Why Charities Can’t Afford to Ignore Emerging Financial Risks
In today’s fast-evolving digital world, the charity sector faces new financial challenges that require immediate and strategic attention. As discussed in our interview with Carl Wakeford, founder of FinOps Partners, charities must recognise and manage the emerging financial risks to ensure resilience and sustainability. By focusing on cybersecurity, economic volatility, and compliance, charities can protect their resources, reputation, and ability to serve their communities effectively.
Cybersecurity: A Growing Concern
With more charities embracing digital platforms, the risk of cyber-attacks is on the rise. A cyber-attack not only exposes sensitive data but also threatens the trust of donors and supporters, which is critical for charities. According to Carl, “Cybersecurity isn’t always a top priority in the charity sector, but it absolutely should be.” To combat cyber threats, charities need to prioritise basic security measures, including:
- Firewall and Encryption: Establishing strong firewall protections and encrypting sensitive data can shield organizations from unauthorised access.
- Regular Training: Employees are the first line of defense. Charities must conduct regular training sessions to help staff identify and avoid phishing schemes and malware.
- Incident Response Plans: An effective incident response plan can save a charity from long-term repercussions by allowing a swift, organized response to data breaches.
Why This Matters for Charities: Cybersecurity isn’t a luxury—it’s a necessity. For charities, every pound spent on preventing a data breach could mean thousands saved in potential losses from fines and donor attrition.
Navigating Economic Volatility
Economic fluctuations have been a staple of recent years, and charities are not immune to the impact. Inflation, interest rates, and changing donor behavior all contribute to financial uncertainty. Carl recommends that charities build resilience through several strategies:
- Diversifying Income Streams: Instead of relying solely on grants and donations, charities can explore alternative revenue streams, such as partnerships and social enterprise initiatives.
- Agile Budgeting: Agile budgets that adjust quarterly allow charities to remain flexible, aligning spending with the current economic climate.
- Reserve Funds: Building a financial buffer enables charities to navigate lean periods without compromising their core mission.
Why This Matters for Charities: Economic resilience is crucial to maintaining operational continuity. By planning for financial uncertainty, charities can avoid a reactionary approach and instead take proactive measures to protect their resources..
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Staying Compliant in a Complex Regulatory Environment
For charities, compliance is a multifaceted issue. As Carl explains, “Regulations around data protection, anti-money laundering, and donor reporting are getting stricter.” To stay compliant, charities should:
- Assign Compliance Responsibility: Designate a team member to monitor regulatory updates and ensure policies align with current standards.
- Conduct Regular Audits: Audits, whether in-house or third-party, provide an objective look at potential vulnerabilities in a charity’s compliance practices.
- Provide Ongoing Training: Compliance is a team effort. Regular training sessions keep staff informed and equipped to uphold regulatory standards.
Why This Matters for Charities: Regulatory compliance is not only about avoiding fines; it’s about protecting reputation. By establishing a robust compliance framework, charities build credibility with donors, who increasingly value transparency and accountability.
Final Thoughts: A Proactive Approach to Financial Risk
Emerging financial risks in the charity sector are complex and evolving. However, by addressing these challenges proactively, charities can build a resilient foundation that supports long-term impact. Charities must view risk management as an investment in sustainability—protecting resources, reputation, and ultimately, the ability to serve.
Author Spotlight
Carl Wakeford, ACA
Carl began his career within the Big Four where he spent four years auditing many public and private sector organisations, and qualifying as a Chartered Accountant. With a passion for business resilience, Carl specialised in risk consultancy, helping organisations strengthen financial processes and controls. Since leaving the Big Four, Carl has worked within multinational commercial finance teams, fast paced start-ups, the charity sector, and is now the CEO of FinOps Partners.
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