Charities need to take a longer-term view of risk or face increasing threats to their prosperity and security, according to a new report by Ecclesiastical Insurance.

The specialist insurer has published its first Charity Risk Barometer, an in-depth study exploring the immediate and emerging risks facing the charity sector. It also highlights potential solutions, with expert commentary from leading thinkers in the sector.

The report asked charity leaders about the biggest risks facing them over the short- (12months), medium- (1-3 years) and long-term (5 years).

Funding continues to be the major concern for all charities. The research found it was the top issue for charity leaders for the short and medium term and the second biggest concern over the next five years.

Unsurprisingly, the impact of Brexit is a major concern for the year ahead, with more than half of charities citing it as a concern, followed closely by growing political instability. Brexit was more of an issue for larger charities and became less important to all charities over the longer-term.

In the wake of the Charity Commission’s criticism of Oxfam’s handling of the sexual exploitation scandal, reputational risks are also high on charities’ agendas, emerging as the biggest perceived risk over the long term.

The report also highlights a number of emerging risks including charities’ ability to attract and retain talent, stress-related burnout among staff and engaging with the next generation of supporters.

In these increasingly uncertain times, the report also highlights the need for charities to think more strategically about risk management to ensure their future prosperity.

Three-quarters of boards have risk discussions as a standing agenda item, but one in four charity leaders feel they aren’t spending enough time considering risk at a strategic level. Worryingly one in three small charities don’t spend any time considering strategic risk on a regular basis.

The research also found that many charities were taking a short-term view of risk. One in five charities is only looking ahead 12 months when considering their strategic risks, and just 40 per cent are looking beyond three years.

Angus Roy, charity director at Ecclesiastical Insurance, said:

“These are challenging times for the sector – uncertainty is the new norm and new risks are emerging all of the time. It is imperative that charities spend more time thinking about not only the potential rewards but also the risks they are facing, now and in the future. As a specialist partner to the charity sector, our role is to help customers manage their risks and our research shows that too many charities are taking a short-term view, which may be limiting their ability to grasp new opportunities and identify emerging threats. It is best, and most logical, to think about risks when a charity is looking at its three-to-five-year strategic plan.”

The report makes four over-arching recommendations:

  • Boards need to regularly evaluate their risks and set time aside to properly consider the threats to the charity’s prosperity and security.
  • Diversification is crucial to protecting charities from financial headwinds and to maintaining relative stability in an unstable world.
  • Fundraising models need to evolve more quickly to attract a new generation of supporters in a digital world.
  • Diversity of opinion and talent at board level will enable boards to move forward as confidently as possible in an uncertain world.

The Charity Risk Barometer follows conversations with key sector partners, including the Charity Finance Group, Institute of Fundraising, and Carers’ Trust, at a panel event last year and a survey of 200 charity leaders.