<aside> <img src="/icons/info-alternate_gray.svg" alt="/icons/info-alternate_gray.svg" width="40px" /> What’s this about? Your organization will face a number of risks, each varying in magnitude and probability. Identifying key risks is an essential aspect of good governance.

What do I need to do? Use our risk register template to identify key risks and their expected impact, based on magnitude and probability. Then, devise mitigation strategies to limit the expected downside of any significant risks. Repeat this exercise annually.

Contents

</aside>

<aside>

Further reading

• Paul Hopkin: Fundamentals of Risk Management

Templates

• Risk register

Databases

</aside>

Risks you’ll face

You’ll likely face risks across all sections of entity setup.

This includes:

• Governance & compliance: Insufficiently clear policies, oversight, and controls might lead to strategic misalignment.
• Finance & accounting: The loss of a major donor might lead to you downsize your activities and operations. Inaccurate budgets might lead to cost-cutting, such as reducing salaries.
• Hiring & HR: Hiring the wrong people might affect the quality of your work and reputation.
• Brand & marketing: If your brand is connected to people, organizations, or communities that become disreputable, you might suffer by association.

You’ll continue to face risks after entity setup, during the day-to-day running of your organization.

In our opinion, compliance is among the greatest of risks to look out for and mitigate. This is because compliance risks that aren’t sufficiently managed can produce significant or irreversible legal issues. Legal issues can in turn be financially costly, reputationally costly, and might even threaten the continued existence of your organization.

• Frameworks for categorizing risk

Risk register

A risk register is a tool used to systematically identify, assess, and manage potential risks that could impact the success of a project or the organization.

We recommend that you complete our risk register template to identify key risks facing your organization.

We also recommend that the risk assessment exercise be completed and communicated to the board annually. We don’t recommend that any organization be completely risk-averse, but we do strongly recommend that the leadership is risk-aware. Developing a habit of routinely monitoring risks and putting mitigation measures in place will help ensure the organization avoids major issues.

Once the system is in place it’s fairly low maintenance to update.

• Presenting risks to the board

Engaging a lawyer

Engaging a lawyer can help you identify and mitigate key risks facing your organization.

Lawyers are particularly useful when it comes to:

• Understanding legal requirements — e.g. when you Understand your business structure.
• Drafting and reviewing documents — e.g. when you Create governing documents.
• Understanding your tax obligations — e.g. when you File forms with the government.
• Establishing governance policies and procedures — e.g. when you Create a staff handbook.

Besides these, lawyers can advise on risk management more broadly.

When engaging a lawyer, one key consideration is whether to seek pro bono or paid support. Pro bono support can be received through platforms like A41D’s development partner program or TrustLaw. However, we generally advise paid support, as pro bono clients may receive less engagement and/or commitment from lawyers. Paid legal support might cost ~$150 per hour, and after the initial entity setup, you might continue to engage a lawyer for ~2 hours for month.

Another key consideration is whether to engage a third-party lawyer or agency, or hire an in-house lawyer. Both approaches can be suitable, but we typically recommend smaller organizations begin by outsourcing to a third party. Once you reach a certain threshold it may make sense to hire in-house legal counsel.

< Obtain business insurance

Maintain a healthy board >