Reputational risk poses biggest threat to future of charities, report finds

Reputational risk poses the biggest threat to charities over the next five years, while funding remains the biggest concern to charity leaders in the short-term, a new report has revealed.

The inaugural Charity Risk Barometer, published by Ecclesiastical, surveyed 200 charity leaders about the biggest risks facing their organisations over the short- (12 months), medium- (1-3 years) and long-term (5 years).

Survey results revealed that in the wake of the Oxfam safeguarding scandal, reputational risks are high on charities’ agendas, with just over a quarter (26 per cent) of leaders claiming it poses the biggest threat to their charity over the next five years.

However, funding remains the biggest concern for charities in the short-term – 54 per cent of leaders cited loss of funding as the main threat to their organisation in the next 12 months, while 26 per cent said it was the biggest threat over the medium-term and and 24 per cent over the long-term.

Unsurprisingly, the impact of Brexit is also a major concern for the year ahead, with more than half of charities citing it as a concern (54 per cent), followed closely by growing political instability (38 per cent). Brexit was more of an issue for larger charities and became less important to all charities over the longer-term.

The report also highlights a number of emerging risks including charities’ ability to attract and retain talent, stress-related burnout among staff and engaging with the next generation of supporters.

It further highlighted the need for charities to think more strategically about risk management to ensure their future prosperity.

Three-quarters of boards said they have risk discussions as a standing agenda item, but one in four charity leaders admit they don't spend enough time considering risk at a strategic level. One in three small charities claim they don’t spend any time considering strategic risk on a regular basis.

The research also found many charities were taking a short-term view of risk. One in five charities said they only look ahead by a year when considering their strategic risks, and just 40 per cent look beyond three years.

“These are challenging times for the sector – uncertainty is the new norm and new risks are emerging all of the time,” Ecclesiastical Insurance charity director, Angus Roy said.

“It is imperative that charities spend more time thinking about not only the potential rewards, but also the risks they are facing, now and in the future.”

The report makes four over-arching recommendations:

• Boards need to regularly evaluate their risks and set time aside to properly consider the threats to the charity’s prosperity and security.

• Diversification is crucial to protecting charities from financial headwinds and to maintaining relative stability in an unstable world.

• Fundraising models need to evolve more quickly to attract a new generation of supporters in a digital world.

• Diversity of opinion and talent at board level will enable boards to move forward as confidently as possible in an uncertain world.

The publication of the Charity Risk Barometer followed conversations with sector partners, including the Charity Finance Group, Institute of Fundraising, and Carers’ Trust, at a panel event last year and a survey of 200 charity leaders.

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