Managing the risk

If your organisation is to be successful, you will expect to take some risks. However, all good leaders of organisations seek to manage and minimise the risks they take. Using an appropriate legal form is one way to do this.

For example, the process of incorporation makes the organisation itself a legal entity liable for its own obligations, thereby limiting the personal liability of the individuals involved.

However, incorporation does not necessarily limit the personal liability of board members if they act in a criminal or negligent way, or if you are a charity, misuse the charity's assets, or act outside the charity's powers.

Incorporation is an important consideration if the organisation intends to employ staff, take on property interests (for example, a lease) or undertake contractual obligations (for example, a contract to provide services with a local authority) or operational risks (for example, working with children). Incorporated legal forms include companies and industrial and provident societies.

Risks can also be managed in other ways, for example through:

• Ensuring compliance with legal requirements, for example, having Criminal Records Bureau (CRB) checks when needed when working with children and other vulnerable service users.
• Purchasing suitable insurance, for example, public liability insurance, building and contents insurance.
• Implementing good policies and practices, such as regular risk reviews, a risk register, staff/volunteer assessments and complaints procedures, a conflicts of interest policy.