Governance, Legal & Risk Management
During times of crisis, it helps to have access to Best Practices and objective input from industry professionals and practitioners. The Global Center for Nonprofit Excellence has assembled a team of nonprofit experts to provide the following recommendations.
The law of governance, risk-management, and compliance is the body of rules, regulations, and best practices that, individually and collectively, are intended to ensure that organizations are managed effectively and in such a way as to enhance social welfare.
-Geoffrey P. Miller, Author
Take Immediate Action
Check Your Bylaws
If current COVID-19 and financial markets crises are causing you to materially change or re-focus your core programs going forward, be sure your bylaws allow you to do so.
Operating programs outside your stated bylaw purpose can result in sanctions by the IRS or your state’s Attorney General.
Consider revising your bylaws to allow your organization to pivot and be more agile program-wise and to ensure alignment with possible future directions.
Review Key Contracts
Make sure you have favorable Force Majeure clauses in your contracts. Exercise them if it’s in your benefit to do so.
- A Force Majeure clause allows you to be released from performing your part of the contract if it becomes impossible to do so because of an Act of God.
- If your contracts don’t have this clause, seriously consider negotiating or re-negotiating them into them.
Renegotiate contract terms and costs with parties who may be sympathetic to the challenges you’re facing.
- The more thoughtfully you craft proposed changes that can help you perform your part of the agreement, the more likely the other party may show leniency and make concessions.
- If possible, offer to provide something concrete in return that you are more capable of providing.
- The sooner you propose changes the better.
Understand your insurance policies and coverages.
- Determine if you have Business Interruption Insurance and whether you can receive any benefits from loss of business due to COVID-19
- Try to negotiate reduced rates if you organization is eliminating programs or reducing risks due to COVID-19
- If you are starting new types of programs, confirm your existing coverages are sufficient for any new exposures the new programs will bring.
Make a Triage Risk Assessment
Have each of your Board members and leadership identify three to five significant risks facing the organization today.
Agree to the top two to three you will address immediately based on
- Potential Severity,
- Probability of happening, and
- Velocity or time horizon when they could materialize.
Assign an individual who is responsible for managing, mitigating and/or eliminating the risk.
- Make it an important part of the job responsibility
- Hold the person accountable as part of their performance standard
Engage Your Board
Consider holding short, weekly board update calls to ensure the board is apprised of important and quick developments and can act immediately if needed.
While most boards delegate all operational matters and decision-making to management, in times of crises, board members may have practical insights, resources and/or professional skills they could share to help management through the crisis.
What to Avoid
If you’re experiencing significant challenges right now, they’re likely not going to just disappear on their own.
- Start the above actions now.
Now is not the time to retreat or go silent even with difficult circumstances or transactions. Increase communications and clarity.
- There are plenty of public and private resources to help you make it through these crises, but they’ll take extra time and effort.
- Building new relationships and communications now will likely empower your organization for the future as well.
If you need help, or want to discuss, any of the above, please contact The Global Center for Nonprofit Excellence Co-Founder, Attorney and CPA Bob Lipps for a private conversation.
Disclaimer: The contents of this article does not constitute advice and should not be relied upon in making or refraining from making, any decision. Independent research is recommended.
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