Managing risk, preserving reputation

Managing risk, preserving reputation

Auditors can provide invaluable support for charities’ managers and trustees who are under increased scrutiny in very tough times, says Steve Harper, charities director at haysmacintyre.

Managing risk, preserving reputation

UK-based international charities are now more aware than ever of the reputational harm caused by safeguarding issues and, in some cases, their perceived failure to respond meaningfully to breaches.

This has come in the wake of unwelcome, reputationally damning coverage and political criticism over a number of major scandals in recent years, with serious allegations still making the headlines.

Each year, haysmacintyre produces its International Charity Financial Benchmarking Report, which considers the areas which are the most important for achieving the good financial governance that enable a charity to deliver on its aims whilst giving value for money. Our recently released 2019 report shows that more than a quarter (28%) of international charities cited safeguarding as one of their principal risks, rising from just 8% last year.

And it has been the perception of an insubstantial reaction of some charities to wrongdoing by their staff and volunteers that has added to much of the disgust. In 2018, Oxfam dealt with allegations about the behaviour of its people, in Haiti, in 2011, with a communications lockdown.

Meanwhile, a Christian charity being investigated by the charities watchdog and police over allegations of financially exploiting its young members has so far declined to comment.

Increasing openness

It appears that this is being followed by increasing openness by many responsible third sector organisations. As haysmacintyre’s research shows, many more international charities are now looking proactively at best practise and exploring safeguarding as a principal risk.

This is vital to their ongoing sustainability, growth and ability to deliver some very important objectives. Reputation, perceptions and credibility are inseparable from – and vital to – fundraising and future financing, which, according to our research, is the chief concern for many charities. Indeed, 58% of international charities reporting it as one of their critical risks.

There is a never-ending need for income generation in a fiercely competitive ecosystem, which relies on cash-strapped funding sources. It means that the hit to a charity’s reputation can severely compromise its revenues.

Meanwhile, there is unease among international charities about wider political and economic uncertainty. More are listing government policy as a risk (20% now, up from 9% in 2018), with Brexit troubling another 15%.

There have long been rumours about the Government’s attitude to international aid donations. Boris Johnson’s December return to Downing Street fuelled worries that the Department for International Development would be closed or absorbed into the Foreign Office, which could be the prelude to a very different focus on overseas aid.

Worries linger

Despite a seeming reprieve recently, worries linger and a group of more than 100 charities has signed a statement expressing concern that UK aid risks becoming a vehicle for foreign policy.

Any of a number of scenarios could radically affect institutional funding and support. As such, it would be foolhardy for any charity to give government an excuse to end funding because of exploitative behaviour or poor practice.

The very challenging landscape that UK charities must try to survive and thrive in presents their trustees with many issues to prioritise. And although safeguarding is now high among them, it is a particularly complex one to navigate and just one of the reputational risks facing major charities.

Trustee boards are not always guaranteed to have the right mix of specialist expertise required to oversee a global organisation, while smaller charities may not be able to afford to retain expert service providers for a single function.

However, the professional advisors that surround a charity can be a ‘critical friend’, supporting areas such as financial planning, process and risk.  that supports planning for and reducing the risks of safeguarding issues. At haysmacintyre, we have seen a significant uplift in our trustee training programme.

Sound knowledge of the sector

By necessity, charities’ auditors and other key professionals have sound knowledge of the sector and its operating environment; can anticipate broad risks and specific dangers; will ‘speak truth to power’ – being unafraid to have difficult conversations and ask hard questions; and can interrogate and review lines of communication and crisis procedures.

As incident planning and management and whistleblowing policy are the foundation stones of effective safeguarding, a suggested six-step query list to help structure policy and effective procedure follows:

  • Do you have a safeguarding policy that clearly lets trustees, staff, volunteers and beneficiaries know what their roles, rights and responsibilities are? If not, why not?
  • When was the policy last reviewed and by whom?
  • Is safeguarding considered part of the decision-making process by relevant groups and committees, including HR, programmes and grants?
  • Are safeguarding risks incorporated into the risk register and monitored as part of the risk management process?
  • Is there a process to confirm that your partners and grant recipients have adequate safeguarding policies and procedures?
  • Is it clear how matters of concern can be reported to trustees and is there a formal whistleblowing policy, which ensures the protection of those passing information on?

With these in mind, many practices are offering trustee training programmes. They help to equip boards with many of the skills needed to manage risk and the key questions to ask. Such added value, consultancy and partnership fosters and enhances client relationships and firms’ reputations and, hopefully, will add a very meaningful contribution to the preservation of a good name, good work and good fundraising record.

Steve Harper is charities director at haysmacintyre

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