FAQs - Risk mitigation for charities

Active risk management is a key duty of charity trustees. The Covid-19 pandemic is an example of a risk arising.

The Charity Commission has extensive and helpful guidance to be found at CC 26 - Charities and Risk Management. Although charities will not have prepared specifically for the current circumstances they should have had in place a disaster management plan.

What immediate actions should trustees be taking?

On the basis there is a plan trustees should be both implementing this and, in parallel, be reviewing it to ensure it is sufficiently extensive.

Given the necessity for remote working, there should be clear delegated authority to staff or individual trustees to make key decisions quickly. Lines of authority and decision making should account for possible unavailability through illness.

Trustees should consider the particular risks to the charity's operations in the following areas:

-        Health and safety - for staff, volunteers and beneficiaries;

-        Operational risk – security (in respect of property from damage and theft); functionality of IT systems (storage and communications); ability to deliver contracted services (we have provided a separate note on whether contracts can be broken);

-        Financial risk – short term cash flow and review of budgets; asset protection (including cash and investments); immediate and longer term funding issues; specialist insolvency advice may be necessary.

What if a charity doesn't have a plan?

Whilst this will be difficult in circumstances where trustees and any management will be operating remotely, they should now be establishing a risk strategy and a plan. Annex 2 of the Commission guidance should be used as a starting point.  The current situation should provide the impetus to work through this as many of the issues in it will be tested in the current environment. Preparing the plan should be delegated to a small team and then reported back to the trustees for review and approval. 

Will insurance provide cover for any losses arising?

It is quite possible that insurance policies will not cover issues arising from Covid-19.  That said, it is important that trustees review policies (a) to see what cover the charity does have and (b) see what remedial actions they may need to take to avoid the policy being invalidated (e.g.  in relation to empty buildings). It may be necessary to have discussions with brokers about such provisions.