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Nonprofits with strong risk management will persevere.
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What to Expect in 2024
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What to Expect in 2024
Nonprofits have maintained a frenetic pace in response to catastrophic events in Canada and around the globe. But declines in charitable giving and government funding — not to mention staffing issues — will challenge nonprofits’ ability to fulfill their missions. Organizational resilience will be key for nonprofits in managing new and ongoing risks.
Explore our key takeaways to protect your
profits and drive organizational vitality and resilience...
Higher costs and funding reductions will impact budgets.
Funding remains a top challenge for nonprofits. Fewer than half of nonprofit organizations report that their funding is equal to pre-pandemic levels, and 80% report that inflation is raising their costs.
At the same time, charitable giving decreased 4.3% between 2010 and 2020.
Cuts to government funding and higher labour costs will also affect nonprofits’ finances. In addition, nonprofits may face more frequent and severe disasters and higher prices for the goods and services they need to carry out their missions. Yet the demand for charitable services remains high, with 22% of organizations reporting that the need for their aid significantly exceeds their capacity.
Higher insurance costs are also hurting nonprofits. But forgoing or reducing coverage exposes nonprofits to greater risk at a time when losses, particularly due to catastrophic weather events, remain elevated.
Property insurance, commercial auto and abuse and molestation coverage will have the greatest impact on nonprofits’ bottom line. Although many nonprofit organizations responding to the HUB International 2024 Outlook Executive Survey indicated they are confident in their risk preparedness, only 21% said they have enough insurance coverage to protect their contribution margin.
Vitality
Resiliency
Crisis Management
Crisis Management
Resiliency
Economic Viability
Personalized benefits will improve recruiting and retention efforts.
A tight job market continues to test the nonprofit sector. Nearly 60% of nonprofits report that they have the same number of paid staff — and fewer volunteers — despite the increased demand for services. Absenteeism ranked as a top concern for 90% of HUB’s Canadian nonprofit survey respondents, followed by job market dynamics, inflation and employee wellbeing at 79%.
Compensation also ranks as one of the top challenges, according to nonprofit survey respondents. Higher costs strain budgets, yet nonprofits must compete for talent with the private sector, which can offer higher salaries.
Rising employee benefits costs also continue to bedevil nonprofits, particularly when those organizations rely on the quality of their benefits to compensate for lower wages.
Personalized benefits that consider individualized employee needs and focus on wellbeing can help nonprofits recruit and retain talent, even with salary constraints. Wellness programs and mental health services that speak to individual employees can be a key differentiator in recruitment and retention.
In addition, nonprofits can boost employee talent acquisition and workforce management through personalized benefits. Personalized benefits informed by data and analytics can deliver quality employee experiences (QEX), which helps improve employee engagement, loyalty and productivity.
Though personalized benefits may seem like a stretch for some nonprofits, they are not out of reach. Cost-effective benefits changes that integrate diversity, equity and inclusion initiatives or align benefits with environmental, social and governance criteria can create significant value that attracts employees to the organization.
Nonprofits can take advantage of unconventional funding strategies to boost their benefits offerings, such as creating a human capital endowment fund or exploring a benefits captive.
Those with limited financial means can provide a range of minimal-cost benefits such as health savings accounts, emergency savings funds and free or reduced-cost access to financial education and wellness platforms.
Crisis Management
Vitality
Economic Viability
Eliminate silos to improve risk management.
Budget pressures and staffing shortages have made it difficult for nonprofits to prepare for and respond to risks. In fact, HUB’s survey found that just 32% of nonprofits have fostered a culture of risk awareness and preparedness.
Insurance rates are rising between 7% and 20% for coverages, and capacity in the nonprofit space is more limited. Insurers are requiring more information before issuing a policy, and organizations may struggle to secure sufficient directors and officers (D&O), cyber, and abuse and molestation insurance coverage.
Given these challenges, it’s critical that nonprofits pay more attention to mitigating exposures. Developing an enterprise risk management (ERM) plan that includes a thorough assessment of the organization and implements strategies for addressing exposures is the key to organizational resilience. Built in partnership with all organizational stakeholders, an ERM plan can help prevent expensive losses that could arise from catastrophic events.
Resiliency
Vitality
Economic Viability
Planning for worst-case scenarios is essential to survival.
Nonprofits are experts at responding to those in need during a crisis, but they aren’t always as prepared to handle crises that affect themselves.
In general, nonprofits are more trusted by the public than other institutions, but public trust in nonprofits declined to 56% in 2022, down 3 percentage points from 2020.
That doesn’t mean all nonprofits can assume community support. Abuse allegations against the organization, mishandling of funds, financial misconduct or a cyber breach that compromises personally identifiable information can cause devastating reputational damage.
How nonprofits handle a crisis can determine if the organization can rebuild public and donor trust, and ultimately, if the organization can survive the fallout.
A crisis management plan must go beyond contacting board members for help and should involve a call to insurers and brokers first after an incident. Nonprofits may not realize their insurers have the resources to handle a range of situations and are equipped to assist with crisis management, legal counsel and digital forensics.
Notifying your broker and insurance carrier immediately after an incident may also accelerate the claims process and save the organization money.
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Make a Plan
HUB nonprofit insurance, risk management and employee benefits specialists will work with you to develop a tailored strategy to protect your bottom line, support the vitality of your workforce and build resiliency for 2024. Here are some initial considerations:
Develop a comprehensive risk plan.
Making ERM a key component of your organization’s culture can help you identify exposures and place your nonprofit in the best light if an incident occurs. Make sure your broker understands how to strategically approach risk and identify gaps in the organization.
Create a personalized benefits strategy.
Rely on your carrier in a crisis.
Be transparent with your broker.
Rely on your carrier in a crisis.
Be transparent with your broker.
Develop a comprehensive risk plan.
Stand out from the competition by offering benefits your employees want. Consider integrating employee benefits that align with the values of your employees and address diversity, equity and inclusion.
Create a personalized benefits strategy.
An incident can be devastating to the reputation of a nonprofit. Take advantage of your carrier’s expertise if an event occurs. They may be able to assist with such areas as legal counsel, crisis management or digital forensics.
Rely on your carrier in a crisis.
Develop a comprehensive risk plan.
Create a personalized benefits strategy.
Be transparent with your broker.
Consistent communication with your broker will help you identify and mitigate issues in advance of your next renewal. Review exposures and insurance needs at least 90 days prior to policy renewal to allow your broker to find the optimal mix of coverage for your organization’s needs.
Be transparent with your broker.
Develop a comprehensive risk plan.
Create a personalized benefits strategy.
Rely on your carrier in a crisis.
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Download our 2024 Nonprofit Outlook and Insurance Market Rate Report to see what to expect in the coming year.
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When you partner with HUB, you’re at the centre of a vast network of experts who will help you improve your profitability, enhance the vitality of your workforce and remain resilient into the future. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB nonprofit advisor. We’re here to help.
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1. Environics Analytics, “The Giving Report 2023: Insights and What’s Next for Canadian Charities,” May 11, 2023.
5. Environics Analytics, “The Giving Report 2023: Insights and What’s Next for Canadian Charities,” May 11, 2023.
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2. The Fraser Institute, “Generosity in Canada: The 2022 Generosity Index,” December 2022.
3. Canadian Underwriter, “Where 2023 Cat losses stand after summer storms,” September 20, 2023.
4. HUB’s 2024 Outlook Executive Survey polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience.
6. Benefits Canada, “Employer health benefits cost trends rising 10% in 2023: survey,” October 17, 2022.
7. The Conversation, “Donor beware: Pause before you give to any cause,” September 12, 2022.
8. Carleton Newsroom, “To clean up Hockey Canada, financial transparency is a must,” November 8, 2022.
However, nonprofits are improving their economic viability by becoming increasingly savvy and agile, with many leveraging the technological expertise of the newest generation of employees to broadcast their mission and thinking outside the box to make a social impact. Organizations with clear visions, strong leadership and a strategic plan for managing risk will be best positioned for the future.
of organizations reported that the need for their aid significantly exceeds their capacity.
Too often organizations work in silos, which can threaten resiliency. For example, a nonprofit may have strong water damage mitigation measures, but neglect to implement controls for vetting employees and volunteers, exposing the organization to risk. Failing to conduct background checks or review motor vehicle records could expose an organization to significant liability.
Making risk management a true part of the organization can help nonprofits navigate today’s tough insurance environment by improving the organization’s insurability and enabling them to continue their mission for years to come.
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A robust crisis management plan can help nonprofits respond quickly if an incident occurs. Nearly 60% of nonprofit respondents to HUB’s survey cited a loss of reputation as a significant risk to their organization.
of nonprofit respondents to HUB’s survey cited a loss of reputation as a significant risk to their organization.
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