The big risks facing charities in 2022

Charities have faced a tsunami of challenges over the past two years, as the coronavirus pandemic wreaked havoc on the world economy and disrupted everything from charity service delivery to regular fundraising efforts.

 

In 2022, the most visible effects of the pandemic – such as lockdowns, restrictions on events, and periods of isolation – have largely disappeared. But your charity may still find 2022 a challenging year, for different reasons.

 

Here are some of the biggest risks that your charity should be aware of, along with some suggestions as to how these risks can be mitigated.

 

 

Operational risks

 

The Omicron variant appears to have passed its peak, but in the short- to-medium-term there are no guarantees that your charity will not be faced with high levels of staff absences.

 

These could be due to infections, “long covid”, or simply the need to isolate to reduce the risk of further infections in the workplace. These absences could make it hard for your charity to carry out the basic day-to-day operations.

 

When staffing levels are reduced for extended periods, this places extra stress on those charity staff that remain. According to Ecclesiastical Insurance’s Charity Risk Barometer, 44% of charities see burnout as a significant threat to their operations.

 

 

What can you do to mitigate these risks?

 

Ensure that working from home arrangements are in place, along with security measures. This will help minimise the disruption caused by staff being unable to come in to work.

 

 

Income risks

 

With the end of lockdowns and furloughs, and the economy recovering to pre-pandemic levels, your charity may be expecting its income to return pre-pandemic levels as well.

 

But the truth is that – in part due to the pandemic – the economic outlook is far from rosy. Specifically, energy costs are likely to have a significant effect on supporters’ disposable income in the short-term, while rising inflation is likely to squeeze potential donors’ budgets in the medium-term.

 

There is also considerable uncertainty as to how the pandemic will unfold during 2022. The emergence of a new variant could mean that gathering restrictions are reimposed, potentially causing major fundraising events to be postponed or cancelled.

 

 

What can you do to mitigate these risks?

 

Your charity may be well advised to avoid an “all eggs in one basket” approach to fundraising because of the unpredictability of the coming months. A “little but often” approach to fundraising which includes virtual fundraising events may be a more sensible option which avoids the risk of a flagship fundraising event being cancelled.

 

 

Cyber security risks

 

Cyber criminals thrive on periods of uncertainty because it’s during these periods people consider behaving in ways that are out of the ordinary. This makes it easier for charities to fall victim to cyber attacks – particularly phishing attacks, which exploit people rather than computer systems.

 

This is a particular problem when confidential personal information is compromised. The Information Commissioner’s Office (ICO) has made it clear that it can and will fine charities in certain cases when confidential information is leaked during a cyber security breach.

 

 

What you can do to mitigate these risks?

 

Ensure that your charity avoids the temptation to make up for lower revenues by cutting cyber security budgets excessively. Your charity should also ensure that any third-party IT contractors are managed effectively. That’s because if these third-parties are the source of a data leak, then then your charity may be liable to sanctions or fines.

 

 

IT risks

 

2022 is the year many charities will try to get their digital transformation projects back on track after the disruption of the past two years. But charities need to be aware of the risks that their projects may fail to produce the anticipated benefits, or they may end up costing far more than was originally budgeted for.

 

 

What can you do to mitigate these risks?

 

Strong management oversight is required to ensure that your charity’s IT projects remain as close to schedule and budget as possible, despite delays caused by chip and other hardware shortages and associated price rises.

 

 

Compliance risks

 

Your charity should be up to speed with the UK GDPR by now, but it’s important to be in full compliance with newer standards such as the Code of Fundraising Practice released by the Fundraising Regulator and the Charity Commission in 2019, and the Charity Governance Code, which was updated in December 2020.

 

These require charities to ensure that they have robust governance in place, that trustees to have effective oversight, and charities focus on integrity, equality, diversity, and inclusion.

 

 

What can you do to mitigate these risks?

 

Unfortunately, there is no silver bullet for reducing or removing compliance risks. Reducing compliance risks during 2022 will inevitably entail committing human resources to the task. The good news is that, far from being a mere box ticking exercise, ensuring good governance and other attributes that regulations promote can be very valuable to your charity.