Webinar Round-Up: Risk Identification Matrix Unveiled

S. Scott Seamands, partner at Lindquist von Husen & Joyce, LLP, and Julie Goldfine, COO/CFO at Mutual Housing California, revealed a risk identification matrix currently under development by our firm that serves as an information network for financial learning in the nonprofit affordable housing industry.

After years of interviews and discussions with CFOs about their approach to risk, we are creating this comprehensive tool designed to help organizations develop more cohesive approaches to the identification and mitigation of enterprise risks.

During LvHJ’s recent virtual Affordable Housing Roundtable, Seamands and Goldfine facilitated discussion and gathered feedback on how this matrix can help affordable housing developers develop more cohesive approaches to the identification and mitigation of enterprise risks.

The tool is also in response to comments from audit committee board members, having expressed sincere interest in being more proactive in understanding the underlying risks within their respective organizations, enabling them to provide deeper oversight to the full board.

The Excel schedule matrix in development identifies eleven areas of risk common to most organizations. These areas include Loss of Assets, IT, Pipeline, Human Resources, Competition, Financial Statements, Non Compliance, Insurance, Environmental, Legal, and Regulatory risks. For each area of risk, we have drilled down to include a list of more specific risk topics requiring evaluation (and potential action) on their impact to the organization.

Repeatable Scoring For Nonprofit Risk Management

In order help CFOs develop appropriate (and repeatable) plans of action, the tool includes a matrix for assessing the impact of each risk. The matrix scores both urgency and impact to the organization, and it uses color mapping to help quickly identify urgent matters with significant impact or harm.

The tool also identifies four common questions to be raised when assessing the gravity of a risk. Questions include: The likelihood of the risk; the consequences of the risk; the risk rating; and finally the efforts needed to mitigate the risk. Users must decide the frequency and importance for each characteristic.

Once the likelihood and consequences for a risk have been determined by the team, the tool determines a risk rating. Users will quickly—and graphically—understand the mitigation urgency and available options.

With more and more CFOs delegating the task of risk mitigation throughout their organizations to draw on expertise within each department, the matrix tool serves as a roadmap to help each department focus on their most significant risks. For example, if a risk involves cyber security, identification and mitigation tasks might best be handled by IT leadership. Since specific expertise may be required to both understand and resolve departmental risks, having a common assessment tool in place instills confidence that a clear, repeatable process exists for all departments to follow. Audit committees can then track organization-wide efforts to mitigate the most significant risks.

As the matrix tool is still in a development stage, we are actively seeking input from the financial community on areas that may have been overlooked or items that should be added to the form. In the open discussion portion of our virtual roundtable, members shared a few suggestions, including the need to add the pandemic crisis as a significant unforeseen risk.

Ultimately, Strength Matters may share parts of this tool on their website so that their members may use it to improve their organizations. Strength Matters is a nonprofit initiative that serves as an information network for financial learning in the nonprofit affordable housing industry.

PPP Loan Forgiveness Update

In an earlier segment of the Roundtable (that was not recorded), Julie Goldfine led an update discussion on the PPP Loan Forgiveness applications. In addition to Julie’s walkthrough of both versions of the forgiveness application (EZ and otherwise), we discussed how organizations are planning to treat payroll costs eligible for PPP loan forgiveness in an organization that often allocates many of the payroll costs to affiliated properties.

LvHJ’s quarterly CFO Roundtable brings together CFOs, Controllers and Accounting Managers in the affordable housing community to learn from each other and industry accounting experts. The quarterly series has been a firm tradition since the early 1990s.

The recent recording about the risk matrix is available here to review these areas for your organization. Please let us know if you have any questions specific to the topics we presented by contacting us at info@lvhj.com.

Affordable Housing CFO Roundtable, September, 2020

You may also be interested in our past Roundtable recording about the CARES Act and tax planning.


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