CHAPTER 4

Risks of Nonprofit Organizations

Risk in a for-profit organization, with some important exceptions, mostly come down to the effect on the variability of profits or cash flows of the firm. These risks are, for the most part, relatively easy to quantify. By contrast, in a nonprofit organization, the key risks are those that deal with the variability of the obtainment of objectives, or the mission of the nonprofit. This risk is generally much more difficult to quantify and is generally quite subjective and open to interpretation. This creates a fundamental difference in how risk is managed in a for-profit, versus a nonprofit organization.

A second difference is that the risks of a for-profit firm are likely shared among members of the ...

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