With a tight job market, declines in giving, and inflationary pressures, 2024 presents concerns for nonprofit CFOs. In a Forbes article featuring a survey on top risks, CFOs highlighted talent, economic uncertainty, and cyber as top risks. Nonprofit leaders are embracing these 4 strategies to mitigate enterprise risk.

  1. Adopt Advanced Fraud Prevention

Fraud impacts nearly one in five nonprofits, swiftly eroding trust and reputation. Train your nonprofit’s employees and boards on how to recognize fraud and red flags to look for.

Key fraud prevention measures:

  • Limit Checks: Transition to electronic payments: ACH, bill pay, or wire transfer
  • Positive Pay: Use tools like ACH or Check Positive Pay to identify threats
  • Authorized Users: Limit transaction types and amounts for authorized users
  • Approvers: Require two approvers for check and electronic transfers
  • Reconcile: Review accounts monthly and report fraudulent transactions
  1. Foster Proactive Risk Management

HUB’s Outlook 2024 found 70% of nonprofits need to do a better job fostering risk mitigation. Create a risk map prioritizing financial, personnel, mission, and brand risks. Set up processes and form a committee for incident investigation. Risk management incurs costs, whether invested upfront or incurred after an incident.

Every nonprofit faces unique risks, with top areas to watch including:

  • Property: Stay proactive with property maintenance and safety improvements
  • Auto: Enforce driver controls and ensure sufficient insurance
  • Employees: Uphold a zero-tolerance policy against discrimination and sexual harassment
  • Cyber: Cultivate a cybersecurity readiness culture and assess your cyber liability coverage
  1. Prioritize Strategic Financial Insights

CFOs are spending less time on routine tasks and prioritizing strategic financial insights and enhanced forecasting. This shift requires automating tasks, scalable processes, real-time data, and accelerating financial closing. Concentrate on program sustainability by analyzing P&Ls and impact at a program level.

Shift more time to strategic financial leadership efforts:

  • Risk Management: Conduct scenario analysis of risks and develop contingency plans
  • Cash Flow: Allocate capital to growth areas and optimize cash flow for liquidity
  • Strategy: Lead ongoing discussions on strategies to increase financial sustainability
  • Budgeting: Adjust budgets and use rolling forecasts to support mission and goals
  • Reserves: Optimize investment policies to maintain and increase reserves
  1. Expand Financial Fluency
    Nonprofit CFOs need to expand financial fluency across boards, leadership, and staff. CFOs must foster clarity, ensuring an understanding of how operations translate into numbers. Clear, transparent financial data is a trust signal for donors, foundations, and boards. Leaders with financial acumen inspire confidence, rapidly adapt to risks and opportunities, and drive long-term success.

Key conversations to have with your board, leadership, and staff:

  • Performance: Use analytic tools to evaluate and optimize performance and profitability
  • Funding: Diversify funding sources, revenue streams, and expand strategic partnerships
  • Data-driven Insights: Prioritize and report on key metrics to track daily, monthly, and quarterly
  • Adaptability: Revise strategies and adjust budgets to evolving mission needs and goals
  • Capacity: Plan leadership development and strategic projects to engage, retain, and mentor staff

Take Steps in 2024 to Fortify Your Nonprofit’s Resilience

Nonprofits should examine their risk management strategy, identifying financial, operational, and brand risks to address this year and create a plan for incremental improvements over the next 2-5 years. Reach out for expert guidance on program profitability, enhanced forecasting, and strategic insights.

Authors: Kathy Gasperine, John Gillespie, Melissa Straka