3 Biggest Risks For Non-Profits

non profit risks and liabilities singapore

3 Biggest Risks For Non-Profits

Non-profits do a great service to the community, but this service is fraught with risks. Hackers could steal highly sensitive data from you. Injuries could strike your staff and volunteers. And worse still, you might inadvertently hurt the people you’re serving if you’re not careful. All these situations create tremendous legal liability and operational disruptions. It’s crucial for non-profits to take steps to mitigate these risks, so that they can fulfil their organisational mission to the best of their ability.

Here’s a list of the 3 biggest risks for non-profits while serving the community:

#1. Data breaches

Imagine telling all your donors, staff, and volunteers that you’ve just been the victim of a data breach.

How bad would their reactions be? How much faith would you lose from your donors? How would it affect staff and volunteer morale? Do you think people would ever trust your organisation as much as the used to?

Getting hacked is a very real threat to non-profits – hackers are increasingly targeting charitable organisations because they’re seen as “soft targets”. If you accept donations online, your organisation will be an even bigger target for hackers looking to steal sensitive information like credit card details or bank account numbers.

The unfortunate reality is that many non-profits are indeed very vulnerable to such attacks because they don’t have robust cyber protection. It’s important for non-profits to have a strong cyber security plan in place. It’s also crucial for non-profits to have cyber insurance to shield themselves against legal liability if they get hacked. Non-profits will face significant legal repercussions if the personal information of their donors, beneficiaries, or volunteers get stolen or leaked all over the internet.

With Singapore’s PDPA law (Personal Data Protection Act), there is also a strong regulatory imperative for securing your data. In 2019, the largest fine for breaching the PDPA was levied on a company called Learnaholic, which was fined $60,000 for data breaches. Non-profits must seriously guard their data.

#2. Professional Liability

Organisation Liability

Unfortunately, just because you’re doing good doesn’t mean you’re absolved from legal liability (if only the world were that kind). Non-profits have a legal obligation to ensure that your services don’t cause harm to anyone. If your services end up injuring people, or causing illness, that you’ll be just as liable as a for-profit corporation in the eyes of the law.

Example Situations:

If you deliver cooked meals, the people who eat your food might fall sick. If the food was contaminated, they may even end up hospitalised. You can be held legally liable for making them ill.

If you run a home or a hospice, you can be held liable for injuries or illnesses that occur to your residents. If a resident falls and injures themselves because there was a puddle on the floor, you can be found negligent and held liable. If a resident falls sick, or has a worsening illness due to your staff providing insufficient care, you ca be found negligent and legally liable.

Directors Liability

Beyond organisational liability, directors of non-profits also face personal liability risks. If your non-profit gets sued, chances are the directors will also get sued personally as well. If you’re a non-profit director and you get sued, your personal assets like your house and savings will be exposed to claims.

Example situation:

You run a non-profit counselling centre for people with mental health issues. One of your counsellors befriends a client outside of work. The counsellor makes inappropriate romantic advances towards the client. The client suffers psychological trauma, and decides to file a lawsuit against your organisation’s directors for not having proper governance structures in place that would have prevented the counsellor’s inappropriate behaviour.

#3. Employee/Volunteer Injuries

Your employees or volunteers may get injured while carrying out work. Non-profits will have often members travelling around the country, or even going overseas, to perform duties. Car accidents could injure your members while they’re on the road. Your members’ duties might involve manual labour like building shelters or lifting heavy items. Accidents can easily occur while doing such physical work. If your members are volunteering in a developing nation, they’re at even great risk of accidents, or falling sick due to diseases contracted there. Many injuries or illnesses could occur during all this travel and work, creating significant legal liabilities for your organisation.

Examples Situations:

Your staff are out delivering food to low-income households. A staff member slips and falls during a delivery, breaking her arm. Under the Work Injury Compensation Act (WICA), your organisation would be liable to pay for her medical expenses and lost wages.

You organise an overseas mission trip to Cambodia to build homes for villagers. While there, some of your volunteers get injured when a roof collapses on them. Some other volunteers contract parasites from dirty water and fall very sick. Your non-profit would be liable for their medical expenses, and could potentially have to pay damages for not sufficiently ensuring your volunteers’ safety.

Real-world situations:

See: 20 SMU students injured in Vietnam during overseas service project
Several students suffered serious injuries, including spinal fractures, and other broken bones. If this had been your non-profit, you can expect to face multiple lawsuits from the injured volunteers. And no, getting people to sign waiver forms isn’t likely to help – see this helpful explanation.

See: 9 JC students injured in overseas community service trip

See: 4 Singaporeans killed in horrific car accident in Port Dickson, Malaysia

Under WICA regulations, if you had 4 staff members who died while working, your non-profit would have to pay up to $1 million in compensation ($225,000 * 4) to the families of the deceased.

What insurance protection do non-profits need:

#1. Cyber Liability Insurance to protect against data breaches

#2. Professional Liability Insurance to protect against non-profit liability

#3. Directors & Officers Liability Insurance to protect against director lawsuits

#4. Work Injury Compensation Insurance to protect against staff injuries




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