Hallmarks of a Risk-Aware Nonprofit

Hallmark #1: Takes More Risks than It Avoids

The Challenge

In the equation of success, risk-taking does not equal making mistakes. Nonprofits that demonstrate Hallmark #1 know that. They take more risks than they avoid because they know that informed and thoughtful risk taking is an essential component of organizational success. Therefore, they take risks—all the time.

A nonprofit cannot go about its daily work of mission fulfillment without taking risks. Risk-taking may lead an organization into uncharted territory when it expands its services to a new category of beneficiaries, or brings its programs to foreign countries, or adds an on-line “donate here!” button to its web site.

Avoiding risk, while not child’s play, is much easier than knowing which risks are imperative for the nonprofit to take. It is hard work to evaluate whether to take a risk or avoid it. Nevertheless, for nonprofits that take more risks than they avoid, the work of evaluating risks pays off. An excellent risk management program will enable the nonprofit to achieve a proper balance between prudent risk taking and the paralysis of trying to avoid all or most risks (and in the process, necessarily avoiding some, or even all opportunities.)

Peter Drucker said, “People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.” A nonprofit that takes more risks than it avoids can innovate and explore uncharted paths to accomplish its mission, while remaining alert to emerging threats that must be avoided in order to protect critical assets.

The Process

To manifest this Hallmark, your nonprofit will:

  1. Encourage thoughtful risk-taking:
    • In a staff meeting, commend someone who has taken a risk.
    • Create an award that is rotated monthly (or given when deserved!) for a staff person who took a risk.
  2. Raise awareness of risk-taking:
    • Ask a staff member to tell the rest of the staff about a risk taken at work and explain what happened. What was the outcome? What did you learn?
    • Inspire the board’s awareness about risk-taking that occurs by describing when and how taking thoughtful risks is encouraging innovation and moving the organization forward.
    • At any opportunity, engage the board in discussions of risk versus reward and the value of risk-taking.
  3. Evaluate risk-taking: Explore why some risks do not pay-off but others do.
    • Keep track of the risks the organization has taken and those it has avoided.
    • Evaluate which risks resulted in positive outcomes—and which ones did not. Then think about why—and whether there were better alternatives.
      • This works well as the topic for discussion in a staff meeting, or as a warm-up during the strategic planning process, or as a task force project.