Many nonprofits don’t think of fundraising as an inherently risky process. This is in large part because two different departments handle risk management and fundraising. When these two teams operate without consulting one and other, it creates the potential for risky situations. Any organization relying on donations needs to familiarize themselves with the top fundraising risks so they can develop strategies to manage them.
Falling Short of Fundraising Goals
Missing fundraising goals by a few hundred dollars does not mean the end of a nonprofit; however, missing the mark by thousands can disrupt charitable organizations. From unrealistic goals to taking long-term donors for granted, there are several reasons that fundraisers fail. When this happens, nonprofits may have to cut back on services and programs.
To prevent this problem, nonprofits need to take a good look at their fundraising organizers. If the panel is comprised of all like-minded individuals, there is likely not enough diversity. Diverse points of view can allow individuals to point out potential problems with the fundraising campaign and fine tune it to ensure success.
Confusing Compliance with Transparency
The internet has allowed donors to connect with and research nonprofits in ways they could not in decades past. However, while it is easier than ever for individuals to donate to charities, they also want to know more about who leads the nonprofit, how the nonprofit spends its donations, and how effective the nonprofit is at carrying out its mission.
Many nonprofits confuse transparency with compliance. The government requires nonprofits to disclose certain pieces of information. Transparency is a conscious decision charitable organizations make to disclose the information their donors want to know. Failing to do so can result in the loss of donors due to mistrust. If a nonprofit refuses to answer donor questions about where their donations go, the donor will assume the organization has something to hide and may rescind their offer to contribute.
Accidental Patron Disrespect
No nonprofit calls existing and potential donors with the intent to disrespect or irritate them, but it happens all the same. To avoid treating donors with lack of respect, nonprofits should avoid the following:
- Calling donors early in the morning or late in the evening
- Calling during dinner hours
- Calling over and over again
Disregarding Donor Requests
Ignoring a donor’s request for how to use his or her donation can have disastrous results. While a generous donation may seem like a windfall, it may come with strings attached. Donors who make significant contributions often include instructions on how they would prefer the nonprofit use their funds. If the nonprofit ignores these directives, they may lose the donor or find themselves in court.
To mitigate this risk, charitable organizations need to consider the factors before accepting donations that come with conditions.
- Are the donor’s requests reasonable and can the nonprofit accommodate them with their given resources?
- Can the nonprofit comply with the request in its entirety?
- How will the nonprofit track the use of the donation?
- How will the nonprofit keep the donor informed and show how they used the donor’s gift?
The above represent just some of the most prevalent risks nonprofits can encounter during fundraising. SteelBridge Insurance Services can help nonprofits identify any fundraising risks as well as develop solutions to mitigate them. To learn more, contact us today.