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Practical risk management solutions will help nonprofits 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 the U.S. 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...
Financial woes may persist amid higher costs and reductions in funding.
Funding remains a top challenge for nonprofits. Seven out of 10 nonprofit organizations report their charitable donations will decrease or remain flat in 2023 and nearly the same number expect their donor base will decrease or stay the same. This follows a 3.4% decrease in overall charitable giving, or 10.4% when adjusted for inflation, in 2022.
Cuts to government funding and higher labor costs will affect nonprofits’ finances. In addition, nonprofits will face more frequent and severe disasters and higher prices for the goods and services they need to carry out their missions.
Higher insurance costs are also hurting nonprofits, with rates increasing 5% to 15% on average for insurance. But forgoing or reducing coverage exposes nonprofits to greater risk at a time when losses remain elevated.
Property insurance, commercial auto and abuse and molestation coverage will have the greatest impact on nonprofits’ bottom line in 2024. Although many nonprofit organizations responding to the HUB International 2024 Outlook Executive Survey
indicated that they are confident in their risk preparedness, only 18% said they have enough insurance coverage to achieve their mission-critical organizational goals.
While shouldering more risk may be necessary from a financial standpoint, nonprofits need to ensure they are insuring against risks that could devastate them and spend time and effort developing remedial strategies to mitigate other exposures.
Workforce Vitality
Resiliency
Crisis Management
Crisis Management
Resiliency
Economic Viability
Improve retention with personalized benefits.
A tight job market continues to test the nonprofit sector. Nearly 75% of nonprofits currently are hiring and 52% of nonprofits have more job vacancies now than in the past five years. Talent retention was the biggest concern for 73% of HUB’s nonprofit survey respondents, followed by talent recruitment at 63% and compensation at 62%.
Salary ranks as one of the top challenges according to nonprofit survey respondents. Higher costs strain budgets, yet they must compete for talent with the private sector, which can offer better salaries.
Rising healthcare costs also continue to plague nonprofits, particularly when those organizations rely on the quality of their benefits to offset lower wages.
However, personalized benefits that take into account individualized employee needs and focus on wellbeing can help nonprofits recruit and retain talent, even with salary constraints. Wellness programs, retirement plans and mental health services that speak to individual employees can be a key differentiator in recruitment and retention.
Though personalized benefits may seem untenable, options are available. Nonprofits can take advantage of unconventional funding strategies, such as creating a human capital endowment fund, or exploring a benefits captive. A captive can also act as a source of contingent capital for organizations facing cash-flow issues by paying a dividend or loaning capital to the nonprofit. A knowledgeable broker can help organizations find captive solutions that meet their needs.
Nonprofits with limited financial means can provide a range of minimal-cost benefits such as narrow health network plans, health savings accounts and emergency savings funds. Organizations could also offer free or reduced-cost access to financial education and wellness platforms and help connect workers to personal risk solutions.
Crisis Management
Workforce Vitality
Economic Viability
Prioritize risk management to effectively respond when needed.
Budget pressures and staffing shortages have made it difficult for nonprofits to prepare and respond to risks. HUB’s business survey found that just 30% of nonprofits have fostered a culture of risk awareness, preparedness and mitigation — with 70% needing to improve their risk management or face the exposures.
Built in partnership with all organizational stakeholders, strong risk management can help mitigate expensive losses from catastrophic events. The key to organizational resilience is developing an enterprise risk management (ERM) plan that includes a thorough assessment of all aspects of the organization and implements strategies for addressing exposures.
ERM should be ingrained in the organization’s culture, with everyone — from the CEO to the new social media assistant to the janitorial manager — committed to risk reduction. Successful ERM teams spend time with all stakeholders to identify areas of improvement in each department and connect the dots between exposures to eliminate, or at least minimize, gaps in the overall risk management plan.
Making risk management a true part of the organization can also help nonprofits navigate today’s tough insurance environment by improving the organization’s insurability and potentially saving on insurance costs.
Resiliency
Workforce Vitality
Economic Viability
Plan for the worst in an era of rising reputational risk.
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, charities are more trusted by the public than other institutions, and 70% of people said trusting a charity is the most important factor they consider when donating.
Abuse allegations against the organization, board transgressions or financial misconduct, or a cyber breach that compromises personally identifiable information, can cause devastating reputational damage or even result in criminal action against an organization.
How a nonprofit handles a crisis can determine if the organization can rebuild public and donor trust, and ultimately, if the organization can survive the fallout.
A robust crisis management plan can help a nonprofit respond quickly if an incident occurs, but not all organizations have one: Only 57% of respondents to HUB’s nonprofit survey say they are prepared to deal with events that could damage brand credibility or reputation.
Your crisis management plan must go beyond contacting board members for help and should involve a call to your insurer or broker first after an incident. Nonprofits may overlook the fact that their insurers have the resources to handle a range of situations and will be equipped to assist with crisis management, legal counsel or 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 that will protect the bottom line, support 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 less typical benefits to fit your budget or adopt an unconventional funding approach such as creating a human capital endowment.
Create a personalized benefits strategy.
An incident can be devastating to a nonprofit’s reputation. Take advantage of your insurer’s expertise if an event occurs. It 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 and position your organization in the best light. 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.
Nonprofit
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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 center 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. National Council of Nonprofits, 2023 Nonprofit Workforce Survey Results, April 2023.
5. NonProfit Pro, “How Nonprofits Can Capitalize on Strategic Partnerships for Long-Term Sustainability,” September 27, 2023.
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Resiliency
Crisis Management
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2. The Indiana University Lilly Family School of Philanthropy, “Giving USA: Total U.S. charitable giving declined in 2022 to $499.22 billion following two years of record generosity,” June 20, 2023.
3. Swiss Re, “Severe Thunderstorms Account for Up to 70% of All Insured Natural Catastrophes in First Half of 2023,” August 9, 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. Fierce Healthcare, “Employer health costs set to rise 6.5% in 2023,” August 19, 2022.
7. Give.org, Donor Trust Report: State of Public Trust in the Charitable Sector, accessed September 19, 2023.
8. NOLA.com, “LaToya Cantrell-aligned nonprofit plans to shut down; judge upholds firing of former leader,” October 20, 2022.
Despite this challenging economic outlook, nonprofits are improving their viability by becoming increasingly agile. More are engaging in strategic partnerships with other nonprofits or even for-profit corporations — an approach that can expand their outreach, increase access to funding opportunities and magnify social impact. Organizations that think outside of the box, maintain strong leadership and have a strategic, actionable plan for managing risk will be best positioned for the future.
Property insurance, commercial auto and abuse and molestation coverage will have the greatest impact on nonprofits’ bottom line in 2024.
Too often organizations work in silos, which can threaten resiliency. For example, a nonprofit may have strong water damage mitigation measures, but fails to implement controls for vetting employees and volunteers, exposing the organization to risk — something ERM likely would have identified as a potential hazard.
Failing to conduct background checks or to review motor vehicle records could expose an organization to significant liability. Many nonprofits have paid out millions or faced bankruptcy in cases when abuse occurred, but the perpetrators’ histories of such conduct were overlooked.
of nonprofits need to do a better job of fostering a culture of risk awareness, preparedness and mitigation.
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