Risk Assessment
FOR CHARITIES
The revised statement of recommended practice (SORP) “Accounting and Reporting by Charities” published in October 2000 introduced a new major requirement for trustees. Under SORP 2000, trustees are required to include a statement in the Trustees’ Annual Report that “the major risks to which the charity is exposed, as identified by the trustees, have been reviewed and systems established to mitigate those risks”.
The inclusion of a statement on risk assessment for all accounting periods beginning on or after 1 January 2001 is mandatory for charities whose gross income exceeds £250,000 and strongly recommended as best practice for all other charities.
WHY IS IT EASIER FOR SPOFFORTHS TO HELP?
The implementation of a risk assessment policy can provide significant benefits to the charity by focusing on actual or potential risks and establishing systems designed to mitigate those risks. In addition an effective risk management starategy will provide comfort as to the accountability of the charity’s operations to beneficiaries, donors and the general public.
In many cases identification of the various categories of risk to which a charity may be exposed may be a complex exercise requiring guidance and assistance from experienced professional advisors.
The major risks referred to in the SORP are those risks which have a high likelihood of occurring and would, if they occurred have a severe impact on operational performance, achievement of aims and objectives, or could damage the reputation of the Charity, changing the way Trustees, donors or beneficiaries might deal with the Charity. Such risks are generally categorised into five main areas:
Governance and Management
Operational
Financial
External
Compliance
Within each category the process of identifying and managing risk will involve a number of steps:
Establishing risk policy
Identifying risks and existing controls
Assessing levels of risk
Evaluating what action needs to be taken
Ongoing monitoring and reassessment of all risk areas
In many cases the categorisation, identification and management of the potential areas of risk will be an exercise beyond the capabilities of the trustees. In such cases expertise and guidance provided by Spofforths can be well applied either to assist the trustees or else to independently carry out the entire exercise, reporting on our findings and recommending actions directly to the trustees.
WHY COME TO SPOFFORTHS?
At Spofforths we have a large and well diversified portfolio of charitable clients ranging in size from large national charities with assets in excess of £100m, down to small local organisations providing valuable services, but operating with only the most basic infrastructure. The experience we have gained through working alongside the trustees of our charitable clients, and in many cases already of preparing or assisting in the preparation of risk management assessments, means that we are well placed to provide the necessary advise and support to charities of all sizes.
In addition to ensuring initial compliance with the requirements of the SORP by undertaking the initial identification and assessment exercise, we are also able to provide on-going support by constantly monitoring and re-assessing areas of risk, and advising on all appropriate steps to be taken to mitigate new risks as they are identified.
Contact details
Melanie Nicholson