Published in Presbyterian Record

New article on how churches--particularly ones that love committees--can use risk management as a means of steering away from uncertainty. Check it out:

http://presbyterianrecord.ca/2013/04/01/taking-risks/

What About Other Faiths?

This is just a quick note, really. The focus of this blog is on how churches can use risk management to face and deal with uncertainty. As someone who grew up in, and has done a lot of business-related work with, churches, my expertise relates best to them. That's not to say, however, that the information and advice provided here would not apply just as well to synagogues, mosques, temples, etc. When it comes to risk and religion, the particular faith doesn't play the largest role, as they all have to face the same uncertainties: a synagogue has to be just as concerned about keeping a steady revenue stream, a mosque has just as much reason to ensure its building is prepared for another storm season, and a temple is just as likely to experience infighting among its worshipers.

So if you're viewing this site from a non-Christian-church perspective--and traffic figures for this site indicate that quite a few people are--don't discount the writing because of its focus on churches. Risk surpasses all faiths and beliefs. And it's always better to be aware of it.

What's Your Risk Appetite?

One of the first, and most important, aspects of developing a risk management plan for any organization is to know how much risk it's overseers want to take on. While it's impossible to have no risk at all (an issue that will be covered in future entries), it is entirely possible to set a level of risk that an org is willing to face. This is called Risk Tolerance or a Risk Appetite.

Knowing a company's risk appetite is crucial to ensuring its uncertainties are managed properly. A company with a large risk appetite is one that will take on more risks as a part of its business, with the expectation of greater reward. A multinational corporation with a large appetite is one that will expand with aggression and attempt to enter new markets; there's an incredible amount of uncertainty to such business, but the payoff can be huge. By contrast, a company with a small risk appetite is going to be cautious when it comes to any form of uncertainty, and as a result will see diminished, but likely steadier, growth. Small businesses generally have a decreased risk appetite, especially for the first few years, since a few wrong steps can shut things down for good.

So where should churches be when it comes to risk appetite? Generally speaking, they should try to keep it petite. Given that churches are not trying to operate like a for-profit business, taking on large risks could prove hazardous for a church's health and standing. Doing such is also unfair to the numerous stakeholders each church has, from congregants to renters to those who receive support.

Of course, this doesn't mean a church should avoid risks at any cost, or be afraid of taking a larger one from time to time; there are countless stories of churches stepping outside their comfort zones and reaping great rewards from it. What's important is for the decision makers in the church to know how much risk they want to take on, and the best ways to deal with it. With a risk appetite established, the rest of the risk management process can flow much easier.

Risk thought: what's your church's risk appetite? Would other congregants agree with you?

Risk #4: Here is the Church, There Goes the Steeple

When I'm staying in a different city over a weekend, whatever the reason may be, I love to get up early on a Sunday and visit a local church. It's always nice to see the different customs and traditions each church brings to its services, and it often gives me great ideas to bring back home with me ("They all pray in small groups during Prayers of the People! We should try that!"). A few weeks ago I found myself in the middle of downtown Toronto for the weekend, and I was up bright and early on Sunday morning to attend a service in a large, old Presbyterian church.

The service itself was great, with a powerful sermon about forgiveness and an organist who really knew what he was doing, but the most-provocative moment for me was at the very beginning, during announcements, when one of the church's elders informed the congregation that a pipe had burst overnight, causing massive flooding in half a dozen rooms. As a result, the rooms were entirely inaccessible and the congregation now faced two large bills: one for fixing the pipe, the other for the cleanup of all the water damage.

The impact of this would undoubtedly be felt well beyond the walls of that church. A quick look at the church's bulletin revealed a long list of community events and activities scheduled to be held that week, but would now likely have to be cancelled. Being in the heart of Toronto, this church was clearly a gathering spot for many different groups, particularly those focused on helping the lonely and needy. One burst pipe may have put all those ministries on hold.

Though it lasted no more than a minute, this announcement served as a great reminder of the risks associated with the physical church building. Many churches in North America are well over fifty years old and have not had serious updates or renovations since they were built. Add to that their large, exposed structures and the increasingly-erratic weather we've been seeing, and you have some serious threats to a House of Worship.

Thus, when it comes to thinking about the risks a church is facing, the physical structure has to be considered and should be a priority, especially as the seasons change. Can the sanctuary roof survive another winter (or hurricane season)? Has the electrical wiring been inspected at the appropriate time? Have any complaints about leaky or frozen pipes been made? Who is responsible for ensuring the church stays clean, and do they have a way to report any problems they find?

Staying on top of the building's condition can save the church thousands of dollars in avoided repairs and replacements. More importantly, it keeps the church's doors open and the surrounding community active. As the church I attended on that Sunday learned, the inability to host other support groups can be devastating. Especially when it could have been avoided.

Risk thought: Does your church have a plan for the upkeep of its building? How closely is that plan followed?

What about other types of risk?

So far, this blog has covered three overarching types of risk: financial, operational and reputational. These three are by-far the most predominant in a church's everyday business, and need the most focus. There are, however, other types of risk that could arise, but for the most part are not going to be a huge hazard to a house of worship.

For most companies and corporations, which make money from selling goods or services, market risk is important to pay attention to. This is the risk that fluctuation in prices and costs can have an effect on the overall bottom line. For example, commodity prices could rise, causing greater expenses to the organization, or interest rates could go up, resulting in a greater cost of debt. There's also currency risk, which happens when a multinational company deals with money from different countries, and equity risk, where stock and security prices constantly fluctuate. Going even deeper, some organizations pay a lot of attention to volatility risk, which is focused on primarily with derivatives trading, and are also focused on systemic risk, another securities-related term which describes risk that is impossible to mitigate.

So what should churches think of these risks? Ultimately, probably not too much, because there isn't a whole lot that can be done about them from an individual congregation's perspective. Take market risk: it's unlikely to cause too much trouble, because churches typically won't have their budgets wiped out by a few rising prices. Interest rate risk also exists for a church that's carrying debt, but not to the extent that it would affect a multi-billion dollar corporation. And equity and currency risk may affect pensions, but most denominations keep a pension plan that is well outside the decision power of each congregation.

When discussing risk, it's important to have scope. Financial, operational and reputation risk are all important to a church, and more importantly, are manageable from the congregational level. The fluctuation of commodities and stock markets are most-definitely not. Knowing all the risks the church faces is immensely valuable, but even more so is knowing where, and where not, to focus the attention.

Published in L Magazine

I've recently had several articles published in church magazines and journals, including the United Church of Canada's The Observer in Nov 2012. Now L Magazine (formerly The Clergy Journal), a Lutheran publication in the States, has printed another article. You can check it out here:

http://www.lmagazine.net/wp-content/uploads/LMagazine-Jan-Feb2013.pdf#page=29

Risk #3: Reputation Risk: An Overview

Reputation risk can be tricky for any organization. It essentially examines the uncertainty surrounding how much the general public trusts an org, and what the general perception of that institute is. There are few businesses that can thrive despite strong public disapproval (one may think that energy companies are the exception to this rule), which makes a positive reputation crucial to the survival of any company. For churches--whose ultimate goal is to minister to those outside its doors--a negative image can be devastating.

Building and maintaining a good reputation in the community is challenging enough, but churches these days seem to have the deck stacked against them. There is a growing distrust of organized religion in North America, and a rise in people identifying as irreligious. Those outside the church frequently view it as being narrow-minded, homophobic and too involved in politics; without the amount of media attention given to "religious leaders" who sound more like political pundits, this is hardly a surprise. On top of all that, hardly a week goes by without a story breaking about a scandal in the church, or a viral video of a crazed pastor calling for the death of a minority group, or a secularism advocate condemning the general church in the harshest of terms. The end result is a society that looks at the church uneasily and keeps its distance whenever it can.

This, of course, is unfair to individual churches and their congregations, who get a completely inaccurate perception cast upon them due to the actions of a few people who could be as far away as the other side of the world. Unfair as it may be, it's nevertheless an unfortunate reality, one that churches need to be aware of.
Then there are the reputation risks that individual churches are in control of. Members and leaders should be asking themselves how they are viewed within their community, and should be taking into account their outside perception when making decisions. Projects like church renovations, meetings and parties, and third-party rentals can all have an effect on the surrounding area; if done without consideration for neighbours, they can create a backlash against the church.

At the same time, there is great upside to reputation risk. Since the church is meant to be a light in a world of darkness, there is incredible opportunity to build bridges and form relationships with those in the community. When a church's outreach is focused on being a beacon to those around it, and when its acts mirror those of Jesus and the early Christians, it will undoubtedly gain a reputation as being a place for joy and celebration, as well as care and healing. While the general outsider perception of churches may be of distrust and skepticism, a taking into account of reputation risk can open a church's doors wider than ever before.