Boards and Financial Risk
The one who gets wisdom loves life; the one who cherishes understanding will soon prosper. (Prov. 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. They must exercise reasonable care and diligence when making decisions on behalf of the organization. Financial oversight is fundamental to this duty. 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. This is especially noteworthy in light of increasing complexity and uncertainty in the external environment. To protect the ministry, board members must also have a high bar for personal expertise and financial risk management. They must 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. They are expected to know what a prudent person would do in a similar situation.