Running services in areas with which they are not familiar could leave organisations more open to mistakes that result in legal claims, and could leave them facing the prospect of having to change their charitable objects.
"We have been approached to run drink and drug-related services, but we try to be selective about what we do," says Andrew Hodges, director of finance, performance and ICT at mental health charity Rethink. "We try to be structured and focus on things that are in line with our mission."
Nick Rudnai, a partner at Case Insurance, urges organisations to be wary of diversifying. "Charities should not be tempted to move into areas they don't understand properly," he says. "And if they do decide to make the move, they should make sure they get appropriate advice."
Paul Emery, head of charities and the voluntary sector at Zurich, says the potential for mission drift poses a reputational risk.
"It would be tempting for some charities to tender for services with a tenuous link to their mission; it is tempting to follow the money," he says. "But if they apply for a contract that is not core to their capabilities, that increases their resilience risk, reputational risk and risk around volunteer expectations." And reputational risk can quickly transform into financial risk, affecting the organisation's ability to attract funding or voluntary income.
According to Hodges, reputational risk is something charities should deal with internally. "We have no policy to cover our reputation, but we do have situations where stuff gets into the public domain," he says. "We deal with that in our media relations department."