Minimize The Reserves Controversy:  Many nonprofit boards struggle with the issue of reserves adequacy and accumulation and often default to an arbitrary ratio that has no relationship to the organization’s unique strategic risks, and so the controversy continues. The appropriate level of reserves for any organization should not be based solely on industry averages, benchmarks, or metrics established by watchdog organizations. When reserves are determined based on an enterprise-wide view of risks and strategic investments that are understood and accepted by the board, reserves management becomes logical and defensible.

 

 

 

Risk Management and Strategic Planning are Inter-Related:  Strategic planning is a useful exercise in providing guidance in fulfilling a mission. Unfortunately, most strategic plans fail to consider risks and have no visible articulated connection to the organization’s strategy. Risk management and strategy-setting are not separate and distinct activities. Nonprofits must take certain risks to achieve their mission. Boards are showing a growing interest in developing a more robust risk management protocol in which senior management and the board together identify major risks and establish a process for mitigating them.

 

Engaging the Board and Financial Oversight Committee:  Risk management should be a collaborative process between the board or its financial oversight committee, and senior management. Insight into clearly articulated and quantified risks eliminates second guessing and the “we never saw this coming” syndrome.

 

Don’t Ignore Opportunities for Strategic Investment:  All organizations have wish lists – those strategic investments of capital that might ensure continuing or enhanced relevance to its constituents. They are unbudgeted and unplanned and represent a sort of “if we only had the funding” expenditure for such things as technology and human capital. A meaningful reserves strategy incorporates not only identified risks, but also future investment opportunities such as new programs, upgrades to infrastructure, public relations campaigns, or other advocacy efforts.

 

Reserves strategy is an outcome of an effective risk management protocol. In an advisory capacity, we work with you in identifying and quantifying potential risks and future opportunities. We integrate them into clear-cut reserves strategy that harmonizes with your organization’ s strategic goals; enabling more effective and efficient mission execution.

Advisory Services

INSIGHTS & RESOURCES

Case Study: Creating a Better Financial Strategy with Tate & Tryon

Advisory Services09/19/2017

 
The Challenge
A $100-million-dollar nonprofit accumulated a liquid reserve of $120 million, and The Board was at odds as to what their next steps should be. Some believed the reserve was excessive and were concerned about potential IRS problems, negative ratings by watchdog groups, and constituent perceptions about a large war chest. Others expressed concerns about […]

Enterprise Risk Management – is it Part of Your Strategy?

Enterprise Risk Management06/25/2017

Strategic planning is a useful exercise in providing guidance in fulfilling a mission. Unfortunately, most strategic plans ignore risks and have no visible or clearly articulated connection to the organization’s strategy.  Risk management and strategy-setting are not separate and distinct activities.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO), defines enterprise risk management as:
“A […]

Strategic Planning − the Emerging Emphasis on Risk Management and Metrics

Enterprise Risk Management11/17/2014

Forward looking nonprofits are increasingly focusing on risk management and metrics in the strategic planning process led by a proactive CFO in collaboration with the audit committee. So what is risk management?
The Committee of Sponsoring Organizations of the Treadway Commission (COSO), defines enterprise risk management as:
“A process, effected by an entity’s board of directors, management […]

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