IV. Financial risks
Financial and investment loss
During its normal operations, War Child is exposed to currency, cash flow, credit and liquidity risks. To control these risks, War Child has instituted policies and procedures that are intended to limit the risks of unpredictable adverse financial developments. War Child does not trade in financial derivatives, nor does it invest any of its income in the stock market or other risk-bearing assets, believing that it is inappropriate to speculate with donations meant for its mission.
There is a risk that War Child fails to reach its fundraising targets. This could have an impact on the continuation of our programmes. War Child mitigates this risk through diversification of donors. Generating income from multiple, diverse sources reduces the risk of a sudden decrease in income. It also ensures the availability of flexible income in addition to earmarked income. War Child seeks a prudent balance in earmarked and non-earmarked income. Earmarked funds have to be spent in a specific country or project, but the availability of sufficient non-earmarked funds allows War Child to adapt quickly to changes in circumstance.
In accordance with the Dutch Accounting Guidelines for fundraising institutions (RJ650), War Child holds a continuity reserve as a buffer. War Child’s continuity reserve complies with VFI (the Netherlands Association of Fundraising Organisations) regulations and is reviewed and approved annually by the Supervisory Board. The size of the continuity reserve and the underlying analysis are further explained in the annual accounts.
Ineligible costs may arise when the organisation fails to follow procedures required by large donors or when there are difficulties with implementation according to a grant agreement. This may lead to financial setbacks and can impair our relationship with donors. To avoid the occurrence of such events, War Child focuses on training, support and communication of guidelines, and also performs internal and external audits.
Despite War Child’s policies and measures to ensure the best use of its funds, the threat of a breach in integrity standards can only be minimised and not ever fully abandoned. Fraud and corruption have financial implications as well as implications for War Child’s reputation and credibility. War Child is continuously updating and strengthening its anti-fraud measures. War Child reduces the risk of such incidents by monitoring compliance to existing anti-fraud measures such as the segregation of duties, the authorisation matrix and procurement requirements through internal and external audits.
The organisation also conducts thorough background checks for all new employees before they are hired. And, last but not least, staff, implementing partners and suppliers are continuously made aware of our Integrity Policy and whistleblowing procedures. This is done through co-signing our Integrity Policy, organising discussions about relevant themes and sharing alerts about incidents of fraud to raise awareness.