Board Competencies, Network Ties And Risk Management Disclosure Practices In Non-Profit Organizations

Abstract

In the current challenging economic environment, non-profit organizations (NPOs) are exposed to an array of risks and some of these risks are unique due to the characteristics of the organizations. Understanding and managing these risks are crucial in ensuring sustainability of the NPOs and the responsibility lies with the board. However, risks management and disclosure of risks in NPOs is less well developed relative to for profit organizations and this may affect boards’ role in enhancing risk management practices of these organizations. As such, this study aims to examine the relationships between certain board characteristics: board competencies, network ties and risk management disclosure practices in NPOs. Information on these variables are obtained from content analysis of annual reports and Financial Information Forms of 219 NPOs registered with Companies Commission of Malaysia for the financial period 2011. Results of this study reveal that the overall extent of risk management disclosure practices is at a moderate level. In addition, only board competencies are significantly positively related to the extent of risk management disclosure practices while network ties are not. This infers that some board members acknowledge the importance of being engaged in risk management decision. However, lack of specific guide on risk management in NPOs may reduce the motivation of some board members to do so. The guidelines and relevant trainings to board members provided by relevant authorities may increase the understanding of key risks and management of these risks as part of good governance in NPOs.

Risk Management in Public and Non-Profit Organizations: A Systematic Literature Review

“…Qualitative Quantitative Conceptual Total (Domańska-Szaruga, 2020) 1 1 (Ghani et al, 2019) 1 1 (Moloi, 2018) 1 1 (Gibb & McNulty, 2014) 1 1 (Kim & Kim, 2020) 1 1 (Scarozza et al, 2017) 1 1 (Kumah et al, 2019) 1 1 (Karakaya & Karakaya, 2017) 1 1 (Arshad, Abu Bakar, et al, 2016) 1 1 (Moloi, 2017) 1 1 (Spikin, 2013) 1 1 (Hood & Smith, 2013) 1 Totals 1 5 5 1 12…”

How has the literature contributed to creating effective risk management policies in nonprofit organisations

“…However, a deeper understanding of risks' dynamic nature implies long-term analysis (Arshad, Bakar, and Othman 2016), and stakeholders' interests and NPOs' environments can vary. To be representative, research results need to include different realities from the perspectives of varied actors (Arshad, Bakar, and Othman 2016;Benjamin 2008;Domanski 2016;Gibb and McNulty 2014).…”

How has the literature contributed to creating effective risk management policies in non-profit organisations

“…The most common method used to process data was content analysis. Almost half the publications analyzed texts from legislation, transcribed interviews, and annual reports (e.g., Arshad, Bakar, and Othman 2016;Gibb and McNulty 2014;Tarr 2011).…”

“…These findings suggest that NPOs' internal actors (i.e., board members and employees) are poorly prepared to assume their collective responsibility for these organizations' success. Given that board competencies have been found to have a positive influence on risk management disclosure practices (Arshad, Bakar, and Othman 2016), clear guidelines and relevant training have become required features of NPO board members.…”

“…In terms of methodology and protocol analyses, the literature review revealed that longitudinal studies are being neglected and multiple data sources have not been considered a research option. However, a deeper understanding of risks' dynamic nature implies long-term analysis (Arshad, Bakar, and Othman 2016), and stakeholders' interests and NPOs' environments can vary. To be representative, research results need to include different realities from the perspectives of varied actors (Arshad, Bakar, and Othman 2016;Benjamin 2008;Domanski 2016;Gibb and McNulty 2014).…”