Bryan Whitefield and Ron Switzer
Risk Management Partners Bryan Whitefield (left) and NFP Analysts Ron Switzer (right) discuss major factors in organisation governance and minimising risk.
Some very clear trends have emerged in recent years for higher public interest, greater compliance and increased complexity around the not-for-profit (NFP) environment.
This has led to ever-increasing levels of sophistication in the way NFPs are run and managed. Some recent corporate failures have put the spotlight on the management of entities. Not only has this increased scrutiny led to more regulation; it has fostered public demand for more accountability, transparency and better management.
Has all this become too hard and too complex? The answer can be ‘yes or ‘no’ depending on how it is approached. The aim is to run your association or charity well enough to better achieve its objectives and desired outcomes. But corporate governance is all about ensuring there is a complete ‘system’ for ensuring excellent practices across ethical and functional areas.
Everything starts at the top. Do you have an environment conducive to the highest standards of corporate governance? The board, management committee or governing council must take overall responsibility. They must practice - and demonstrate that they practice - those high standards.
This should be documented in a code of conduct, conflict of interest statement, and the strategic plan; and demonstrated by such things as appropriate skill mix, tenure and periodic individual assessments. There must also be a clear delineation between the governing council and management. Similarly the CEO should be given unambiguous objectives and assessment requirements mapped to the strategic plan.
There are some key elements fundamental to and embedded within a corporate governance framework, including:
- a proper structure and functioning governing body;
- a sound management framework;
- the promotion of high ethical values and public interest;
- an emphasis on financial and operational integrity;
- a demonstrated respect and transparency for all stakeholders; and
- a recognition and active management of risk.
This last point – the management of risk – is the best way to reduce complexity. Risk management is a tool for establishing and monitoring priorities and the road map for deployment of resources. Done well, everyone in the association understands the imperatives and is armed with the skills to make decisions aligned with the desires of the governing council and management. In turn, these will reflect the balanced requirements of key stakeholders. When you have achieved this, you have a “risk intelligent workforce”.
There are three key areas that be addressed to break down the challenge.
- Strategy – the establishment of an achievable strategy involves bringing together the two worlds of operations and the governing council.
- Operations – operational planning, including prioritisation of resources, can now be guided with improved knowledge of the strategic imperatives.
- Compliance – similarly to operations, compliance can now be guided by the priorities set in the strategic plan and associated risk profile. Failure to comply should be seen in the context of these imperatives and resources aligned accordingly.
The key point is to recognise complexity and to let the risk management process guide you towards the best governance framework for the association’s needs. Do nothing more than is needed to achieve strategic imperatives and, of course, nothing less.
Bryan Whitefield is a director at Risk Management Partners and can be reached at bwhitefield@rmpartners.com.au
Ron Switzer is a consultant with NFP Analysts and can be reached at ron@associations.net.au
This article first appeared in Associations Edition 29 – June 2011