Risk Assessing Third Party Agreements

Risk Assessing Third Party Agreements

By Nick Koerbin

No matter the size of your association, risk management is one of the significant challenges facing volunteer boards. Often, Boards are expected to meet and decide there and then to enter into contracts with suppliers, sometimes worth thousands of dollars, without a proper risk assessment.

The latest research by Association Executive Services of over 100 Associations in Australia has revealed that very few associations have a structure for conducting a risk assessment on proposed partnerships or contracts with suppliers.

Most association board members are volunteers and time-poor and are often vulnerable to poor decision-making when entering agreements with third parties.

To reduce risk to your association, set up a risk management committee.
Here is how to go about it!

💡  Get sign-off from the Board and develop terms of reference for the risk committee. What risks will the committee assess, and how will they report to the Board?
💡  Identify who should be on the risk committee; it is typically the treasurer and about three other volunteer members who may have financial, legal, supplier management or similar skills.
💡  Define responsibilities, reporting structure, and duties. When do they meet? Who do they report to?
💡 Develop a risk management framework and risk assessment structure. For example, the risk management committee may need to review contracts over a certain amount in value.
💡  Identify the assessment process and timelines for reporting to the Board.
💡 Finally, could you ensure there is a Board policy supporting the roles and functions of the risk committee, which forms part of the compliance under board governance?