Nonprofit businesses and organizations are staples of the communities in which they serve. The mission of most nonprofits is to advocate for and support those in need by enriching and bettering the lives of those who depend on your organization.
Is your nonprofit’s mission protected? Read on to learn about the risks that threaten nonprofits and how best to protect against them.
Threats Faced by Nonprofits
Nonprofits are businesses with unique, community-oriented missions. Unfortunately, nonprofit organizations are susceptible to some of the same risks and threats that face many other small businesses.
Data breaches and cybercrime, embezzlement and fraud, and wrongful termination suits are all common risks faced by nonprofits.
Nonprofits are privy to an array of personally identifying information, or PII. Your nonprofit may collect such information as names, dates of birth, social security numbers, and credit card details. What would happen if a data breach released such information to the general public — or a nefarious hacker?
A data breach may even occur through no fault of your own but through the negligence of a third-party vendor or contractor. Data breaches often result in costly legal fees, and can negatively impact your nonprofit’s reputation — tarnishing your nonprofit’s ability to do good for your community.
Embezzlement and Fraud
Employee embezzlement and fraud is rife in the business world — and “shockingly common at nonprofits,” according to the Boston Globe. Misuse of nonprofit funds for personal use or abuse of perks and benefits can cost nonprofits hundreds of thousands of dollars.
Perhaps worse than the loss of funds is the resultant distrust in your nonprofit among your donors and those you service. Such erosion of trust can lead to lower income and limited community outreach.
All businesses — including your nonprofit — are susceptible to claims of wrongful termination, even in states with at-will employment. Out-of-court settlements range, on average, between $40,000 to upwards of one million dollars. If litigated, 67 percent of wrongful termination suits are ruled in favor of the plaintiff.
A protracted legal issue can cost your nonprofit a significant chunk of change, even if you choose to forego a legal battle by settling.
How to Protect Your Nonprofit’s Mission
The most intricate and best-laid planning won’t totally nullify the risks that endanger your nonprofit’s mission. Thankfully, insurance can help mitigate those risks to keep your nonprofit’s mission protected and secure.
Cyber Liability Insurance
A hack that exposes your patients’ confidential information or donors’ credit card details can be disastrous — and isn’t all that unlikely.
Cyber liability insurance helps protect against the costs stemming from a data breach or cybersecurity intrusion. Cyber liability coverage can:
- Cover expenses incurred by the interruption of your business
- Provide credit monitoring for individuals affected by the breach
- Ensure compliance with state notification laws
- And protect against financial costs associated with regulatory fines and lawsuits
There is no industry-standard cyber liability insurance package. A broker can assist you in custom-tailoring a solution that addresses the specific needs of your nonprofit.
Directors and Officers Liability Insurance
Your nonprofit’s board of directors is the linchpin to your organization. Failure to adhere to regulations, claims of mismanagement, and unacceptable professional conduct — alleged or otherwise — can all result in costly legal fees.
Directors and officers liability insurance, or D&O insurance, protects your leadership from being held personally responsible for accusations of wrongdoing.
Nonprofits file twice as many D&O claims when compared to public and private businesses. A D&O liability policy to protect your nonprofit’s mission not only protects your leadership but helps recruit and retain your valuable officers.
Employment Practices Liability Insurance
Allegations of discrimination, harassment, or wrongful termination can cripple the effectiveness and perception of your nonprofit. While it’s important to minimize your risks as best as possible, employment practices liability insurance can protect your nonprofit’s mission from costly legal fees.
Employment practices liability insurance covers the cost of defending your nonprofit in a lawsuit, such as one stemming from allegations of wrongful termination. Employment practices liability coverage is often packaged as part of a business owners policy.
Continue to Serve Your Community by Protecting Your Nonprofit’s Mission
At first, insuring your nonprofit might seem like an added expense in an industry where overhead should be as limited as possible. The reality, however, couldn’t be further than the truth.
A broker or agent, like the advisors at Gallo|Thomas, can custom-tailor an insurance solution that protects your nonprofit’s mission from the risks it’s exposed to. By insuring your organization, you’re safeguarding its ability to serve your community and those who depend on your important work.