Business leaders are apprehensive. Amid ongoing economic uncertainty and growing reputational challenges, nonprofit organizations have no choice but to focus on protecting themselves from emerging and existing exposures.

How to Navigate the Rough Waters of Financial Uncertainty

Americans are giving less. Just  two of three Americans  made individual donations in 2023, down from eight in 10 back in 1983.

Government grants and contracts, which make up roughly one-third of nonprofit funding, are another important source of funding—and one that has remained fairly steady.

Unfortunately, total charitable giving can’t seem to keep up with the rise in expenses. Instead, it declined 2% when adjusted for inflation.

This all points to one uncomfortable truth: Nonprofit organizations need to consider other ways to collect new revenue. Consider these tips:

• Seek out different sources of funding. Corporate and foundation giving are both growing sources of revenue for nonprofits, and government contracts can be an especially lucrative source—especially if your services are targeted toward immigration and housing.
• Explore new partnerships. Consider reaching out to nonprofits that offer similar services to see if you can collaborate to overcome mutual challenges. According to the HUB Survey, nearly half of nonprofit leaders were considering a merger or acquisition in the next 24 months.

Note that mergers and acquisitions come with added risk. Nonprofits should seek out the support of a trusted advisor who has experience with M&A pitfalls across the whole process. An insurance broker who specializes in nonprofit coverage can be invaluable in securing appropriate coverage for the new organization, while mitigating latent liabilities.

How to Strengthen Your Struggling

Attracting and retaining talent is a real struggle for the nonprofit sector, where 20% of employees are living paycheck to paycheck. The good news is that nonprofit leaders recognize there is an issue to be addressed, with nearly half of respondents to the HUB survey identifying it as a major focus.

Another major focus is addressing the reputational challenges associated with employment-related lawsuits. Discrimination charges were up 10% between 2022 and 2023—and the reputational harm from such charges not only impairs a nonprofit’s ability to fundraise but also makes it harder to attract and retain talent. Even volunteers can be negatively impacted.

Nonprofit organizations need to consider other ways to attract and retain talent. Consider these tips:

• Total rewards: Develop an appropriate reward strategy to build excitement about the organization and create a people-centric culture that appreciates and protects its staff and volunteers.
• Data analytics: Use the data you have to determine what employees want or need—without increasing costs.

Some benefits, such as access to personal insurance or financial wellness tools, can be genuine differentiators for employers, especially if they satisfy key needs or wants.

How to Efficiently Manage Your Risk

The single most important thing any nonprofit can do to manage risk is to develop a comprehensive risk management strategy.

Unfortunately, many nonprofits are still skipping this step and responding to risks situationally. Those that implement enterprise-wide risk management (ERM) will promote cross-disciplinary collaboration and alignment—from the CEO and board members to staff and volunteers—a critical underpinning of mission success.

While robust commercial insurance is a critical element of that risk strategy, many nonprofits are challenged to secure the amounts of protection they need.

Nonprofit organizations should consider coverage for specific risks, despite the expense. Consider these vital coverages:

• Misconduct and abuse allegations.  Limited insurer capacity has complicated the quest for this coverage. Most carriers expect the market to harden, and they will insist that applicants have meticulous abuse prevention policies in place before offering coverage.
• Cyber-related threats. Nonprofit organizations, like many businesses, rely on technology to operate their organizations and process financial transactions.Yet according to the HUB survey, less than one-third of nonprofit respondents had cyber insurance in place.

How to Win in the Current Nonprofit Landscape

As the challenges multiply, nonprofit organizations will need to prioritize their risk management strategy in order to protect themselves from outsized risks. Yet, with the right supports in place, many nonprofits will achieve their goals in the near future.