Safeguarding Your Success: Top 3 Risks for Non-Profit Organizations in Alberta to Watch Out for.
Givens LLP | JAN 12 2023
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Non-Profit Organizations (NPOs) foster local community development and address various challenges. However, because their main focus isn’t on making money or necessarily expanding the business, they can often find themselves without the same protective structures as big businesses do to handle risks.
While these organizations focus on making a positive impact, they must also navigate many risks, ranging from data privacy concerns to insurance vulnerabilities. As our non-profit friends are tax-exempt under the Income Tax Act, we’re taking a quick break from tax and fiscal strategy to delve into the top three risks that non-profits in Alberta should be mindful of, emphasizing the importance of data privacy, good digital practices, and protecting your finances.
Cybersecurity Concerns for Non-Profits
In the digital age, NPOs often rely on data collection for their operations, making them especially susceptible to cybersecurity threats that can compromise sensitive data and threaten operations. Phishing attacks, in particular, pose a significant risk to NPOs. A phishing attack typically involves cybercriminals using deceptive emails, messages, or websites to trick individuals into divulging sensitive information, such as passwords or financial details.
According to the Canadian Anti-Fraud Centre, phishing scams have been on a meteoric rise, targeting organizations of all sizes. For example, Spear Phishing was responsible for $54 million in losses in 2021, compared to $30.2 million in 2020. Because NPOs often have limited resources to educate teams on digital privacy and how to prevent these scams, they can make attractive targets for cybercriminals engaging in phishing schemes.
To minimize phishing risks, non-profits must implement employee education plans so teams can quickly recognize, report, and avoid phishing attempts. Implementing robust data management practices, including hard drive copies of files, password management software, and firewall security, are all equally important. After all, any threat to your data (email address, website access, or even your device itself) may threaten the information of your donors, volunteer databases, and financial data!
Providing Insurance for Staff and Assets
Unexpected events can jeopardize the well-being of staff and the NPO's assets, as non-profits have a less predictable day-to-day structure. One often-overlooked source of financial strain for NPOs is the consequence of not having sufficient insurance coverage. After all, many non-profits operate with a mindset of doing good, but without comprehensive insurance, they may find themselves vulnerable to unexpected events.
Imagine a situation where a staff member or volunteer gets hurt while doing their job. Adequate insurance coverage can help cover your organization's costs. Over time, there might be claims from past events, such as harassment claims or safety issues. Securing sufficient insurance for both your staff and organization is something that all Alberta nonprofits should consider to ensure they are protected should an unexpected event arise.
Preventing Fraud Through Internal Controls
Fraud is an ongoing risk for all organizations, no matter how small. Non-profits, despite their limited resources, are no exception.
The challenge for non-profits lies in their often limited team size, making segregation of duties challenging. In an ideal scenario, different individuals should handle financial transactions related to their area of focus, but this may not be feasible for smaller NPOs whose board members cross roles, often in volunteer capacities.
Non-profits should implement stringent internal controls to prevent a single individual from having too much control over important assets like finances or data. One effective way is to use a dual-signing authority (DSA) system. This means that two authorized people have to agree before any money leaves the bank account. This provides extra protection against fraudulent activities that may slip past a single individual. This also adds additional layers of accountability to spending and data sharing, which works well in preventing phishing scams.
Conclusion
Navigating the complex landscape of risks is an ongoing challenge for non-profit organizations in Alberta. Data privacy, good digital practices, and financial protection are paramount for their sustainability and success. As a non-profit, partnering with the Givens LLP team can provide you with the specialized accounting expertise needed to address these risks effectively and with your continuity in mind.
For guidance tailored to your nonprofit's unique needs, please reach out to our experienced team. We’re here to help safeguard your mission, protect your stakeholders, and ensure the longevity of your organization by taking proactive steps to manage risks effectively. Contact us today for a more secure and resilient future for your non-profit through future-focused accounting and strategy.
