YOUR FORUM FOR PLAY, SPORTS UND LEISURE AREAS
This particularly holds true for activities that are mostly performed in an honorary capacity and involve a high level of personal commitment, motivation and idealism.
Old debates which were mostly considered to be settled are rekindled. What and how many structures do honorary posts require? How long can you afford to do voluntary work and to what amount? The efficiency and effectiveness of action for public sphere organisations will in future be questioned and called for to an even higher degree than it used to against the background of a decrease in subsidy funding from local authorities and at the same time an increase in competitive pressure on the individual associations: Besides, the question arises how volunteers can still position themselves as contacts, in particular for local authorities.
Given these requirements, further questions arise:
What does “the” association of the future have to accomplish and achieve? How much money can be spent on promoting and supporting the community on an honorary basis? How are the achievements, activities and efficiency of associations “assessed” irrespective of their organisational form? How is professional risk management practised? What are the milestones towards a sustainable and thus successful reorientation of associations?
Associations will have to become even more professional regarding their accom-plishable purposes and objects, their structures and actors in order to have a suffi-cient number of members, membership structures, “subjects” and affordable effi-ciency also in future. However, not all actors are equally familiar with and experi-enced in dealing with the risks and opportunities arising from the accomplishment of these tasks in future. The situation is compounded by jurisdiction and the compli-cated tax law. It is therefore all the more important to have some efficient and reliable risk and opportunity management.
Initial situation of many associations
Many associations – no matter whether they are non-profit-making sport, social, charitable or educational organisations and institutions or whether they engage in profit-making activities as advertising associations, business improvement associa-tions, tourist associations or trade associations – are in a similar initial position:
Generally speaking, they have to become more attractive to members to be able to unfurl a wide and attractive range of offers, activities and services given a proportionately high number of members and membership fees. Besides, they have to raise their profile, develop a prominent, unmistakable profile of their own to set themselves apart from the multitude of offerings of other, rival associations. Finally, the self-imposed goals and purposes or tasks have to be accomplished professionally. However, these expectations often can’t be met. Hardly any association feels on a par, for example in negotiations with potential sponsors and other backers, or is considered as such as, in the end, there is a sizeable gap between aspirations and reality. Inevitably, questions arise as to how sustainable “my” association actually is and whether it is able to meet future challenges.
What, actually, is a risk?
As defined by Martin Schütz, a risk is “the potential positive (opportunity) or negative (hazard) deviation from a predefined objective or expectation, depending on the probability or frequency of occurrence and impact of an event“. (Martin Schütz in “Risikomanagement der Öffentlichen Hand“ [“Public Sector Risk Management“], Physica-Verlag 2009, p. 127).
This basic definition can be exemplified by the “liability and status regime” of an as-sociation:
As a general rule, the management of an association has to see to it that the latter adheres to a strict separation between charitable or non-profit-making purposes and economic activities. Besides, to minimize legal liabilities and risks, the basic rule applies that the higher the level of sustainable economic activity is, the higher is, of course, the exposure to personal liability for the board of management or managing director. At the same time, with very distinct or extensive economic activities of the association one has to bear in mind the risks to which the association status as such is exposed. In the end, the status as a registered association (e.V.) may be at risk if the association, which ostensibly pursues non-profit-making objectives, actually proves to be an entrepreneurial civil law association or has to be considered as such.
Motives for implementing risk management systems
Why should a “normal“ association concern itself with the sometimes difficult imple-mentation of a risk and opportunity management system? The motives can be classified into three groups:
The first group comprises all the motives that describe the need for change for formal reasons. This includes the frequently discussed, but seldom consistent “relaunch of the statutes“, with which the association amends and adjusts its rules and regulations to recent developments and court decisions on the law of associations and tax law of associations. Especially with old-established associations, it is often the case that actual rules, behaviour patterns, formalities and regulations are not in line with the wording of the statutes and their by-laws, true to the motto: “That’s the way we have always done it, no matter what the statutes say“. In the risk description, the disengagement of association structures and organizational processes from the wording of the statutes and the way how they have taken on a life of their own can only be noted with great regret.
The second group encompasses the needs for change that arise for practical rea-sons to control and minimize risks. This includes, for example, the incorporation of exemption clauses (to the rules and regulations) to increase flexibility. The more varied the membership structure is, the more differentiated is often also the dues schedule. Whoever wants to introduce or levy fees in a differentiated and legally admissible manner will be bound to incorporate relevant exemption causes, for example clauses or stipulations to the statutes that differentiate according to member groups. Much the same applies, for example, to questions regarding the levy of special assessments. Without being clearly and adequately laid down in the statutes, the risk increases for the association to get into dire financial straits as it is not able to collect money due.
Finally, substantive reasons are given as motives for change: Departments and divi-sions which have actually formed over the years and which play an important role, for example in shaping the association’s identity or establishing a profile are enshrined in the statutes or in the rules of procedure and cash management regulations of the departments or divisions and thus put into writing to avoid misinterpretation and conflicts resulting from it as well as sometimes long-lasting disputes between managing board and members about the “right” way. A pleasant side effect of this risk control is the professionalization of the structures as such.
For which associations does the implementation of risk management systems pay off?
Risk and opportunity management systems can and should be implemented regardless of the association’s size. The reasons for implementing them are varied – irrespective of any legal obligation. For example, such systems can be used to prepare for an upcoming audit or a controlled turnover in the managing board, to reduce costs or to plan, measure, monitor and control liquidity as well as to compress and optimize inter-association processes and organizational structures.
With the help of effective risk and contract management, the risks resulting from the association’s business operations can be identified in time, assessed and sensibly controlled.
Risks and opportunities are two sides of the same coin. In this respect, talking about risks leads from the discharge of the legal obligation to implement early risk detection systems to the “value driver” in the strategic management and control of associations.
Conclusion
Associations that know about their risks will be able to identify and seize opportuni-ties and thus be able to face future challenges. Without such risk and opportunity management, they will perhaps be confined to dealing with internal matters and the question of sustainability will remain unanswered.
Author: Lawyer Andreas Schriefers is a co-founder of the anwaltsKONTOR Schriefers Rechtsanwälte in Düsseldorf and legal counsel of the Bundesvereinigung City- und Stadtmarketing Deutschland e.V. (bcsd), the German Federal Association for City and Town Marketing. He advises both municipal and private actors throughout Germany on issues regarding urban marketing, tourism as well as business development and has co-developed a certification programme for associations.
