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Assessing risk in strategic responses to cost of living pressures

By Simon Hickman, CEO, Access Insurance.

Inflating costs will draw various responses from the charity sector, from simply surviving, to adapting, merging and restrategising. Serving beneficiaries and fulfilling contracts will be a priority, but with rising overheads of energy and premises costs, 86% of charities surveyed by CAF are worried about the impact the cost of living crisis will have on people, their services and budgets. Concerns have also been raised about a fall in volunteering, another essential engine of the third sector.

This leads trustees and boards to make some tough decisions and brings with it new risks of which senior management and trustees should be aware when responding strategically to the cost-of-living crisis. Senior charity leaders must avoid rash actions that would put themselves or their charity in the position of breaching their duty to manage resources responsibly, act prudently, and in the charity’s best interests.

Performing risk assessments and updating your risk register is vital to ensure good risk management and to fulfilling your duty of care and compliance.

Creating efficiencies in operations and service delivery

Many charities adapted to new working methods during the pandemic, including using digital service delivery to ensure beneficiaries still benefited from their work. Some charities saw a shift in direction, cutting back certain projects and focusing on other areas. Decision makers will once again need to evaluate efficiencies to address rising costs and increased demand.

Managing the risks:

  • Avoid reputational damage by not considering beneficiaries or failing to fulfil your duty of care – create crisis management plan.
  • Digital safeguarding – step up safeguarding protocols and policies to encompass online and offline activities.
  • Stay compliant if recruiting volunteers – volunteers are essential and this is perhaps under threat too. Volunteers shouldn’t be asked to do the work with which employees were tasked. You still have duties in caring for your volunteers, ensuring they are insured and supplied with correct training and resources.
  • Increase cyber security.

Saving costs from suppliers

Some have suggested negotiating with energy suppliers for favourable terms or contracts, or taking advantage of preferential rates through membership bodies. Regarding insurance, having a policy that fits your needs, without unnecessary off-the-shelf policies, can help save costs – but ensure you are being covered properly before choosing a cheaper cover. Help from a Chartered Insurance Broker to advise on a policy designed for your unique risks will balance costs with an effective risk strategy. Dealing directly with an insurer is a non-advised alternative which can have serious governance repercussions in the event a claim is not met.

Managing the risks:

  • Seek professional advice if you are looking at having a leaner insurance programme.
  • Reduce the risk of breaching longer-term contracts or agreements.
  • Carry out due diligence of new suppliers and check terms of business.

Rethinking income generation strategies

Charity trustees may seek to diversify or change fundraising and income generation strategies. Any investment in fundraising needs to be justified and changes agreed to reduce risk and act in the charity’s best interest. From looking at grants, dormant assets, digital fundraising to promoting legacy giving.

Managing the risks:

  • Ensure compliance with fundraising standards.
  • Manage reputational risk that new forms of fundraising bring to your charity.
  • Implement effective financial controls to reduce risk malicious acts like fraud.
  • Obtain relevant permissions when going door to door or running campaigns or events.
  • Fulfil duties to invest funds wisely (essential trustee).
  • Handle and store data securely and fulfil GDPR obligations.
  • Reassess risks with new fundraising methods that may involve working at height, slips, trips and falls, hygiene or handling donations.


Corporate and other charity partnerships can expand reach and cut overheads through initiatives such as shared office space, creating new revenue streams or sharing similar projects. Risks also emerge through such agreements with their close affiliation/proximity, so trustees must ensure due diligence and strategic reviews are done to ensure they will serve the charity’s best interests.

Managing the risks:

  • Assess conflicts of interest and any restrictions posed by sponsors.
  • Be compliant with relevant checks, as well as providing the necessary information to volunteers who may support your work as part of an agreed volunteering scheme.
  • Carry out appropriate due diligence.
  • Apply proper controls on any financial or fundraising commitments.
  • Legal contracts and agreements – ensure you will have the resources to fulfil any contracts.
  • Seek professional advice when entering into office share agreements and complete risk assessments of shared spaces.
  • Control reputational risk and prepare a crisis management plan.

Officer liabilities and insurance

In making the tough decisions in response to the cost-of-living crisis, the risks and opportunities of changes must be evaluated. CEOs will be at the forefront of this, as well as trustee boards and executive teams. To minimise the risks of breaching duties, misleading or committing wrongful or imprudent acts, effective risk management should be carried out in all operations and key decision-making processes. Trustees, senior management and directors can all be personally liable for a range of reasons including:

  • Negligence.
  • Errors or omissions.
  • Wrongful acts (instances or allegations).
  • Poor administration of funds.
  • Misleading statements.
  • Reputational damage.
  • Breach of trust or duty.

Without the right trustees, directors and officers (D&O) insurance cover, the costs of defending and potentially settling the claim may need to be met by senior management individuals. For this reason, D&O liability insurance has become an essential component of most charities’ insurance programmes.

Managing the risks:

  • Act prudently and avoid exposing the charity’s assets, beneficiaries or reputation to undue risk.
  • Be familiar with the governing document.
  • Seek professional advice when needed, when unsure about duties or when required by statute.
  • Implement effective risk management and financial controls.
  • Know what areas of law might affect the charity’s activities, such as employment, health and safety, human rights and data protection.
  • Ensure that the charity has the resources to meet its requirements under any contract it signs, and understand the consequences if there is a breach of contract.

Speak to your charity insurance specialist about the appropriate covers and level of protection for your organisation.

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