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Surviving the squeeze

Smart risk management moves for nonprofits under pressure

The financial pressure mounting across the nonprofit sector is undeniable, and for the majority of nonprofits that have less than three months of operating reserves on hand, the impact of shrinking government budgets, delayed grants and inflationary costs hits hard. Staffing is stretched thin. It’s harder to deliver the same level of programming. Maintenance gets deferred, and tough trade-offs become routine.

The result is a fragile balancing act between staying operational and staying protected. While it may be tempting to reduce insurance coverage or delay critical facility upgrades during lean times, doing so can expose your organization to greater long-term costs.

Consider this: Since the start of the year, the public sector has lost at least 14,000 full-time jobs, almost all of which have occurred since February, when federal funding cuts accelerated. For those even able to replace trained workers with volunteers or less-experienced hires, the risk profile shifts dramatically. New general liability exposures, professional errors or abuse and neglect claims can arise when staff are underprepared, overworked or unfamiliar with safety protocols.

That’s why now is the time to think not just about cutting costs but about managing risk more strategically. With the right approach, nonprofits can preserve essential protections, avoid costly missteps, and even uncover hidden opportunities to save.

Here are five best practices to guide risk decisions in lean times:

1. Don’t trade coverage for cost without understanding the risk.

When budgets are tight, cutting or reducing insurance coverage might seem like a quick cost win, but lower premiums can come with higher deductibles, reduced limits or critical exclusions that leave the organization vulnerable. Before making any changes, work with a broker and carrier to model different coverage scenarios and understand what’s truly at stake. Smaller premium savings in the short term could lead to an outsized financial or reputational loss later.

2. Take advantage of built-in risk management tools.

The right insurance policy should do more than respond to claims. It should help the organization prevent them. Look for a carrier that includes risk management services and tools that can reduce the organization’s total cost of risk. Examples include smart sensors that alert the business to property exposures such as leaks or extreme temperatures, telematics tools to track fleet driver behavior and employee training tools. These types of tools not only improve safety and compliance but could also support grant applications and reduce long-term expenses.

3. Address staffing risk before it becomes a liability.

The operational strain of fewer experienced workers on staff introduces multiple layers of risk — from overworked employees who are prone to mistakes or delays to volunteers who lack the training and experience needed to navigate high-risk environments such as caregiving, youth services or transportation. Whether it’s reinforcing safety protocols, meeting compliance requirements or simply building confidence on the job, training is one of the most cost-effective ways to protect the organization, its people and its patrons. Some insurance partners even offer built-in training platforms or access to expert resources, making it easier to upskill staff without stretching already limited budgets.

4. Right-size your policy to match today’s operations.

Reassessing the organization’s coverage structure to make sure it fits current needs is one of the most effective ways to capture savings without compromising on protection. For example, if the organization has closed locations, paused programs or adjusted service delivery due to economic strains, its insurance should reflect those changes. There may be opportunities to remove coverage for inactive properties or assets, adjust limits or right-size deductibles in lower-risk areas. This exercise isn’t about cutting corners — it’s about making sure the coverage fits the current operations.

This is also a good time to proactively address any deferred maintenance, whether it be on aging roofs, outdated HVAC systems, or vehicle fleets. Fixing what’s within budget now can reduce long-term risk and help maintain favorable policy terms.

5. Engage early with insurance partners if considering a merger or acquisition.

Mergers, acquisitions and shared services models are becoming more common avenues to find financial stability — but they also introduce new risks: duplicate coverage, inconsistent limits and missed exposures across combined entities. Engage with an experienced carrier early in any M&A process to ensure alignment and help prevent gaps in coverage during the vulnerable transition period.

Staying protected while staying mission-driven

Nonprofits are no strangers to doing more with less, but don’t forget that managing risk is also a form of cost control. Taking a strategic approach to insurance and risk management can uncover savings, prevent disruptions and protect the resources the organization’s mission depends on.

By Tony Canci | Vice President of Underwriting – Human Services, Philadelphia Insurance Companies

Philadelphia Insurance Companies (PHLY) leads the industry in nonprofit insurance, offering policies designed to meet the unique needs of mission-driven organizations. Along with core policies such as general liability, professional liability, cyber and more, PHLY clients have access to value-added risk management tools. To learn more about these nonprofit risk management solutions, visit phly.com.