How can your organisation minimise risk and deal with financial difficulties?
Organisations need to identify and evaluate potential risks or areas of uncertainty and have policies and procedures are in place to effectively manage them. Unexpected things can and will happen but if flexible structures and controls are in place, risks can be minimised.
But risk is not a dirty word, it can equal both positive and negative outcomes. You could try replacing the idea of risk with areas of uncertainty during the planning process.
What's important is recognising that problems can and will occur and have a plan ready to deal with them.
Causes of financial problems fall into two categories:
- The one-person rule: chief executives should lead without dominating
- Non-participatory board: trustees should take an interest beyond topics of appeal
- Lack of balance in the top team: an over-abundance of individuals with similar roles weakens finance or strategic expertise
- Lack of management depth or experience
- Budgetary control: utilising a budget vs. actual figures system enables variances to be identified and dealt with continuously
- Cash flow forecasts: a cash crisis can arrive unexpectedly without effective forecasting
- Overtrading: can cause cash shortfalls which may require borrowing of funds
- The big project: ask is it worth doing? What are the risks? Can we deliver?