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Insights

Why your charity's risk register should include governance

Posted on 09th March 2021 in Charities and Social Enterprise

Posted by

Amy Laver

Partner and Solicitor
Why your charity's risk register should include governance

Kids Company has made the headlines again following the judgment of Mrs Justice Falk in the action brought by the Official Receiver against the trustees of the charity under the Disqualification of Directors Act 1986.  It’s a long and detailed judgment which we will not review in this insight, but it has brought, again, into sharp focus the role of trustees within a charity or not for profit organisation and the essential need for good governance.

Some risks to charities are obvious, loss of funding, reputational damage, fraud and loss of data; others require more consideration and understanding of the particular organisation. There are common misconceptions about the role of trustees, as highlighted by Mrs Justice Falk in her judgment, where she felt the Official Receiver had difficulties with the concept that trustees are (subject to a few exceptions) unpaid volunteers. They should be trained and supported in the same way as staff and volunteers delivering services. Poor governance and weak understanding of the organisation’s strategy and operations can lead to inappropriate decision making and increase the other risks to an organisation. 

The Charity Governance Code was updated in December 2020 and is relevant to all charities and not for profit organisations that deliver a public or community benefit and those who have a social purpose.  It is designed as a tool to promote and support the continuing improvement of governance within these types of organisations.

It is based on the assumption that those who commit to being trustees do so because they are committed to the relevant cause, understand their roles and responsibilities and wish to contribute to the organisation’s success and improvement.  More detailed guidance is set out under seven headings within the code, including organisational purpose, leadership, decision making and risk and control.

The code offers a good foundation for charities and not for profit organisations reviewing their risk profile around board effectiveness and governance understanding amongst trustees.  In the current uncertain period interrogating risk at a fundamental level and ensuring good governance as the basis for delivering their objects will benefit the sector as it continues to work around the multiple and varying challenges arising from the Coronavirus pandemic.

 

For more help and advice on governance and structure, please visit our charities hub page, or contact our dedicated charities team.

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