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Charity Sector Governance and Risk Management
Forward Thinking Business Blog –
Recent leadership failures show that the quality of charity sector governance is never more important than when things go wrong writes Feargal McCormack.
The charities sector is not immune to governance failures. Over the last few years we’ve seen several high profile scandals that resulted in significant reputational damage with knock-on consequences for fundraising and service provision.
In many instances, these situations could have been avoided through better corporate governance. So it is not surprising that we now see more charities assessing their leadership and investing in board training and skills improvement.
Across the Island of Ireland, thousands of charities and voluntary organisations provide valuable social and community services. In November 2016, some 19,290 organisations were included in the Benefacts database of Irish non-profits. In Northern Ireland, around 5,500 NI charities out of an estimated total of up to 17,500 had registered with the Charities Commission by April 2017.
As highlighted by my Charities Director colleague Lowry Grant at the launch of the FPM Protecting People with Purpose leadership support service in October 2016, charities across the island face a prolonged period of uncertainty and risk due to Brexit, new technologies, data protection, cyber security and social media, together with developments in corporate governance and regulation, which are driving change. In this context it is vital that corporate governance and risk procedures are implemented within an agile strategic environment.
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Good Governance Code
In January last year, the Developing Governance Group — an organisation that works to improve governance practice in Northern Ireland’s voluntary and community sector — published a code setting out five principles of good governance.
Under the Code, charity sector governance is improved when boards
- Understand their role and responsibilities
- Work well as individuals and as a team
- Ensure the delivery of organisational purpose
- Exercise appropriate control
- Behave with integrity and are open and accountable.
At FPM, we work with more than 200 charities in the UK and Ireland and hold regular training and networking events to keep our clients up to date with the latest regulatory requirements and best practice guidance.
In our experience, not-for-profit organisations with the most effective leadership share certain characteristics:
- They have robust procedures to ensure they meet their legal and regulatory compliance obligations.
- They periodically audit board skills to identify gaps which then inform the board’s recruitment policy.
- They conduct regular board performance appraisals.
- They implement effective processes to monitor policies and exercise control.
- They promote open and transparent communication.
- They recognise the value of reputation and work to embed integrity across every function of the organisation.
Above all, they recognise that effective leadership and good governance is a journey and not a destination. In the charity sector as in every other business, good governance requires ongoing development and monitoring.
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