Finance: Smaller charities 'opting out of risk management'

Smaller charities could be opting out of risk management, according to the Charity Finance Directors' Group.

The umbrella body held its seventh annual Risk Conference last week, but it says the event is becoming more popular with larger charities than smaller ones.

"There has been a 10 per cent shift towards large charities," said David Membrey, deputy chief executive of the CFDG. "We do not think this is mere coincidence, but a sign of a worrying trend.

"Our analysis fits in with a wider fear in the sector that many smaller charities feel they cannot afford continuous development of their risk management functions."

Barclays Capital used the conference to warn that international charities were losing money by using spot transactions to buy foreign currency, mainly US dollars.

The bank said that between December 2004 and June 2005, a fall in the dollar exchange rate had hit charities that need to convert currency to spend on projects abroad. One charity lost 10 per cent of its annual income, greater than the amount given by its largest donor.

"Volatile exchange rates have a material impact on the purchasing power of a charity," said Darrell Porter, director of Treasury Risk Management at Barclays.

He argued that charities should negotiate "smart forward" contracts that commit them to buying currency in advance, offering protection against falls in the exchange rate.

"Many charities do this, but other sectors are looking at other options," said Porter.

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