Systems and knowledge in place to embed and drive the highest standards of financial and risk management.
Sound financial planning and management are amongst the most important foundations of a highly effective organisation. This requires robust financial policies, procedures and controls to be in place, but also extends to more strategic requirements, including long-term financial planning, a reserves policy and commercial and/or income strategy. The Senior Leadership Team and Board must be able to demonstrate their involvement and oversight of the financial management of the organisation.
Risk management is a closely aligned and equally critical area. A risk management plan which is embedded throughout the organisation is essential if risks are to be identified as early as possible and steps taken to mitigate the potential for these to adversely affect the business. The Senior Leadership Team and Board must be able to demonstrate their involvement and regular scrutiny of the risk management plan.
Example finance indicators:
- The financial policies in place; the extent to which they are comprehensive, up-to-date and operational.
- Regularity of external audits (e.g. annual); the content (e.g. number of control points) and the monitoring of action points by the relevant Finance & Audit Committee; the oversight by the Senior Leadership Team and Board, including their ability to make sound financial decisions.
- The extent to which long-term financial strategies are in place, and how aligned these are to the strategic plan.
- Adequacy and trends of turnover and reserve levels; levels, sources and trends of non-grant income – and whether commercial and earned income strategies exist and their strength.
- The strength of financial management within subsidiary companies and how this is cascaded within the committee structures.
- Partnership working with grant giving bodies; appropriate capacity, training and succession planning are in place for key individuals (paid and voluntary) responsible for financial management within the organisation.
Example risk indicators:
- Whether the risk policy is in place and approved by the Board.
- How clear risk management responsibilities are within the Board structure and whether the Board is accountable for risk management; how regularly risk management plan is considered by Board.
- How well staff and key volunteers understand the purpose and process of risk management.
- Whether risks are identified and mitigated within each team of the organisation and significant risks shared with the Senior Leadership Team.