In recent years, the requirements for the responsibility of the director for the results of the company’s activities have become tougher. How to unload the manager from paperwork and share responsibility? How nonprofit boards can reduce internal risk?
Why Are There Internal Risks in the Company?
In recent years, the director’s responsibility for the performance of the company has increased. The main tightening was adopted in 2022. It can be read as follows: if during the bankruptcy of a company the claims of the tax authorities amount to more than 50% of the total amount of claims of creditors, then the bankruptcy arose as a result of the action or inaction of the head of the company. Until proven otherwise.
The internal risks supervisory authorities oversee the measures developed and implemented by the private sector to conduct anti-money laundering checks and report suspicions. Effective risk-based supervision is an important part of a sound anti-money laundering system. This document provides guidance and guidance to supervisors on how to conduct a risk assessment of their supervised sectors and reallocate resources in accordance with that assessment. This document also presents strategies for dealing with common and most commonly encountered problems and difficulties.
There are common goals between the nonprofit boards and the company’s management, and on the other hand, if functions are duplicated, the company’s manageability can be lost. The Board of Directors determines the strategic issues of the corporation’s development, the foundations, and principles for the existence and development of business in the long term. Management develops and implements the strategy, carries out operational and day-to-day activities.
To reduce internal risks, it is also recommended to:
- Relieve the director as much as possible from paperwork on signing personnel and internal documentation.
- Analyze existing employment contracts for the risk of litigation with employees.
- “White” wages without increasing the tax burden.
What Are the Main Components of Reducing Internal Risks with the Nonprofit Boards?
The nonprofit boards can reduce internal risk as well as:
- Determination of priority areas of the company’s activities.
- Education of executive bodies.
- Early termination of powers of executive bodies.
- Suspension of powers of the manager (managing organization) and appointment of a temporary sole body.
- Creation of branches and opening of representative offices.
- Determining the terms of the contract and the amount of remuneration of executive bodies.
- Exercising control over the activities of executive bodies.
- Approval of the company’s internal documents (with the exception of documents, the approval of which falls within the competence of the general meeting of shareholders and executive bodies).
Operating under the influence of these factors, a company with organizational unity has a stable structure and management bodies with high competence and a degree of fulfillment of obligations. Building an effective system of company management bodies, the distribution of powers, and the role of the board of directors are designed to neutralize conflicts of divergent economic interests.
If the majority of your nonprofit board is transactional, it is not sustainable. Events and fundraising take a lot of time and effort. At some point, you feel like a squirrel in a wheel. So focus more on the transformational feed. This will require you to think about your donors and communicate with them regularly. Keep the two types in balance, or even better, use a transformational rather than a transactional approach.