September 24, 2008

Anxiety + Motivation = Inspiration for Sound Risk Management

These days the news is all about risk in the financial markets. Many institutions and individuals are justifiably anxious about their investments, their banks, and their insurance companies. At the Nonprofit Risk Management Center we believe that facing a crisis has some benefits. What could possibly be the benefit of the current turmoil in the financial services industry? At a minimum, the events of late Summer remind us that while seeking positive opportunities, we shouldn’t neglect to prepare our organizations, and those who depend on a nonprofit’s programs and services, for potential downside risks associated with those efforts.

Is all this anxiety about the financial markets and the stability of insurance giants making you nervous? If so, here’s another thought about the upside: Some authorities on leadership believe that the proper dose of anxiety can help leaders motivate staff and volunteers. In his new book, Just Enough Anxiety, Robert Rosen, of Healthy Companies International, describes a level of discomfort that actually motivates people to higher performance. In Rosen’s view, leaders who create “just enough anxiety” in their organizations motivate because they tell the truth about the present, while maintaining an optimistic view of the future, which produces just enough anxiety to encourage their organization to flourish in a time of uncertainty. Such leaders, he says, ask hard questions, admit mistakes and are responsive to new ideas, all while establishing a balance between growth and safety. They are also skilled in “realistic optimism, constructive impatience and confident humility.”  

Risk management looks both at the benefits of pursuing opportunities while also being very focused on the potential downsides. Managing risk cannot be accomplished by hiding past mistakes, denying uncomfortable realities or succumbing to anxiety. Enlightened risk taking requires awareness of the potential downsides of a new program or approach, thoughtful planning for positive outcomes, and simultaneously ensuring that there is as soft a landing as possible when a venture doesn’t work out as planned.

As described in the Center’s newest publication, Financial Risk Management: A Guide for Nonprofit Executives, key financial risks include:

• A loss of confidence in the nonprofit by its stakeholders, funders, clients, staff, and the public at large.
• A catastrophic financial loss to the organization because inadequate attention has been paid to impending financial trends or other foreseeable factors.
• Personal financial liability for the leaders of the nonprofit because of a failure to discharge the duty of care.

It all sounds pretty serious. Clearly nonprofits are as susceptible to unprotected risk-taking as the world’s largest financial institutions, and after recent events in the world’s financial markets, it’s easy to agree that how a nonprofit approaches financial risks is critical to mission-fulfillment. If you are anxious–that may be a good thing. That means you have the opportunity to lead your organization with “just enough anxiety” to inspire prudent risk management.

We’re here to help. Look to the Center’s new publication, Financial Risk Management: A Guide for Nonprofit Executives, for fifteen lessons for every nonprofit executive, supplemented by easy-to-use tools and up-to-date guidance on financial risks that make us all a little anxious.

Insurance Worries? We Can Help.

If you want to improve your understanding of your nonprofit’s insurance program (and reduce anxiety along the way!), the Center has another resource that will help—the 2nd edition of our must-have insurance text, Coverage, Claims and Consequences: An Insurance Handbook for Nonprofits. To learn more about the book or order a copy for yourself, your CFO or your go-to person on risk management, visit http://nonprofitrisk.org/store/coverage-claims.shtml.

Staff Worries? Take the High Road!

Staff-inspired headaches are common among nonprofit executives. Many CEOs report spending 24-50% of their time on personnel matters—much of it devoted to putting out fires, dodging or handling tricky issues such as unexplained absences and coaching underperforming employees. All in all, overseeing supervisory and line staff can be exhausting and at times, demoralizing. Getting your employment practices in order is a key step in returning your focus to the mission and client-serving programs of your nonprofit. The Center’s book, Taking the High Road: A Guide to Effective and Legal Employment Practices for Nonprofits is a proven antidote to HR stress. Many leaders have told us that their personal copy of High Road is never out of reach. The book offers easy to understand and apply explanations of legal risks as well as detailed recommendations for managing difficult situations. Examples of key HR tools are featured throughout the book, along with references to state and federal mandates for employers. The online companion—free to those who buy the book—features hyperlinks to all of the laws and references cited in the book. To learn more about Taking the High Road, or order a copy to keep on your desk, visit http://nonprofitrisk.org/store/high-road.shtml

© 2008 Nonprofit Risk Management Center