with more and more organisations exploring electronic communication and around half of respondents claiming to use social networking sites.

Caron Bradshaw, CEO of CFDG, said: “All charities have to adapt in order to respond to broadly changing demands; so far the organisations here are doing just that, showing innovation is alive and well.

"However, with charities having to use tactics, such as focussing services in order to respond more efficiently, there is a risk that those more bespoke services will be lost.”

Richard Weighell, risk management partner at PKF and one of the authors of the report, said: “The report shows that there is a fundamental imbalance between supply and demand in the not-for-profit sector: charities are seeing growing demand for their services but are unable to invest enough to provide these services effectively.

"There is little sign of the situation improving in the foreseeable future, which means that many charities are faced with a business model that no longer works in the longer term.

“Commendably, charities are exploring a variety of strategies to continue their activities, although it appears that very few are doing enough to secure their long term future.

"However, even those that make considerable changes to their business models will not be completely out of the woods - new initiatives almost always involve risk and the survey reveals that, for many, there are still gaps in risk management.

"The next year is going to be tough; productive assessment and analysis of risk will have real benefits when implementing new strategies in order to close the gap between supply and demand.”

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