Managing Risk

This page provides some simple guidance. This guidance together with a more detailed worked example is available in pdf form  and also a similar, but more detailed document on risk assessment from the Baptist Church.

1 As good practice, all parishes should try to manage the risks to which they are exposed. The largest parishes have a legal obligation to include in their Annual Report a statement “confirming that the major risks to which the charity is exposed, as identified by the trustees, have been reviewed and systems or procedures have been established to manage those risks.”

2 The first step is to identify the types of risks that may occur. The following headings may help you to organise your approach.

Governance risks – the skills, competence & organisation of the PCC etc

Operational risks – health & safety, employment, child protection etc

Financial risks – reserves, cashflow, investments, income stability, fraud etc

External risks – demographic & employment changes, public reputation etc

Regulatory risks – fundraising, disability discrimination, Inland Revenue …

See below for a more detailed list. You may find our “minimising risk” checklist useful at this stage.

3 Next measure the likelihood of each risk occurring. It is generally sufficient to assign most risks to either “high probability” (ie likely to occur in the next 5 to 10 years) or “low probability” (ie not very likely to happen in the next decade). Assign the “high” risks a numeric value of 2, and the “low” risks 1.

4 Next try and assess the likely impact of each risk in terms of cost and inconvenience. Again use “high” — say an impact of more than £1,000 — and “low” categories, valued at 2 and 1 respectively.

5 Conceptually, you can now assign each risk to one of the 4 boxes in the following table. The probability and impact ratings have been multiplied together to give an assessment of the relative scale of risks involved. Those activities in the “4” box in the SE corner of the table need to be stopped, or alternative (less risky) ways of achieving the same objectives developed. The PCC needs to spend most of it time working on the activities in the two boxes labelled “2”, containing an element of either high probability or high impact.

  Probability of risk occurring
Low = 1 High = 2
Impact on church if risk occurs Low = 1 1 Accept risk. 2 Establishpreventative and detection measures.
High = 2 2 Insure against risk and establish a contingency plan. 4 Abandon activities.

6 Concentrating on the highest risks, you can then develop a more detailed analysis on similar lines to this table:

Risk Keys stolen or lost Loss of generous members through death, moving away, arguments Risk C
Likelihood of occurrence Low to medium1 — 1.5 Low 1  
Severity of impact High 2 High 2  
Overall risk score 2 – 3 2  
Control procedures Restrict keys to very few people.
Theft insurance.
Pastoral sensitivity.Thank you letters.  
Residual risk (££ estimate) £500 excess £4,000 pa  
Monitoring processes Key register Review donors.  
Responsibility Warden AB Planned Giving Secretary  
Further actions required Ensure local locksmith only makes authorised copies of keys. Promote legacies.
Ask movers to join Friends.
Annual stewardship renewal
 
Review frequency Annual Annual  
Review dates September 04 etc November 04 etc  

7 The following lists may help you to identify some of the key risks to consider. The lists are not comprehensive, and are simply meant to help get you started. There will always be local factors and issues to consider.

Governance

  • Activities outside ecclesiastical objectives
  • Lack of key skills (eg treasurer, organist)
  • Lack of budgets and forward plans
  • Conflicts of interest
  • Confidentiality issues
  • Lack or loss of records

Operational risks

  • Fire & lightning, flood, storm etc
  • Volunteer competencies
  • Health & safety
  • Theft of valuables
  • Vandalism
  • Employment issues
  • Computer failure
  • Failure of phone, gas/oil or electricity supplies

Financial risks

  • Fraud
  • Budget cost over-runs
  • Income tax and VAT on trading activities
  • Cashflow sensitivity
  • Large increase in parish share required
  • Loss of regular income from members
  • Misuse of restricted or endowment funds
  • Loss of fees, rents etc

External risks

  • Upsetting local residents
  • Scandal at Church school
  • Economic recession affects income
  • Misinformed press comment
  • Local demographic changes
  • Competition from other local churches

Regulatory

  • Child protection
  • Data protection
  • Disability discrimination
  • Charity Commission
  • Ecclesiastical canon law
  • Unfair discrimination, equal opportunities . . .
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