Risk #1: Financial Risk--An Overview

Risk management is not entirely about financial risk. In fact, when it comes to churches, financial risk is likely not even the biggest type that clergy and congregations face. And yet, within a house of worship, financial risk is ubiquitous. Budgets dictate just about every congregational activity, from outreach to parties. Costs are a frequent worry of anyone looking to endeavour on a major project. Offering is collected right after a fiery sermon. The most emotional use of the Lord's name comes when calculating revenue and expenses. If a church wants to keep its doors open, it has to be able to pay.

Some of the risks associated with finance are obvious: there is always a good deal of volatility to congregational donations, which make up the vast majority of a typical church's revenue. Such a financial model is particularly risky because there are several factors that influence it's uncertainty: both overall attendance and the generosity of those who attend are key elements in keeping revenue up, and both are susceptible to extreme change each week. Many churches find that givings ebb and flow, decreasing in the summer and spiking close to Christmas and other holidays, which can create difficulty in paying the steady expenses.

This leads to another, equally-important risk. A church's expenses determine how efficiently it can run and how much of its money can be used for external missions and outreach. Despite this, it is often given a secondary focus to revenues, perhaps because revenues are easier to approach from a full congregational standpoint. This can be dangerous for a church to do: expenses, from salaries to utilities to physical materials, are as much a concern for everyone as are revenues. Failing to see and address this risk can wreak havoc on a church's budget.

When a church starts openly discussing the uncertainties that surround its cash inflows and outflows, numerous smaller risks will come to the surface. Have certain expenses been rising too quickly for comfort? What sort of contracts has the church locked itself into, and what problems may arise from that? What has happened to average givings over the course of one, three and five years? What possibilities are there to cut expenditures? These are not always easy, or pleasant, questions to answer, but are far better being asked than ignored.

Evidently, financial risk goes deep in any organization, leading to numerous elements and particulars that need to be discussed. But it's never too early--or late--for a church to start looking at its finances and asking the tough questions. A few years down the road, it may be very glad it did.