Hallmarks of a Risk-Aware Nonprofit

Hallmark #7: Understands that Hindsight Isn’t 20:20, But It’s Better than a Blindfold

The Challenge

Nonprofits that take the time to evaluate what has worked and what has not, cannot guarantee that their future will be rosy and bright. On the other hand, those that ignore past mistakes, or operate in denial, guarantee that history will repeat itself.

Savvy nonprofits regularly ask the question, ‘what went wrong?’ whether anything obvious went wrong or not. They understand that history is bound to repeat itself, and that knowing what is coming can arm them with defenses that are likely to ward off the worst.

When a nonprofit understands that hindsight is 20:20, staff and volunteers throughout an organization see accidents and loss incidents as learning opportunities. Rather than being embarrassed and ignoring the past with the attitude that ‘it can’t happen again,’ a nonprofit that learns from its experiences is in the strongest possible position to reduce the chances of recurrence.

A nonprofit is likely to be judged more culpable if it has a policy that it does not follow or does not hold those accountable who failed to follow the policy. When nonprofits ignore lapses in policies or procedures, an error of omission becomes a sin of omission. Having a policy and not following it—or not disciplining an employee who has violated a policy—is hiding behind a dangerous blindfold.

Nonprofits that throw away the blindfold embrace the opportunity to learn from past experience.

The Process

To demonstrate that your nonprofit understands that hindsight isn’t 20:20, your nonprofit will:

  1. Keep accurate records of losses and near losses.
  2. Engage in a process of regular evaluation of its losses and its insurance program.
  3. Determine who is accountable for every loss and take appropriate action. Were policies and procedures followed? Did staff and volunteers apply policies as intended?
  4. Ask the insurance company for your general liability or office package policy for guidance on conducting an “accident investigation.” The goal of an investigation is to identify primary and contributing causes of the accident. By addressing those causes, future accidents may be prevented.
  5. If your organizations faces a fraud loss or theft, openly acknowledge the loss and what you are planning to do to address it and prevent similar losses in the future. Being open about losses will help your organization maintain its standing as a trustworthy nonprofit.  See Hallmark #8. Use a designated spokesperson, and prepare a statement/press release that can be shared with the media and posted on your organization’s web site.
  6. Keeping records of important business documents such as insurance policies, and of losses is important both to support your organization’s insurance claims and for use to analyze past losses. If you don’t have the data you can’t analyze it! To view a sample document management and retention schedule offered by Compasspoint.org, click here, and for resources for developing document retention policies click here. To view a sample record retention/destruction schedule that includes a category of “loss records,” Click here.