Harnessing the power of data analytics for NFP entities
During our recent NFP session our assurance and risk division, discussed the merits of data analytics. Data analytics is defined as the science of examining raw data with the purpose of drawing conclusions about that information and can be used as follows:
- to validate trends;
- identify root causes of issues;
- comprehensively assess performance;
- illustrate future possibilities;
- streamline operations;
- increase cost efficiency;
- forecast performance;
- improvement budgeting processes; and
- enhance mission effectiveness.
Our external auditors at HLB Mann Judd use data analytics to obtain a better understanding of a client’s operations and the underlying factors contributing to a financial result or position. These procedures can also be used to establish whether a client’s internal controls have been effective throughout the year. Our internal auditors will often use data analytics to assess the integrity and legitimacy of data.
We often find that the observations made from our analyses are not only useful from an audit perspective, but also can be insightful from a managerial perspective. Not-for-profit entities can benefit can use data analytics in terms of the following:
- marketing and fundraising;
- budgeting and forecasting;
- assessing program effectiveness; and
- fraud detection.
Establishing a risk management framework
Circumstances can change rapidly and without a robust risk management framework key risks may not be adequately identified and managed. Our risk and assurance division discussed the importance of a structured and consistent risk management framework in terms of the Three Lines of Defence Model.
A key takeaway from the session was that for a risk management framework to be effective, consideration must be given to an organisation’s strategy and risks managed within its risk appetite. The benefits of an effective risk management framework are as follows:
- better way to identify opportunities and threats;
- enables proactive management of business risks;
- more effective way to allocate resources;
- improve incident management and reduce loss;
- improve stakeholder confidence and trust;
- improve compliance with legislative obligations;
- better corporate governance; and
- provides good information to make decisions which affect our ability to effectively deliver our objectives.