Although all organizations operate in an environment that is inherently characterized by risk, most nonprofits have limited exposure to the practice of assessing and addressing their vulnerabilities to risk. Assessing, managing, and mitigating risk is a crucial endeavor for all nonprofits regardless of size, age, issue area, and location. We believe that when organizations consistently engage with risk, they not only head off potential crisis, they position their organizations to successfully fulfill their missions, grow strategically, and present their organizations as smart investments to savvy donors and funders alike.
Social sector risks can include multi-year contracts with flat funding, complex program eligibility, increasing PS and OTPS obligations, capped overhead rates, growing community demand, and rigorous performance requirements to name just a few. As recent nonprofit closures and collapses illustrate, failure by executives and boards to identify, assess, manage and mitigate risk undermines the sustainability of the organizations they lead and poses a serious threat to the millions of people who count on them.
CRE’s Risk Management practice enables and supports nonprofits to regularly and proactively engage with risk. To aid this, CRE developed a digital tool, the CRE Fitness Test (CREFT), which assists nonprofit organizations in identifying and assessing vulnerability to risks. The tool — and its report — can also serve as the starting point for creating customized risk mitigation and organizational fitness plans.
Using elements drawn from user-centered design, state-of-the-art organizational assessment, cross-sector research, and CRE’s nearly 40 years of providing organizational development support, CREFT is the first online platform to take a comprehensive view of nonprofit risk. CREFT’s holistic assessment of an organization’s risk (also called “enterprise risk”) is unique in the nonprofit sector.
The tool considers risk indicators and organizational activities across:
- Six operational and performance categories
- 21 sub-categories or domains spread across these categories
The assessment’s 160 survey items include:
- Risk indicator questions designed to highlight sources of risk and help identify patterns of vulnerability called risk clusters
- Risk scenarios designed to gauge organizational response to more significant risks
CREFT has three distinct values:
- It creates a framework for focusing and educating organizations on vulnerability and risk.
- It allows nonprofit leaders and boards to identify risk vulnerabilities specific to their own organization as a first step toward managing or mitigating them.
- The data collected through CREFT can be used to build a body of evidence that tells a story about risk in the nonprofit sector.