There will be some tough decisions that will be made in response to cost-of-living pressures. CEOs will be at the forefront of this, as well as trustee boards and executive teams. To minimise the risks of breaching duties, misleading or committing wrongful or imprudent acts, effective risk management should be carried out in all operations and key decision-making processes. Trustees, senior management and directors can all be personally liable for a range of reasons including:
- Errors or omissions.
- Wrongful acts (instances or allegations).
- Poor administration of funds.
- Misleading statements.
- Reputational damage.
- Breach of trust or duty.
Without the right trustees, directors and officers (D&O) insurance cover, the costs of defending and potentially settling the claim may need to be met by senior management individuals. For this reason, D&O liability insurance has become an essential component of most charities’ insurance programmes.
Steps to managing these risks:
- Act prudently and avoid exposing the charity’s assets, beneficiaries or reputation to undue risk.
- Be familiar with the governing document.
- Seek professional advice when needed, when unsure about duties or when required by statute.
- Implement effective risk management and financial controls.
- Know what areas of law might affect the charity’s activities, such as employment, health and safety, human rights and data protection.
- Ensure that the charity has the resources to meet its requirements under any contract it signs, and understand the consequences if there is a breach of contract.