August 21, 2015
Good Governance: Safer or Better?
Recent high profile press coverage has, once again, shone a light on
governance in the voluntary sector. But is there a danger of over reacting? How can we address the short term challenges while protecting the longer term?
Guest Blog by Nigel Kippax Managing Director of Consultancy Services
Recent high profile press coverage has, once again, shone a light on governance in the voluntary sector. While the specific details of each case may differ, the reaction of trustees and chairs will inevitably focus on 'strengthening' governance practices. But what does this mean and is there a danger of over reacting? How can we address the short term challenges while protecting the longer term?
When bad stories abound we all have a tendency to play
things safe, ensure we don't make any mistakes and perhaps, be a little more
risk averse. And with the front pages full of stories, most prominently featuring
Kids Company, its work with children, its financial woes, its demise and its potential
resurrection with new pop-star funding, this long list of negative press will
have virtually every charity board focusing internally and asking itself if
there's anything the press can find on them too.
When it comes to governance, much of the advice we receive
from the Charity Commission or from legal and accounting firms focuses on the
roles, responsibilities and liabilities of trustees i.e. compliance. We are encouraged to understand how we could mess
up and have the necessary control systems in place to help ensure that we don't.
Of course I agree wholeheartedly that every trustee must
understand their responsibilities and that they must always act in the best
interest of the charity,its beneficiaries and other stakeholders. But there is
a crucial question.
Does avoiding personal liability and minimising risk always
act in the best interest of these parties?
I would argue that it does not. It's a necessary activity
but by no means sufficient to fulfil a trustee's obligations. A broader
understanding of risk is needed within the context of a charity board.
How many organisations can you recall that have achieved
sustained success through focusing on avoiding mistakes? To grow their impact
charities need to change, and with change comes risk. In his excellent article
published in the Harvard Business Review in June 2012 Robert Kaplan describes
three categories of risk which adapt well for the UK voluntary sector.
What many boards
consider when they discuss risk and where the law and finance educated trustees
shine. It covers issues such as fraud; safeguarding and financial
reserves. Control systems need to be put in place to minimise these risks,but
risk does not start and end here.
The more entrepreneurial
leaders understand strategy risk very well. They accept that an organisation
cannot change, improve and grow its impact without taking risks. The mind set
required to address this category of risk will be different from preventable
risk and may benefit from a different trustee leading this discussion.
What's needed is a
leader able to evaluate the upside versus the potential downside and make
informed decisions within the context of the charity's stated strategy. It is
not possible to manage strategy risk on facts and data alone, a degree of
ambiguity must exist and therefore a high level of judgement must be applied.
The third category
includes those events that the trustees have no control over but never the less
may put the charity at risk. Issues such as global warming, war or
terrorism. For these, trustees need to undertake scenario planning and put
in place mitigating planning and actions.
When reacting to recent press coverage and considering risk,
trustees must understand the different categories and plan accordingly. They need to be aware that focusing too much
on compliance and not enough on strategy and performance could reduce rather
than enhance the impact their charity has on beneficiaries.,
A board that minimises preventable risk may be creating a
safer charity, but surely trustees should be aiming higher than this? Indeed, a
complete focus on risk as opposed to leading the organisation is a material
risk in itself.