Wendy Cotton head of care underwriting, UK at Markel warns that the charity sector is facing new risks and requires a new approach to mitigation.

The Charity Commission’s latest sector risk assessment outlines a worrying picture for the 185,000 registered English and Welsh charities. Governance failures, safeguarding breaches, fraud, cyber-attacks and the destabilising effects of social unrest and geopolitical tension have all been cited as growing threats.

Against this background, risk management has never been more essential for charities, but with the commission also highlighting that many are under increasing financial pressure, this too poses a challenge.

As a specialist insurer for the charity sector supporting many brokers and their clients across the UK, Markel has seen the risks outlined by the regulator play out in real time. With the challenges appearing to increase, so too must risk management. What is essential is for trustee boards to put the right plans in place to address both known and emerging exposures.

Below, we examine some of the most pressing risks facing UK charities and outline practical steps organisations can take to protect themselves, their people and their beneficiaries.

Governance and leadership

Governance failures are a primary concern for the Charity Commission. With a reliance on trustees or volunteers some smaller charities may have limited experience or knowledge of breadth of their responsibilities. Even in larger organisations, experience and oversight can be inconsistent.

Risk management starts at board level. Trustees must be confident in their responsibilities, which starts with their own training to ensure they are up to speed. There must be clear policies and a regular review of risk registers to ensure this remains comprehensive and relevant.

Safeguarding

For charities, especially those working with vulnerable people, safeguarding is a constant concern. Clear and comprehensive policies are essential, and so too is a charity’s culture.

Practical steps include regular staff training, clear reporting procedures, DBS checks, and regular reviews of safeguarding frameworks; the overall structure a charity uses to protect children, vulnerable adults, staff and volunteers from harm or abuse. For organisations operating across multiple sites or with high volunteer numbers, procedures must be embedded and regularly audited.

Where possible, charities should seek external help, through practitioner support or independent audits, to validate their approach and minimise the risk of legal action.

Cyber threats and data protection

Charities typically hold a variety of data, including that of their beneficiaries. They are increasingly reliant on digital platforms but can lack the cyber capabilities and protection of large commercial organisations, which can make them an easy target for cyber criminals.

To illustrate the risk, The Information Commissioner’s Office (ICO) recently fined the British and Foreign Bible Society ?100,000 after hackers gained access to more than 400,000 supporters’ personal data.

Phishing, ransomware and data breaches can result in significant financial and reputational damage, and disrupt critical services.

Measures like two-factor authentication, regular staff training and robust password management are a starting point. But charities should also consider cyber insurance and plan for a crisis. If an incident does occur, the ability to respond quickly is essential.

Financial fraud and mismanagement

The risk of fraud is very real for charities. Whether that’s insider fraud, procurement irregularities or fundraising scams, the cost to charities can be substantial, both financially and reputationally.

Segregation of duties, strong financial controls and external audits will all help. The right culture is important too, with charities needing an environment where concerns can be raised without fear of reprisal.

The Commission has repeatedly emphasised the importance of whistleblowing mechanisms. Every organisation, no matter how small, should have one.

The impact of wider societal and geopolitical risks

All charities will be affected to a greater or lesser degree by political unrest, economic instability or international conflict. Risks such as these can affect supply chains, fundraising and staff safety, especially for those operating in dangerous environments.

For charities particularly susceptible to this type of risk, assessments should include broader environmental factors. Scenario planning, crisis simulations and contingency funds can help charities keep their people safe.

As risks become more complex, it is vital that charities view risk management as a priority and not a regulatory tick box operation. Insurers, brokers and legal firms can provide practical support, from training and policy development to incident response and cover that reflects sector-specific exposures.

But fundamentally it is up to the charities to have the right systems, culture and cover in place to manage the risks they face.