Safeguarding your Board’s Reputation by Mitigating Risk

Q&A summary with NFP expert and Atlantic Business Magazine CEO Hall of Fame member Darrell Kuhn

One of the questions I keep getting is how do I manage my good reputation? We already enjoy a pretty good reputation in our community so what’s the reasoning for having a risk management structure in place to manage this?

The important thing to understand is that when something happens it’s going to cause a significant alert to your community. Your key stakeholders are going to be very concerned and it’s going to impact your ability to even attract board members or even to attract funding support and volunteers if it’s not handled properly. I’ve personally experienced situations where all three of those areas have had a detrimental impact and it made the board focus on some recovery actions. Some of them are still feeling the significance of it years later.

Let’s start with a recent example of a situation that is still prevalent today with Hockey Canada. There was a significant event that happened that caused an impact to their reputation that had to do with the coverup of sexual harassment that was happening with their junior teams. This was greatly mishandled by their board. We’ll probably never know details for sure but suffice to say that the impact to that organization was significant.

In the fallout of this event, the CEO of Hockey Canada resigned in disgrace and is probably disgraced to this day. The board members who may not have known what was going on also resigned or were asked to resign in disgrace which could affect their credibility in finding seats on future boards. Even the funding support from some of their major organizations pull back their money – some indefinitely. 

Changes at Hockey Canada are happening slowly but surely this organization is going to feel that impact for years to come. It is a dark moment for them and a black mark on their brand and their activities. It’s a shame that this could have been prevented if there were structures in place around governance around policies and practices. Obviously that wasn’t the case and now the new board and the new CEO are left to try to restore its reputation. I’m sure their risk management strategy is something that’s important for them now. 

The old adage rings true – that it takes years to build your reputation and only a minute to lose it. It has never been more prevalent than in today’s landscape, especially with social media. Things happen quickly and before you even have a chance to react, things can run rampant and if this happens to your organization it becomes increasingly more difficult to try to mitigate the risk. So it’s important that the board put in place the risk strategies that they need. These organizations that I’ve seen over the course in my career fought the same thing. It’s not going to happen here and yet it did, and some of them are still struggling. Some of them are no longer in existence. 

So what is Reputational Risk?

Any significant threat to your good name in the community is considered a reputational risk. Some examples could include:

  1. When a board member speaks poorly about their peers on the board or the organization in public. Perhaps someone didn’t agree with a particular decision or the general direction of the board and by speaking about it in a public setting it causes some concern, especially amongst donors. 
  1. When employees are speaking ill about the organization. Perhaps there’s a toxic work environment and they’re not happy with the CEO or the management team and they’re blaming it on the board. They may voice their opinions publicly or via social media. 
  1. When volunteers are harassing clients or other volunteers. Something like this can certainly be subject to legal recourse.
  1. When the organization is using the resources of a third party and that party is doing something that’s affecting their reputation. You can be certain that in these cases it will also affect your reputation just through association. 

It’s important that when a scenario like this unfolds, that the board is prepared to react quickly. Once you’re in defensive mode, everything you say and do is going to be watched and scrutinized extremely closely. Many organizations will also hire a firm that specializes in communication to help them get through these events and to help mitigate as much of the damage as possible.

As a board you need to keep your sponsors and donors at the forefront at all times. Anything that is going to be a potential risk in their eyes is grounds for them to withdraw their monetary support which affects your sustainability as an organization. 

Reacting with a Communication Plan

We’ve established that threats can come from a variety of areas. The first step to reacting to any threat is having a communication plan in place. This plan needs to be aligned to each one of the stakeholders – from the board to the management team, and even the staff. They each need to understand protocol in case they’re faced with requests for questioning.

Another key piece of the communication plan is reaching out to your donors as early as possible to explain to them what happened, why it happened, who it happened to, and the impact so they are fully aware of the situation. You’ll also need to communicate what action plans you’re going to put in place. Your donors need to feel comfortable that you’re going to remedy the situation as quickly as possible.

Finally, volunteers also need to be made aware of the situation and impact. If you do not keep the volunteers comfortable and confident in the organization it may be difficult to attract volunteers in the future. So just the same as your donors, you need to keep them as comfortable and confident as possible that your board will remedy the situation.

Stay Ahead of Threats with a Risk Management Strategy

Every organization is vulnerable to reputation damage. It’s a responsibility of your board to put a risk management strategy in place before things get dicey. 

First, the board needs to identify each of the key risks that could impact its reputation. Once the risks are known, you’ll need to label the likelihood of that risk happening to the organization. Is it low, medium, or high? Then do the same for the impact to the organization (low, medium, high). The impact is usually measured from a dollar perspective.

Obviously your main focus is the medium to high impact and likelihood risks. Once you’ve scored these risks, you can now put together some corrective actions to mitigate the likelihood of these risks occurring. Keep in mind that low ranked items should not be ignored entirely, as you may be able to address lower ranked items more quickly. 

With those processes in place you can monitor and update them at least on an annual basis. You’ll want to make sure that they’re still relevant and appropriate. There could be new developments happening around the organization that need new attention. Staying ahead of risks the best you can is the best way to minimize their impact.

Policies to Have in Place

Unfortunately, I’ve seen many times in my facilitation with boards that many do not have the necessary governing policies let alone a risk management policy in place to help them mitigate risk. So there are some key policies that your board should absolutely start with:

  1. The Director’s Responsibility Policy 
  2. Conflict of Interest Policy 
  3. Harassment and Intimidation Policy 
  4. Board Meeting and Conduct Policy 

There are a number of additional policies that your board should consider, but these are a good place to start. These policies will provide guidance to everybody – the board, management, staff and even the volunteers. Everybody in the organization can begin to understand what is acceptable behavior and the standards that they will be held accountable to. It also gives the board recourse if these things are being breached. It’s all about building a culture and environment that fosters positive behavior.

An Example I’ve Experienced on a Board

In one particular situation, there was a tendering process to have a project done. Tenders were sent out and they were answered by a number of organizations. We reviewed those and decided on not necessarily the lowest cost option, but who we felt would provide the best quality work. 

We awarded the tender and shortly after we received a call from a sponsor. He told us that he had been at an event where one of our board members was speaking publicly about how they were not happy with the tendering decision. This important donor was very concerned about our process and the impact that this particular situation had on our organization. This quickly turned into an administrative nightmare as more people began coming forward and asking about the situation. 

In this instance, this board did not have a conflict of interest policy and certainly didn’t have a board meeting conduct and responsibility policy, so this board member spoke out of turn. What we found out was that this particular board member had a relative who was involved with one of the other tendering businesses and they were upset that their relative was not awarded the tender. With such an obvious conflict of interest, that individual should have removed themselves from the tender review. They also should have understood that speaking outside of the board meeting on any decision is not appropriate.

The fallout from this ended with the board member being removed from their position – something you also never want to see. The process took several months including many discussions with donors as well as setting up new procedures for handling such situations. I would highly recommend that if your board does not have any of these policies and procedures in place that you make it a top priority, for everyone’s benefit.

Question #1: Are there telltale red flags of oncoming risks, or am I always blindsided?

In hindsight there are always signs. In terms of conflicts of interest, if there’s someone on the board who keeps questioning decisions you may need to ask why. They may not even know that they are in a conflict of interest. Any potential conflicts should be declared before the decision process even begins. 

On top of that, if there are board members who are becoming increasingly withdrawn from discussions, this could be a sign that they may not be happy with the way things are being handled. This may require a private discussion with that board member to see what’s on their mind.

Question #2: How does delegation happen in a time of crisis and who’s responsible?

Overall the board is accountable for every situation. The Board Chair is the lead person. Before executing a communication plan in a time of crisis, they should call a meeting with the Executive DIrector to make sure that they know what’s happened, why it’s happened, who it happened to, the impact and next steps. 

Ideally, you’ll revert to your risk management strategy and policy with the action plan. Typically, the communication portion is handled by the board chair and the Executive Director who need to be communicating in unison. The Executive Director would be communicating with staff, volunteers, and potentially donors as well. The Board Chair will be communicating to the community at large and also to its own board of directors. Making sure the messaging is accurate and consistent is important to carry out your communication as effectively as possible.

D2 offers a variety of easy to follow, self paced courses to help run your board more effectivel. If you like this article, check out our course on creating your own risk management plan with a written guide, more video content and even sample governing policies you can start using today to get started.

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