The one who gets wisdom loves life; the one who cherishes understanding will soon prosper. Proverbs 19:8 

The fiduciary duty of care requires board members of corporations (including churches) to act in the best interest of the organization and its stakeholders, and to exercise reasonable care and diligence when making decisions on behalf of the organization. Financial oversight is fundamental to this duty, as it ensures that the organization has adequate resources, follows sound financial practices, and complies with relevant laws and regulations. 

The bar for board performance and accountability is rising, especially in light of increasing complexity and uncertainty in the external environment. To protect the ministry, board members must have a high bar, too, for personal expertise and financial risk management, and seek expert advice when necessary. As legal cases have shown, board members cannot use ignorance or negligence as an excuse for failing to fulfill their duty of care, as they are expected to know what a prudent person would do in a similar situation.  

The board sets the risk tolerance of the organization. The risk equation used to guide assessments is:  

Gross Risk  -  Implemented Policies  -  Transferred Risks  =  Net Risk 

The board, directly or through staff, identifies the myriad risks and assesses the impact those risks could have on the organization.  Internal risk mitigators are then identified, such as policies and procedures, or risk is transferred externally, eg, by obtaining insurance.  The remaining risk is the net risk facing the organization.  While the board is responsible for considering all risks, financial risks are a particular area of emphasis for the board. The board’s finance committee is often responsible for oversight of general and financial risks for the board, with key risks and issues passed to the full board for consideration.  

What are the key risks the finance committee should consider? 

Download our guide today!