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Risk management report — CBO: Collaboration = Better Off

By Peter A. Persuitti

RISK REPORTAt this year’s BoardSource Leadership Forum (BLF) — a gathering of more than 800 non-profit trustees, directors, executives and specialized service providers — I was struck by a fundamental conversation: Someone raised the issue of why we call ourselves “nonprofit.”

The query brewed as a result of the number of corporate executives in the audience on hand for training and awareness-building as it relates to their own nonprofit-serving governance roles. This tension is not uncommon; in fact, as someone who represents a for-profit corporation with a vertical specialization in the third sector, it’s quite familiar.

Perhaps the bubbling of interest was also a result of the number of BLF sessions that related to efficiency, transparency, accountability and metrics.
It’s a theme that has exacerbated a fissure that exists between the worlds of for-profit and nonprofit; something which, for me — having worked on “both sides of the aisle” — seems anachronistic.

I will never forget a frustrated Peter Drucker lamenting years ago, with a heavy German accent: “Why do we call ourselves ‘nonprofit,’ when the fact remains that profitability is vital to our sustainability?” To this point, I’ve been so impressed with the tools of technology (and equally with recent management appointments in nonprofits) that I’ve been encouraging nonprofits to raise their game relative to risk retention. This can be achieved with a more sophisticated form of reinsuring their liabilities and operations — captive, risk retention group — so that nonprofits’ efforts are rewarded through an ROI on their capital (i.e., a surplus), generating a “profit center” for mission protection.

I believe the time has come for a more holistic view of how we manage, whether it’s our company, our organization or our household. (Interestingly, the word economics actually comes from two Greek words — Oikos and Nomia — whose earliest origins relate to taking stock of the affairs of the home.) I believe this blurring is manifest in much of what I am witnessing:

  • For-profit executives leaving a life of “success,” corporately, for a life of “significance” in a mission-based organization (Bob Buford’s theory) at a mid-point in their lives;
  • For-profit executives sitting on non-profit boards advocating for more Enterprise Risk Management (ERM), a more sophisticated form of risk management; and
  • A tidal wave of interest among emerging generations in the non-profit sector — for careers, volunteerism and engagement.
    Another concept of this blurring relates to the need for nonprofits to see resources, talent, contribution and solutions in their non-profit, community-based neighbors. In fact, it appears that risk management is no longer an “organization issue,” per se; you can have the best-laid plans, but if you aren’t aligned with your community, you risk vulnerability.

Additionally, so many recent security breaches point to the need for community-based solutions that are global, not just US-centric.
Below is a diagram I raised with a faith-based nonprofit to demonstrate how its approach to risk might, more effectively, be to find greater impact through alignments within the local community.

PersuittiGraphic1Engaging your community

Identifying engagement for a local ministry protection committee

Perhaps now is the time for “nonprofits” to change the semantics of their sector to a broader Community-Based Organization (CBO) concept. In fact, one idea which emerged at this year’s BLF gathering was an alternative label for a nonprofit: CBO.
Perhaps — as CBOs — we will more effectively live out our missions, starting with a positive, inclusive versus a negative (“non”) dynamic. And, no doubt, we’ll better manage risk through these alignments.

Ultimately, we’re better off with collaboration!

Peter A. Persuitti (@ppersuitti) is managing director, Religious Practice, at Arthur J. Gallagher & Co. in Chicago. Gallagher is a financial services firm specializing in insurance brokerage, benefits and retirement consulting, claims administration and advocacy, institutional investment and fiduciary services, alternative risk financing and program administration and risk management. As a dedicated Religious Practice, Gallagher works with more than 24,000 non-profits around the world.


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