14 July 2023

Managing the risks of charity fundraising

Diversification of fundraising efforts is a key concern for charity leaders at the moment. Despite the economic climate, 81% of the leaders surveyed in CAF’s 2022 report felt optimistic about their organisation’s future. As a trustee or senior manager, you must be mindful of regulations, care of staff and volunteers and prudent use of funds when updating your fundraising strategy. This will include evaluating the risks and the strategic benefits of the various fundraising tactics available, such as legacy giving, events, mailshots, SMS appeals, payroll giving or commerce.

This guide covers the following risk management considerations in the context of fundraising:

1. Strategic and financial fundraising risks
2. Understanding regulatory risk
3. Reputational risk
4. Collecting funds from the public
5. Safeguarding and reporting
6. Managing cyber risk
7. Avoiding fraud risk
8. Insuring fundraising risk

1. Strategic and financial fundraising risk

Before looking at some of the operational risks, some high-level risks may be looked at in a fundraising strategy. These could include to:

• Diversify your income: Mitigate the risk of focusing too much on one source of income. If your fundraising strategy relies heavily on a single source – be it a particular kind of event, one large donor, or a specific grant – then you are leaving your charity vulnerable to financial instability in case this source of income diminishes or disappears.
• Combat income unpredictability: Fundraising income can be unpredictable. Factors such as changes in the economic climate, fluctuations in exchange rates for international charities, or unforeseen events can greatly affect the amount of income a charity receives. Planning to be more financially resilient is part of a good financial risk management strategy.

2. Understanding the regulatory risk

Again, before looking at the operational and specific fundraising risks, you will not ensure compliance by understanding the various regulatory risks that apply to fundraising activities.

• Comply with the law: Ensure every fundraising activity complies with the law and Code of Fundraising Practice.
• Protect personal data: Invest in robust cybersecurity measures and train staff to handle data responsibly.
• Avoid financial mismanagement: Implement strict financial controls, regular audits, and transparency in all financial reports. This will not only reduce the risk of management but have the potential to help increase the efficiency of operations.

3. Reputational risk

Reputational damage can have severe consequences, and trustees can even be held personally liable. To protect your charity’s reputation, consider the following:

• Create a crisis management & communications plan: Prepare for potential crises by developing a plan outlining how to respond and communicate with stakeholders. This will help you address any reputational damage promptly and effectively.
• Consider Trustees, Directors & Officers Insurance: This charity insurance cover is designed to provide financial support in case of any claims of wrongful acts against trustees.
• Conduct due diligence: Conduct thorough due diligence before entering into partnerships or agreements with others. This will help identify potential risks or issues that would impact your charity’s reputation.
• Establish clear agreements: When entering into contracts with other parties, clearly define the boundaries and terms of the agreement. Ensure that you can fulfil any obligations outlined in the contract to avoid breaching them in the future.
• Adhere to fundraising regulations: Implementing the Code of Fundraising Practice is essential to avoiding complaints that could harm your charity’s reputation. Educate your fundraisers about limitations and best practices to ensure ethical and responsible fundraising.
• Learn from past complaints: Take the time to reflect on any past complaints or reports received through the Fundraising Regulator. Use this feedback to update your procedures and improve communications to prevent future reputational damage.
• Promote ethical and transparent campaigns: Ensure all fundraising campaigns align with your charity’s values and mission. Transparency and ethical practices are key to maintaining a positive reputation.
• Monitor online presence: Establish clear policies for social media use and regularly monitor your charity’s online presence. Respond promptly to any negative or damaging content to protect your reputation.
• Communicate with your donors: Regularly communicate with your donors and stakeholders to keep them informed about your charity’s activities and progress. This will avoid alienating supporters and demonstrate your commitment to fulfilling your mission.

4. Collecting funds from the public

Looking more specifically at fundraising activities, several health and safety, employee and volunteer risks are involved with fundraising from the public. Assessing risks for events and activities is essential. Here are some key considerations:

• Venue suitability: Choose venues that are appropriate for fundraising activities and can accommodate the expected number of attendees. Obtain the necessary permits for collecting money or having a stand. Check cancellation policies and assess other factors that may cause event cancellation.
• Money handling: Find a secure location to collect, count, and store the money. Deposit all cash in the bank as soon as possible, without deducting any expenses. It’s advisable to have at least two people handling the money to minimise the risk of fraud.
• Safety during events: Minimise the risk of slips, trips, and falls by keeping the event area clear of tripping hazards and promptly cleaning up any spills. When conducting door-to-door appeals, always walk on marked paths and well-lit areas.
• Working at height: If there’s a need to work at height, ensure that ladders are in good condition and that anyone using a ladder has a spotter to ensure their safety.
• Driving risks: Require drivers to have a valid driving license, a safe vehicle, and a good driving record.
• Food and drink safety: If serving or selling food and drinks at an event, adhere to safe food handling and preparation guidelines. Obtain the necessary licenses and insurance to ensure compliance.

5. Safeguarding and reporting

Your duty of care will be to protect all individuals involved in fundraising. Here are some key considerations for safeguarding and reporting:

• Reporting procedures: Make sure fundraisers know your charity’s reporting and whistleblowing policies, as well as the relevant contact numbers.
• Safeguarding measures: Implement a safeguarding policy to protect children and vulnerable individuals participating in fundraising events.
• Create a lone-working policy: When conducting door-to-door visits or meeting major donors, it’s crucial to have a lone-working policy. Consider sending two people together to reduce risks, establish policies for accepting gifts, and choose safe meeting locations.
• Working with third-party organisations: Requires implementing controls and conducting due diligence to ensure that your safeguarding standards are met and that partners are committed to the Code of Fundraising Practice.
• Regular training: Provide regular safeguarding training to staff and volunteers to raise awareness and ensure everyone understands their responsibilities.
• Online safeguarding: Implement appropriate age-verification or restriction measures when fundraising online.

6. Managing cyber risk

Digital fundraising brings new risks from safeguarding to other third-party cyber risks. Charity organisations must proactively mitigate these risks, as they can lead to both reputational and financial damage. Here are some practices to consider:

• Secure passwords: Use strong, unique passwords to safeguard your online fundraising platforms. Regularly updating these passwords further enhances security.
• Firewalls: Implement firewalls to prevent unauthorised access to your networks and data.
• Monitoring: Continuously monitor your systems to help identify potential threats or breaches quickly, enabling you to take swift action.
• Training and communication: Regular cybersecurity training for your staff can equip them with the knowledge to identify and respond to cyber threats. Check in with your remote workers to keep everyone aligned with data protection practices.
• Clear policies: It’s essential to have clear policies to ensure secure access to your systems and data from outside the office.
• Secure communication: Utilise secure communication and file-sharing systems to protect confidential information from unauthorised access.
• Software: Equip your people with up-to-date, secure software. This includes the use of secure payment gateways for online donations.
• Third-party risks: If you’re outsourcing any part of your digital fundraising, conduct thorough due diligence to ensure these third parties have robust security measures.

7. Avoiding fraud risk

You’ll need to implement measures to protect your charity from fraud when dealing with finances.

• Educate yourself and your team: Start by educating yourself and your workforce about different types of fraud that can affect your charity. The Charity Commission’s prevent fraud hub is a valuable online resource that offers guidance on protecting against fraudulent activities like hacking, malware, cyber-attacks, and more.
• Screen volunteers and staff: This process helps identify potential risks in the recruitment or onboarding phase.
• Monitor expenditure and grants: Keep a close eye on your charity’s expenditure, especially regarding grant money. Regularly compare your spending with the terms of the grant agreement to ensure compliance. This practice can help identify any discrepancies or misuse of funds.
• Create financial policies: To mitigate the risk of fraud, it’s crucial to have well-defined procedures & policies in place. These should cover areas such as fraud prevention, whistleblowing, conflicts of interest, bribery, and corruption.
• Ensure good oversight: Implement strict financial controls, regular audits, and transparency in all financial activities.

8. Insuring charity fundraising risk

Even when you take every precaution, incidents can still occur, and an insurance programme transfers the risk to an insurer so that you can get back up and running to the point where you left off before the incident. Depending on your fundraising strategy, some of the insurance covers to consider for transferring the risk of your fundraising activities will be:

• Public Liability Insurance: Cover for claims from the public due to accidents or injuries at fundraising events.
• Employers Liability Insurance: Cover for claims made by staff injured during fundraising activities.
• Event Cancellation Insurance: Cover for cancelling or postponing fundraising events for reasons beyond your control.
• Trustee Indemnity Insurance: Protection for senior decision-makers from claims of wrongful acts, errors or breach of duty.
• Property Insurance: Cover for buildings, contents, or equipment used during fundraising events.
• Motor Insurance: Cover for accidents, theft or damage involving charity-owned vehicles used for fundraising.
• Cyber Cover: Cover for costs of recovery from data breaches, ransomware or hacking.
• Fidelity Guarantee: Cover for losses due to dishonest acts by employees or volunteers.
• Business Interruption: A financial safeguard to continue operations if an unforeseen event temporarily halts them.
• Money Insurance: Cover for loss or theft of cash, cheques and stamps.

Speak to one of our experienced insurance advisers about the appropriate covers and level of protection for your organisation.

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