Helping you prosper
As a partner at UHY Hacker Young Fitch, I work closely with charities of all sizes. One thing is clear: understanding the risk landscape is essential for good governance and financial sustainability.
The Charity Commission’s Charity Sector Risk Assessment 2025 highlights key challenges trustees must address. Below, we break down the key findings and outline practical steps charities can take to strengthen resilience and remain compliant.
Financial resilience under pressure
Charities face a growing financial squeeze. In 2023, 42.6% of charities spent more than they earned, and the gap between sector income and expenditure fell by 77%, leaving little room for investment or innovation. Rising workforce costs, static government contracts and increasing demand for services compound the pressure.
What trustees can do:
- build robust financial forecasts and review them regularly
- monitor early warning indicators, such as cash flow and reserves, and act promptly
- explore efficiencies through shared services, mergers or collaborative bids.
Public benefit and compliance risks
Cases of abuse for private benefit rose 23% last year. Common risks include misuse of funds, unauthorised trustee payments, and dominant individuals exerting undue influence. Alarmingly, 11% of charities have only one or two trustees, increasing governance vulnerabilities.
What trustees can do:
- strengthen internal controls and document decisions
- maintain a diverse, independent trustee board
- seek advice on conflicts of interest and trustee payments.
Governance and safeguarding
Recruiting trustees remains challenging across the sector. At the same time, safeguarding failures can have serious regulatory, financial, and reputational consequences.
New and emerging risks include the misuse of technology, such as deepfake content, which can undermine trust and create safeguarding concerns.
What trustees can do:
- review governance structures and succession planning
- ensure boards have independent trustees
- provide training for staff and trustees on digital and safeguarding risks.
Fraud and cybercrime
Fraud continues to rise. Between November 2023 and October 2024, the Commission opened 603 fraud cases and 99 cybercrime cases. Around 50% of charity fraud is committed internally, highlighting the importance of strong internal controls.
Larger charities should also prepare for the new “failure to prevent fraud” offence, due to come into force in September 2025.
What trustees can do:
- implement strong internal financial controls
- conduct fraud risk assessments and document them
- invest in cyber security and staff training.
Technology, AI and social tensions
Technology and AI present opportunities to improve efficiency and service delivery, but they also introduce ethical, legal and reputational risks.
In parallel, increased social media polarisation and misinformation can quickly damage public trust.
What trustees can do:
- develop a clear policy on AI and digital tools
- ensure all communications are factually accurate
- monitor social media and respond promptly to misinformation.
Overseas operations and geopolitical risks
Charities working internationally face heightened safeguarding and financial risks, especially in conflict zones. Geopolitical tensions and hostile foreign states can also impact UK-based charities.
What trustees can do:
- test overseas procedures and controls
- conduct due diligence on partners and funding sources
- stay alert to sanctions and compliance obligations.
Final thoughts
The charity sector has consistently demonstrated resilience, but the current risk environment requires trustees to act decisively and proactively.
At UHY Hacker Young Fitch, we support charities with tailored advice that strengthens governance, financial management, and regulatory compliance.
Our services include
- audit and assurance
- risk management workshops
- trustee training
- strategic planning and compliance reviews.
The next steps
If you would like to strengthen your charity’s resilience and manage risks, please get in touch with Michael Fitch, or your usual UHY charity adviser.
