Why Nonprofits Should Use Reputation Risk Management

A reputation risk management system plays an important role in attracting more funds. A nonprofit organization with a tainted reputation has fewer chances of surviving in 2017 and throughout the coming years. In the modern age of social media and other instant communication methods, reputation is easy to damage in a blink of an eye.

The recent Edelman Trust Barometer reveals that:

  • In 2008, young influencers had more trust in business than they have in 2017.
  • Germany, Ireland, Brazil, Sweden and South Africa are among 20 countries with the highest distrust rates in their institutions.
  • The mass population has more influence and authority than before.
  • Trust in charity organizations, business, media and government has declined in 2017.

The more trust declines, the more there’s a need for reputation risk management.

What is reputation risk management?

Reputation risk management is a process of managing a risk of possible damage to the brand and reputation of the charity organization before it happens. For example, when organizations find themselves in headlines for the wrong reasons, that could result in a damage to their reputation. The best way to manage this will be to avoid being in the headlines for wrong reasons.

Who will for forget the horror of 94 mentally ill patients that lost their lives in the hands of incompetent South Africa nonprofits? This happened after a provincial health department moved over 1000 patients from a well-equipped mental health facility to several nonprofits. According to a report submitted by a South African Health Ombudsman, most patients died from dehydration, starvation and pneumonia. The reputation of the nonprofits involved is damaged beyond repair.

The following are the reasons:

  • fraud and embezzlement of funds
  • non-compliance with the state regulations
  • incompetence of staff members

We’ll be sharing with you some useful tips on how to prevent risks of damaging your nonprofit reputation.

A good reputation makes fundraising easy

While it’s difficult to tell what makes givers to open up their wallets and donate, a good reputation is the main reason. We all donate to people we can trust. Once trust is lost it is lost for ever. It is for this reason that organizations should assess their reputation risks. For example, people with a criminal background should not handle nonprofit finances. They rather handle low-level positions where there is no need to handle funds.

When people trust a nonprofit organization, they may still ask themselves questions like:

  • Is the mission of this organization aligned with mine?
  • Who is going to benefit from my donation?

They do this just to make sure that their donations will go towards making a difference.

A good reputation allows nonprofits to attract more funds

The reputation of a nonprofit is important not only for its survival but also to attract more funds. Organizations such as Greenpeace International have since learnt the hard way of how bad headlines ruin reputation. Reports that GPI had once lost over €3.8 million ($5.2 million) through currency trading by its executive director made headlines in 2011. This scandal nearly damaged GPI’s reputation.

In some cases, what can damage the reputation of nonprofits is something as mundane as being responsive to calls. Calls and emails that take a month to be returned will only make people lose trust in your organization. What if some of those calls are from donors requesting more information on your recent application for more funds?

Here’s what nonprofits should do:

  • Maintain a professional website that is updated.
  • Be sensitive to the privacy of your beneficiaries. While using real-life stories of rape victims makes attracting funds easy, it’s critical to show donors that you are capable of protecting them.
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A good reputation allows nonprofits to grow

Having a good reputation can benefit a nonprofit in a multitude of ways including opening offices. For example, UNICEF fights for the rights of children in 180 countries. They understand that growth cannot be realized without having a good control of their budgets.

In 2011, UNICEF submitted a four-year financial plan which formed part of their strategic plan. This plan was endorsed by their Executive Board which highlights their transparent analysis and how they will be spending donated funds.

This plan was implemented by adopting Rubberstamp.io, a PO system that allows UNICEF’s managers to view purchases as they happen. UNICEF’s employees can load POs and attach invoices from cellphones, tablets, laptops. Rubberstamp.io is customizable to their programs and financial needs. Employees find the software easy to use.

Managers don’t have to be in office to approve, to suggest changes or to reject POs, they can do this while on the road. For every PO request, a notification is sent through their inboxes.

This year, while most nonprofit organizations are uncertain about their future prospects, UNICEF continues to do good. Their reputation remains squeaky clean as they hardly attract headlines for the wrong reasons.

Don’t let budget overruns ruin the reputation of your organization! Sign up for a free trial today. Rubberstamp’s team is available 247 just to make sure that you budget like a pro. If you’d like more info about Rubberstamp (an automated purchase control system), please contact: mariska.pansegrauw@rubberstamp.io

Originally posted: By Alex Mitchell on Feb 06, 2017