Due to these assumptions, the organization may not take the appropriate steps to protect itself and its stakeholders from harm. Dispelling the myths described below is a first step in managing a nonprofit's risks. Insurance is a method for financing or funding certain losses. For most nonprofits, insurance is a critical component of their risk management program. However, insurance is only a financial bandaid.
Nonprofits exist for a variety of reasons and with many different missions.
However, their first goal is to do no harm and in some way enhance another's life. Enhancements include introducing disadvantaged youth to the beauty of the arts, improving the environment, providing management assistance to other nonprofits, or finding shelter for a battered woman. The success of most nonprofits is dependent upon the support of the public either as donors or volunteers. Practicing risk management is an effective way to address these issues. Risk management is the discipline for dealing with the possibility that some future event will cause harm.