Crystal & Co., a worldwide risk and insurance advisor, has released the results of its Nonprofit Risk Survey, presenting a snapshot of risk awareness and exposure among U.S. nonprofit organizations, including human services, foundations, and community service, educational and religious organizations. Among its key findings, Crystal & Co.’s study revealed that 22 percent of nonprofit organizations surveyed have a dedicated risk manager. For the majority of organizations surveyed, responsibility for corporate risk and insurance was handled by the organization’s finance team, or by the organization’s human resources, operations, or legal departments.
The study, which analyzed nonprofit organizations’ risk identification and priorities, strategic and operational challenges, and insurance purchasing patterns, indicated that 80 percent of the participating organizations had undertaken an independent assessment of their corporate risk and insurance program at least once in the last three years. However, nearly 7 percent said that they had never done an independent assessment, and only 36 percent of organizations surveyed had assessed their risk within the past year.
“For a nonprofit organization, risk management is paramount because it’s crucial that this sector protects its operations, personnel, and reputation as complex risks continue to evolve,” said John C. Smith, executive vice president at Crystal & Co.
Jamie Crystal, executive vice president at Crystal & Co., stated, “Our research showed that small nonprofit organizations are arranging only the most basic forms of insurance, not necessarily those that will be vital as they grow. We often advise that smaller organizations should promote greater Board-level engagement in risk management, especially since they tend to also lack professional risk management expertise in-house.”
Nonprofits are also not allocating enough dollars to properly protect against risk. The majority of respondents noted that they spend less than 0.25 percent of annual revenue on corporate insurance. But for adequate coverage, this percentage should be closer to 1 percent, meaning that at present, organizations are buying the minimum and not protecting against risks of an evolving organization.
The Nonprofit Risk Survey also pointed to a strong disconnect between top strategic challenges identified by nonprofits and their corresponding insurance portfolio. For example, diversifying revenue streams will require fundraising efforts, with increased reliance on media and technology likely. Yet media liability, network security, and privacy liability (cyber risk) were within the bottom five types of insurance currently in nonprofit insurance portfolios among the respondents. Furthermore, the larger the organization as measured by annual revenue, the more its Board of Directors was engaged in risk management, according to the study.
A total of 116 responses to the nonprofit risk survey were received from all sectors of nonprofits. The nonprofit sector constitutes a diverse range of organizations across a wide array of differently sized organizations which can be categorized under different subgroups ranging from foundations and associations to education and research to religious organizations.
The survey is a broad representation of the U.S. nonprofit sector at large, as there was a representative mix of respondents across a number of sub sectors operating within the nonprofit space. It looked at organizations with annual revenues ranging from $20 million to greater than $500 million. The study was conducted among senior executives working in nonprofit entities in the U.S. with revenues in excess of $20 million. More than 100 professionals from the nonprofit sector in the U.S. undertook the survey of which 94 percent comprised CEOs, CFOs, directors, presidents, vice presidents or other senior management members. Mid-management executives accounted for the remaining 6 percent.
Crystal & Co. is headquartered in New York, with 10 offices across the United States. Crystal & Co. is a founding member of Brokerslink, a global alliance of independent insurance brokerages.
Source: Crystal & Co.