RISK MANAGEMENT FOR
ASSOCIATIONSAs an association executive or officer it's
your job to assure that your organization runs smoothly and efficiently.
Just because you're nonprofit doesn't mean you don't have a business to
protect. It's your responsibility to protect your association and its
members from unnecessary risk and liability.
The Duty to Prevent Loss and Minimize Risk
Associations, professional societies, foundations and other nonprofit
groups may be subject to liability actions just like their for-profit
counterparts. It is important that association executives, officers
and directors take appropriate steps to minimize the risk that may confront
their organizations. Applying the ancient adage that an ounce of
prevention is worth a pound of cure, every nonprofit organization should
carefully review and update its loss prevention and risk management
procedures to make sure it has done everything reasonable to protect itself
and its members against losses and liability.
Risks to a nonprofit entity will vary depending on the type of
organization and the nature of the membership it serves. Many risks
are similar to those faced by for-profit businesses, but the membership and
volunteer aspects of a nonprofit group may call for special considerations.
In addition to protecting the entity itself, it is necessary to assure that
the organization's members are not subject to additional liability because
of their participation in the association. Likewise, care must be
taken to assure that individuals who volunteer their efforts on the group's
behalf are not exposed to undue risk or liability.
Identifying and Understanding Risk
Like any other entity, the potential losses and liability for a nonprofit
organization depends on what it does, what it owns, and whom it employs.
As an association executive, some of the areas you need to look at and
questions you need to ask to make sure your organization and its members are
protected against unnecessary risk include:
Employee Lawsuits. this is one of the fastest growing
areas of litigation in the country today as more and more plaintiffs'
attorneys look to employment suits as a source of income. Do you
know what federal, state, and local employment discrimination laws your
organization is subject to? Do you know what these laws require?
Is your organization a government contractor? Are you in compliance
with wage and hour laws? Do you use employment contracts? Do
you have an employee handbook and written policies? How do you
respond to requests for references?
Antitrust Liability. A trade association composed of
competing businesses is by its very nature subject to scrutiny for
violations of federal and state antitrust laws. Do you and your
members understand the "do's and don't's" of antitrust laws, and the
penalties for violating these laws? Is the industry you represent
operating under any judicial orders or consent decrees? Does your
organization have an effective antitrust compliance program?
Employee Dishonesty. Although it is unpleasant to
contemplate it, whenever money is handled by individuals there is some
risk that it will be intentionally or unintentionally misused. Do
you have money handling procedures that minimize the risk of embezzlement?
How do you screen the employees you hire? Do you have an audit
conducted by an outside auditor? How is the audit conducted?
Does your organization receive or disburse grant money? How is your
organization's retirement plan money handled and invested?
Property Loss and Liability. If your organization owns
property it may need to be protected from loss. If your organization
owns its own building you will have to consider issues of liability
stemming from ownership, particularly if space is leased to outside
tenants. Does your organization have adequate insurance coverage for
the property it owns, including automobiles? Do you have liability
insurance? Do you have a plan in case of a disaster or catastrophe?
Do you have a program to back-up your computer data?
Trade Shows, Conventions, and Research. If your
organization conducts events and deals with outside vendors you will need
to consider the risks inherent to these events and relationships. Do
you know the requirements of the Americans with Disabilities Act?
Are you aware of music copyright laws? What procedures do you use to
select the parties with whom you contract? Do you use written
contracts? What arrangements are made to apportion liability and
resolve disputes? Do you have insurance broad enough to cover all
contingencies and parties?
Publications. Publications may also be a source of
liability and dispute. Are you familiar with copyright requirements?
Has your organization taken steps to protect its own work product,
and the use of its name and logo? What is done to avoid issues of
libel and slander?
Keys to Minimizing Risk
Once you consider and understand the potential risks and liabilities your
organization faces, you need to take steps to minimize them. There are
various tools at your disposal, and you can use some of them alone or in
combination to address particular situations. It is important to
remember that risk management and loss control is not a one time project.
As your organization enters into new ventures, changes its activities and
methods of operation, and grows or shrinks, you will have to continually
reassess and rethink your risk management options.
