Risk Management Strategies in NGO and Commercial Sector Compared

Corporate Governance and Risk Management

The charity and commercial sectors offer different notions concerning risk management in the corporate arena. Currently, the charity sector is facing various difficulties including a reduction in the funding amount and the need to adopt the use of the ever-changing technology. Besides, the communication means is dynamic hence creating emptiness in service provision. However, it embraces new ideas and innovation that prepare the corporate field for the future. Risk management is the process of ensuring that the occurrence of various risks or activities does not cause any financial loss to the entity (Merna, and Al-Thani, 2011). This differs to corporate governance, which refers to the identification and clarification of activities and responsibilities undertaken by various individuals in an organization (Brikend, 2014). The commercial sector offers direct and proportional risk management proposals where the corporate management pays some money for it to be covered against the occurrence of a risk. The following study identified the differences between the third and commercial sectors in relation to the risk management protocols and corporate governance.

The difference between the two sectors is significant and cannot be ignored. Mostly, after the occurrence of any insured risk, the commercial sector is faster and efficient at responding. Since an individual paid all the premiums for the risk, he or she is entitled to the compensation. In the charity sector, the organization decides whether to compensate the individual or not. In this case, it does not depend on the fact that the risk was genuine or not. However, it is essential to identify that the third or charity sector might be better positioned to handle the needs of the weak and provide services in remote areas in a better way compared to the commercial sector (Krishna, Stuart, and Fitriya, 2013). In order to differentiate the commercial and charity sector in relation to risk management, it is important to identify the goals between the two sectors. In this case, the primary objective of a commercial sector is to make a profit out of the premiums paid by the insured. However, the third sector aims at restoring the financial position of the investor without having to pay any amount of premium. The needs of the societal members are the priority of the charity organization (Tao and Hutchinson, 2013).

The third or charity sector aims at identifying the needs of the people without any form of discrimination. In such cases, the organizations aim at ensuring that all threats posed to the environment are addressed. The organizations' objectives ensure a maximum productive capacity among different groups including the landless and disabled. On the commercial sector, the compensation or view of the risk management process depends on the innocence of the client. In this case, if the client were in the wrong, he or she should not expect any compensation from the commercial company (Jizi et al., 2014). The amount that the clients pay the premiums determines the amount they receive compensation. In the third sector, the amount paid for the premiums does not affect the compensation that the client will obtain. Realistically, the clients in the charity sector do not pay any premiums in order to receive the compensation (Brikend, 2014).

It is essential to identify the efforts and strengths of the charity or third sector differ from one country to the other. For the strong voluntary organizations, a strong interaction between the entities is not guaranteed. In this case, a strong division between the commercial and charity organizations is identifiable. For instance, the claims made by a commercial organization are not similar to the requests made by a charity organization. For charity or third party organizations, the interaction is embraced in places where the environment is favorable for poverty eradication as well as addressing other social issues. In such cases, the cause and effect principle might not have the ability to identify the relationship (Petre et al., 2011).

Many commercial sector organizations are not concerned with the improvement of the society. Rather, it is aimed at compensating people who have provided full premiums for the risks in place. Unlike the commercial organizations, the third parties aim at educating the clients about their welfare and civil rights in relation to corporate governance (Brown, Steen, and Foreman2009). In contrast, the charity organizations operate in collaboration with other official entities in order to offer help to the people. Unlike the commercial organizations, the third sector organizations ensure that all institutions facilitate human development in terms risk management and corporate governance. In this case, they concentrate on training the staff and strengthening all institutions in general. In contrast, commercial organizations do not provide regular training programs in order to facilitate the well-being of the society (Vaughan and Arsneault, 2014.)