Risk Management for Humanitarian Organizations

Introduction

Non-government Organizations (NGOs) are functioning in a specific environment like conflicts, poverty, natural disaster, under donor’s funds and restrictions, local government rules, compliance between international and national laws are facing so many risks. It is now time to identify and assess those risks and finding their effective solution.[1]

Risk can be defined as the common thinking about what might go wrong in a NGO or any other organization[2]. In this context, more precise definition of risk is ‘the effects of uncertainty on NGOs objectives’. With the change in an internal dynamic as well as external environment in which an organization operates, potential risks arrive, vanish or evolve. Hence risk management is the process of coordinated activities for controlling or reducing risks. During risk management (RM), anticipating risks is the first step, then it aims at averting risks and finally at optimizing risks’ impact if they do happen.[3]

Description

This article is a direction for NGOs staff including country representatives, directors, senior staff, managers and any other staff who really want to improve risk management in their NGOs.[4] It will help them in formulating a risk management framework or policy for identifying, monitoring as well as managing risks in NGOs by providing a step-by-step approach.[5]

Source [6]:  (Careersin Audit, 2013)

Steps and key components are as follow:

1. Building the context

·     Organizations objectives taking into account

·     Identification of stakeholders

·     Identification of risk criteria

·     Identification of risk assessment criteria[7]

2. Risk assessment

·     What, when and how about the risks

·     Potential cost to money, time, and performance

·     Impacts of each risk

·     Source of the risk

3. Risk analysis

·     Analysis of existing controls

·     Consequences of the risk been considered

·     Application of likelihood criteria

·     Development of risk matrix

4. Risk evaluation

·     Comparison of the risk against se criteria

·     Development of guidelines about retention and escalation

·     Making decision for treating risk

·     Continue monitoring and reviewing risk

5. Risk treatment

·     Identification of treatment options

·     Assessment of all treatment options

·     Implementation of treatment plans

·     Analysis and evaluation of residual risks

·     Consideration of consultation and communication requirements[8]

The modern world’s environment in which NGOs are operating is evolving quickly, as is the process of the risk management functions and procedure[9]. The changes of the modern world are affecting not only NGOs but also the community and organizations which are serving and funding them[10]. NGOs must keep pace with modifications in the whole political, economic and cultural environment of the risk management practice for executing their missions and accomplishing their long-term goals[11]. Service or social changes oriented NGOs always operate in the dynamic, political, economic, technological and institutional environments hence the risk associated with them are huge[12].

Each NGO’s mission statement promises to improve undesirable aspects of the modern world. Risk management allow NGOs to modify the way they respond to risks which improves their functioning strategies. Several developed NGOs are changing their strategies so that risks can be mitigated in an effective way. However, change will bring uncertainty as well as risk in the path which has to be prevented and resolve.[13]

General Analysis

Risks identification, analysis and effective management in NGOs contribute to compliance and good governance. Further, an effective risk management can contribute to a strategic and business planning of the NGOs. It creates confidence among NGOs staff so that they can assist in delivering desired outcomes, making informed decisions about opportunities while managing threats to the acceptable extent[14].

Hence, some key benefits of risks management in NGOs are as follows:

·     Prepares the NGO for challenging events

·     Prepares the NGOs for improving overall resilience

·     Reduces the probability of critical potential costly surprises

·     Improves the decision-making quality among NGOs at all levels

·     Improves processes of effective planning

·     Enables NGOs for the effective execution of major decisions

·     Improves confidence of the stakeholders/donors in the NGOs

·     Prioritize resources, value of money

·     Helps in establishing clear roles, purposes and accountabilities for the NGOs staff

Source[15]: (Clarke, 2017)

In this way, effective RM improves overall performance of any NGO. These organizational risks can be internal or external that may affect the safety and security of staff and the reputation of the NGOs. For instance, any financial risk to a NGO will directly impact the human resources management processes and systems[16].

Furthermore, there are 3 broad areas of risk faced by the NGOs which require focus:

·     Contextual: External and often outside of the control risks.

·     Programmatic: Risks that does not fulfill program objectives and the needs of beneficiaries which can harm the functionality of NGO.

·     Organizational: Risks that effect the safety and security of NGOs and its staff reputation[17].

In order to measure the probability of a risk and its consequences, there are three key steps to be followed:

·     Step1: Choose a scale

·     Step 2: Label each point on that scale

·     Step 3: Provide more descriptive examples for every point on the scale

Actualization

After the implementation of the steps, “Risk Matrix” is required to assess the overall level of risk. The NGOs risk matrix is constructed for utilizing the levels of probability of risks and  their consequences as discussed in the previous steps.[18]

Source[19]:  (Careersin Audit, 2013)

Hence, overall risks measurement is obtained from the blend of probability and consequences. It increases from the minimum to maximum point while moving for bottom left to top right corner. According to the above instructions every NGO  need to develop a risk matrix to improve their organization[20]. Moreover, decision-making regarding escalation, retention and treatment comes into the next step of the risk management procedure of NGOs[21].

Source[22]:  (United Nations Somalia, 2018)

Recording risks information

Recording risks information comprises the risk analysis results and risks response planning. The purpose of the risk register is to hold and store all the risk information that is generated in risk management process. It helps in documenting the info coherently and systematically[23]. In this way, the process of implementing risk management in the NGOs can be illustrated with the help of figure represented below:

Source[24]: (Gartner, 2018)

The above model figure is demonstrating how the specific theoretical topics apply to reality which helps to model a risk management process for NGOs.

Discussion

Risk Management process is a set of activities the NGOs carry out for identifying, assessing, managing and monitoring the risks [25]. In this context, below figure is outlining the major steps involved in the RM process of the NGOs:

Source: (Sadgrove, 2016)

There are 5 key steps of an effective RM process for NGOs:

·     Identification of risks

·     Analysis of risks

·     Evaluation of the risks

·     Planning of risk response

·     Monitoring and review of the risks.

Additionally, in order to accomplish any project or task, senior managers of NGOs usually manage their ideas on the basis of four major  RM processes[26].They are as follows:

·     Step-I: Risk Identification

·     Step II: Risk Quantification

·     Step III: Risk Response

·     Step IV: Risk Monitoring and Control

Therefore, NGOs should mandatorily understand and identify the risks while planning any project for NGOs. After the risks are dispersed to different team members for effective handling, risk matrix should be use to evaluate the effect of the risks. In this way, each team can come up with a plan which can resolve the risks recognized[27].

Through execution and implementation of a proper RM process, NGOs will be able to identify their upcoming project’s strengths, weaknesses and opportunities. Risks assessment which depends on the preparation, planning and results will produce success in projects[28]. The importance of RM for NGOs can be highlighted through:

·     Successful Planning

·     Assists with Preparation

·     Assists Evaluation

·     Optimizes Results

Pros of RM for NGOs

Pros of the RM for NGOs on a local, national and international level are as follows:

·     Ensures safety from accidents sexual abuse, exploitation, crime and violence

·     Ensures reputational safety from damage to image and against fraud, corruption, theft and diversion

·     Ensures operational security in terms of removing inability for achieving objectives

·     Ensures security from legal and compliance issues

·     Ensures security of information from data breach and loss

·     Promotes capability to research freely with innovative methods

·     Helps in adapting of local situations and responding to local demands flexibly

·     Promotes capability to converse at all levels, since from the beneficiaries to the uppermost levels of administration or government.

·     Promotes collaborated work and handling the strategic plans

·     Managing past projects while nurturing risks associated with the projects

·     Stability of earnings and revenue which reduces loss and impact

·     Identification of likely threats

·     Provides supervision and identification of risks

·     Provides support, faster competition and new opportunities

·     Harvesting knowledge from the world[29].

Cons of RM for NGOs

On the other hand, managing the risks identified causes the waste of time to recompense the projects. It demoralizes the projects that shows huge risks for the system of NGOs[30]. Following are some cons of the effective RM for NGOs as follows:

·     Complex calculations and un-managed losses

·     Ambiguity, uncertainty and dependence on external entities

·     Risk Mitigation process[31] and difficulty during implementation

·     Performance and potential threats[32].

Source[33]: (AustralianGovernment, 2008)

General recommendations

In order to implement an effective operation from the perspective of risks analysis, identification and management there are some general recommendations which can assist the NGOs for their efficient operation in future[34].

·     The NGOs must develop a risk treatment plan before the occurrence of the risks

·     Before implementing the risk treatment plan, its effectiveness must be assessed

·     Residual risks must be evaluated and identified during occurrence of risks

·     Always create a new risk treatment plan for those residual risks.[35]

·     Communication and consultation unit must be there in the NGOs

·     NGOs must adapt to function with high-risk partners

·     NGOs should review and improve security of national-staff

·     While mitigating the risks in the NGOs, they must introduce innovation in the projects and processes to improve quality service.

·     Risks attached to innovation must be evaluated, analyzed and reduced with some distinct criteria.[36]

·     They must prepare for the host-country’s legal challenges

·     A NGO must always:

? Monitor and review risks

? Reduce and control risks

? Determine the risks appetite

? Prioritize and analyze the risks[37]

Conclusion

In conclusion, non-government organizations are functioning in a specific environment for example: conflicts, poverty, under donors’ funds as well as restrictions, natural disaster local government rules and regulations, defiance amid international and national laws hence they need to have an effective risk management process. Thus, this article has intended to identify risks occurred for NGOs during their project implementation, provided strategies and solutions for mitigating those identified risks. In this way, we have seen that how a risk measurement, evaluation, assessment, identification and analysis procedure can help in effective operation of the NGOs. Risk management allow them to imply new technologies, innovation, research, experimentation for the betterment of the society. It also allows NGOs to do effective, efficient and challenging work for the welfare of the society and community. In short, risk management is a way to manage uncertainty in an organization which ultimately enable them for the better execution of their services for the community.

References

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