Risk Navigation


Trusted ministries understand risk-taking and risk management.


 

by Dan Busby

 

If no one ever took
risks, Michelangelo
would have painted
the Sistine floor.
Neil Simon

When Tony Hayward became CEO of BP in 2007, he vowed to make safety his top priority. He instituted requirements that all employees use lids on coffee cups while walking and refrain from texting while driving.

Then three years later in 2010—while Hayward was still the CEO—the Deepwater Horizon oil rig exploded in the Gulf of Mexico, causing one of the worst human-made disasters in history.

The disaster was attributed to management failures that crippled the ability of individuals involved to identify the risks they faced and to properly evaluate, communicate, and address them.

Placing lids on coffee cups while walking and refraining from texting while driving were both sensible rules, but they did not touch the largest risks BP faced.

Following Christ is a wild
adventure full of risk,
frustration, excitement, and
setbacks. It is not an evening
stroll in a planned community
along a well-manicured path.
Larry Crabb, Jr.

We rarely give risk management adequate attention. When we do, too often we assume it can be solved by drawing up lots of rules and making sure that employees follow them.

The BP story reflects a common problem that extends to Christ-centered ministries. Inadequate risk management can have a tremendous, negative impact on the trust level of a ministry.

Risks should be managed proactively instead of reactively. Too many ministries use a piecemeal approach as they review risks. And they are often left wringing their hands when the “risk truck” backs up to the loading dock and offloads a very large risk package.

It is difficult for ministries to place a priority on risk management unless they understand the biblical view of risk. Five Scriptures shape this idea in our thinking:

People who don't take risks
generally make about two big
mistakes a year. People who do
take risks generally make about
two big mistakes a year.
Peter Drucker
  1. We are stewards of resources that belong to God (1 Cor. 9:17).
  2. Faithful stewardship of His resources brings blessings (Matt. 24:45).
  3. The lack of faithfully stewarding His resources brings a curse (Matt. 24:50).
  4. Understanding risk factors relating to His resources we manage demonstrates stewardship (Luke 16:2).
  5. Risk management involves putting on the whole armor of God to stand against the devil’s schemes (Eph. 6:10–18).

Some risks can be managed by a rules-based approach while other risks need dialogue. Using the following three categories may be a helpful approach[1]:

  1. Preventable risks. These risks arise from within the ministry. Examples of preventable risks include
Managing risk is very
different from managing
strategy. Risk management
focuses on the negative—
threats and failures rather
than opportunities and
successes.
Robert S. Kaplan
and Annette Mikes
  • Statement of faith. Does the ministry’s statement of faith fully encompass its beliefs? If the statement more clearly identified the ministry’s religious beliefs, would the ministry be better protected?
  • Governing documents. Are the governing documents up to date? Is the ministry complying with all elements of the governing documents?
  • Policy and procedure manuals. Are board and staff policy and procedure manuals kept up to date, and are they followed?
  • Tax status. Does the ministry participate in any practices that could place its tax-exempt status at risk?
  • Legal compliance. Does the ministry comply with all federal, state, and local laws?
  • Financial controls. Are adequate financial controls in place to ensure strong stewardship of ministry resources?
  • Insurance coverage. Is insurance coverage regularly reviewed to determine its adequacy?
  • Physical safety. Especially for ministries serving children or the elderly, are proper steps taken to ensure their physical safety?
  • Succession planning. Does the board regularly review succession plans for the ministry’s top leader?
  • Key operational areas. Are key operational areas such as physical security, network security, and other areas regularly reviewed for risks?
There is nothing more important
for a CEO than having the right
strategy and the right choice of
goals. And for the board, the
right strategy is second only to
having the right CEO.
Ram Charan
  1. Strategic risks. When a ministry significantly expands or contracts programs, physical facilities, staffing levels, and more, a ministry assumes a degree of risk. Here are some examples:
  • Building a new physical facility. The construction or acquisition of a new facility, especially if there is debt financing, represents strategic risks.
  • Expanding to serve in a new region, city, or country. Expanding the out­reach of a ministry may present strategic risks.
  • New programs and services. Expanding ministry programs and services may increase strategic risks—especially when it involves hiring additional full-time staff.
  • Decreases of ministry programs and services. When a ministry is in a retraction mode, strategic risks may be greater than when the ministry is expanding. Decisions about staff and facility reductions can be treacherous.
  1. External risks. Some risks are beyond the influence or control of a ministry. These risks may include natural and political disasters and major macro-­economic shifts.

It is not possible for a ministry to prevent certain external risks from occurring. The management of these risks must focus on identification (they tend to be obvious in hindsight) and mitigation of their impact as soon as possible.

Fortunately or unfortunately,
The one predictable thing in
any organization is the crisis.
That always comes.
That's when you do depend
on the leader. The job of the
leader is to build an organization
that is battle-ready, that has

high morale, that knows how to
behave, that trusts itself, and
where people trust one another.
Peter F. Drucker

Max De Pree writes, “While a compliance-based approach is effective for managing preventable risks, it is wholly inadequate for strategic risks or external risks, which require a fundamentally different approach based on open and explicit risk discussions.”[2] However, this is easier said than done. “We tend to be overconfident about the accuracy of our forecasts and risk assessments and far too narrow in our assessment of the range of outcomes that may occur.”[3] This causes us to wait until it is too late to think about and discuss risks.

Two critical ministry risks, though subtle, are the loss of credibility and relevance.

  1. The loss of credibility. Credibility takes years to earn, but it can be lost in a moment. The Internet and social media have taken the risk of losing credibility to an entirely new level. When a person cannot get satisfaction on a credibility issue from the ministry, the media is his new best friend.

Some of the ways ministries lose credibility include loss of the biblical stewardship context in which it should function, loss of staff confidence in the leaders and/or the ministry, loss of givers’ confidence in the leaders and/or the ministry, loss of the board’s confidence in leaders and/or the ministry, a major fraud incident, and challenges to its tax-exempt status or other compliance issues.

Risk mitigation is painful,
not a natural act for
humans to perform.
Gentry Lee

A loss of credibility may be evidenced in one of the following ways: high staff turnover, downturn in giving, high financial exposure, high board turnover, and unfavorable media attention.

The loss of credibility may be avoided by placing high priority on stewarding that which God has entrusted the ministry, depending on the Lord for guidance in all matters (Jas. 1:5), avoiding extreme positions, and following high standards of integrity.

  1. The loss of relevance. When relevance slips away, it leaves at an imperceptible pace. Relevance has a tendency to deteriorate. Board members are often the last to know about lost relevance.

Intervening in the loss of relevance is what Max De Pree calls the “interception of entropy.”[4]

The sterling reputation
is better than striking it rich;
a gracious spirit is better than
money in the bank.
Proverbs 22:1

We often fail to see relevance as it departs because the gradual loss of relevance is difficult to measure, the loss of relevance is often obscured by “smoke and mirrors,” we often rely on anecdotal information regarding the ministry’s relevance to our constituents, we underestimate the power of the Internet and social media to change how constituents think about a ministry—how these forms of communication can control the message, and we do not adequately track changes in giving patterns.

 A loss of relevance will be evidenced by gradual deterioration of the ministry’s significance in the eyes of constituents, when people stop telling tribal stories or cannot understand them, and a tendency toward superficiality.

A loss of relevance can be avoided by sensing the nudging of the Holy Spirit, communication with constituents which will evidence whether loss of relevance is occurring, e.g., in-person conversations with key constituents, surveys of constituents, etc., avoiding the discounting of negative information, and truth-telling.

He who defends
everywhere
defends nowhere.
Sun Tzu

Identifying and taking steps to mitigate the ministry’s most significant risks. Identifying risks requires intentionality on the part of both the governing board and the staff. It is impossible to identify all risks in advance. Some risks will creep up on us no matter how high our risk antenna may be. However, this does not negate the need to identify and mitigate risk.

A ministry’s governing board should actively ask the “What if?” question when the top leader proposes new or major new programs or changes to programs, recommends new facilities, mergers, and more. The “what ifs” stress test the strategies.

Proactive boards regularly devote time on the board agenda to discuss and discern potential risks.

For guidance as we arm ourselves against risks, consider praying this prayer at your next board meeting:

God is strong, and he wants you strong. So take everything the Master has set out for you, well-made weapons of the best materials. And put them to use so you will be able to stand up to everything the Devil throws your way. This is no afternoon athletic contest that we’ll walk away from and forget about in a couple of hours. This is for keeps, a life-or-death fight to the finish against the Devil and all his angels.

Proactive boards
regularly devote time
on the board agenda
to discuss and discern
potential ministry risks.

Be prepared. You’re up against far more than you can handle on your own. Take all the help you can get, every weapon God has issued, so that when it’s all over but the shouting you’ll still be on your feet. Truth, righteousness, peace, faith, and salvation are more than words. Learn how to apply them. You’ll need them throughout your life. God’s Word is an indispensable weapon. In the same way, prayer is essential in this ongoing warfare. Pray hard and long. Pray for your brothers and sisters. Keep your eyes open. Keep each other’s spirits up so that no one falls behind or drops out (Eph. 6:10-19).

 

  Questions   for reflection

 

  1. How does the ministry you serve proactively identify risks?
  2. What are the three largest risks facing your ministry?
  3. Does the ministry place sufficient emphasis on strategic and external risks?
  4. Does the ministry adequately consider the potential loss of credibility?
  5. Does the ministry properly consider the potential of lost relevance?
  6. Does the ministry’s risk management adequately consider their witness for Jesus Christ?

 


[1] Robert S. Kaplan and Anette Mikes, “Managing Risks: A New Framework,” Harvard Business Review (June 2012), 49–60.

[2] Ibid.

[3] John S. Hammond, Ralph L.Keeney, and Howard Raiffa, “The Hidden Traps in Decision Making,” Harvard Business Review (September 1998), 7.

[4] Max De Pree, Leadership Is an Art, reprint (New York: Crown Business, May 18, 2011), 110.

 

From TRUST: The Firm Foundation for Kingdom Fruitfulness, ECFAPress, 2015, www.ECFA.org/KnowledgeCenter


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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