Date updated: Monday 13th October 2025

Charities large and small currently face heightened risks which can make navigation of the day-to-day extremely challenging. Whether it is financial uncertainty, the burden of increased regulation, the fragile political climate (exacerbated by social media) or the threats and opportunities of AI, it is a difficult environment. In a blog for the Association of Chief Executives of Voluntary Organisations (ACEVO), Kye Lockwood, CEO of charity DataKind UK, described the environment that charities are currently operating in as being in a state of “volatile, uncertain, complex, ambiguous (VUCA) permacrisis”. It therefore feels timely that, in publishing a high level view of current risks to the sector, the Charity Commission is recognising the difficulties faced by charity leaders.

In this article and as experts in charity law, we take a look at the risks considered to be of the most significance by the Commission, which says that this risk assessment is intended to assist trustees and charity leaders to understand the risk landscape and support decision making. Trustees are encouraged to consider how the risks identified might affect their own charity’s operations. 

The risk assessment draws on data from annual returns and accounts as well as from the Commission’s compliance work and its engagement across the sector. It identifies two key risks: financial resilience and risks to public benefit. In addition, it flags other areas of significant concern, as set out below.

Financial resilience

The Commission reports growing evidence of a financial squeeze within the sector. It records that, over the past year alone, the difference between sector income and expenditure reduced by almost three-quarters. The 2023 Annual Return data is stark. Over 42% of charities had expenditure exceeding their income, up from 38% in the previous year. This suggests increasing use of reserves to bridge the gap. The Commission concludes that many charities are left with little or no headroom for investment or for riskier projects. Smaller charities, with an income below £500,000, are particularly at risk. Collectively, charities in this income bracket saw expenditure exceed income. 

Data from annual accounts and returns is inevitably relatively dated. However, the Commission‘s sector engagement also bears out the considerable financial challenges many charities are facing. The Commission reports increasing concern from charities over the last year about workforce costs and the accompanying tax changes, challenges in securing sustainable public funding and increases in demand. 

The risk assessment sets out actions that trustees should take to mitigate financial risk. Many charities will already be doing much of this, while also endeavouring to deliver their mission. The Commission advises trustees to focus on effective financial planning, ensuring financial reporting is fit for purpose, regular, and provides them with the necessary level of detail. Trustees are urged to act on ‘early warning indicators’  to help manage finances whilst they still have a range of options. To this end, trustees should regularly review financial forecasts to monitor variations to cost or revenue expectations. It is interesting that the Commission also expects trustees to consider if there are opportunities to work more efficiently – for example, through joint ventures, collaborative bids, mergers or by combining back-office functions with other charities. Again, this is something that many charities continually explore, but it also takes up resources to do this properly. There also may be a significant expense in merging back offices; for example, processes such as integrating IT and CRM systems and possibly making employees redundant, will not always make for an easy fix or immediate savings.

Risks to public benefit 

The Commission highlights a rise in concerns over charities being used for private benefit, whether deliberate or inadvertent. Whilst the number is small overall, the Commission reflects that the impact on public trust and confidence in charity can be significant.

The Commission’s data shows the total number of cases related to concerns about abuse of charitable status for private benefit has risen from 390 cases in 2022-23 to 479 in 2023-24. Complaints to the Commission from members of the public, whilst still low, have almost trebled over the same period. It is recognised that, in part, this may be due to increasing public awareness. 

We agree with the Commission that these cases are small and we also know from first-hand experience how most charities do their utmost to deliver public benefit. However, it is also the case that these sorts of abuses risk tainting the work of other charities. The Commission identifies three broad areas where concerns about private benefit are arising:

  • Deliberate abuse of charitable status – this might, for example, include attempts to register multiple charities as part of wider criminal activity. The Commission reports that it identified a significant number of sham registration applications last year, albeit this formed a very small proportion of all applications received.
  • Dominant individuals – where one individual dominates a charity, this can impair oversight or challenge from other trustees. This can leave the charity vulnerable to any attempts by the dominant individual to derive personal benefit. Very small trustee boards are flagged as having the potential to increase risk factors relating to dominance, lack of independence and conflicts of interest. According to 2023 Annual Returns, around 11% of charities report having only one or two trustees (although this will include some charities with a sole corporate trustee).
  • Lack of knowledge or understanding among charity personnel – the Commission comments that a lack of knowledge or understanding of the rules and requirements facing charities may leave charities open to abuse, particularly where charities are operating in a complex regulatory framework.

The risk assessment sets out actions trustees can take to mitigate these risks. These include ensuring that proper financial controls are followed and that financial transactions are monitored. Also flagged is the need to follow the correct processes before any payments are made to trustees, to ensure the payments are lawful and that conflicts of interest are managed. Where appropriate, trustees should report concerns to the Commission. The risk assessment also signposts relevant guidance from the Commission.

Other threats and risks 

The risk assessment contains brief comment on the Commission’s view of other “significant ongoing threats facing the sector”. It is an interesting selection, reflecting the Commission’s recent casework and its engagement across the charity sector. In each case, the Commission’s commentary is accompanied by links to relevant guidance from the Commission. 

  • Governance risks – governance concerns are seen as a factor contributing to many other risks facing charities. Addressing these issues can help charities avoid wider problems. The Commission cites examples of its casework related to federated charities and the management of community assets by local authorities.
  • Safeguarding risks – safeguarding is a regulatory matter for the Commission when safeguarding risks are not properly managed by trustees. The Commission notes that those working for charities, for whom charities have safeguarding responsibilities, are increasingly targeted online. From Stone King’s work with charities, we know that this is a very real risk. We have also seen refugee and migrant charities being targeted, even having to set up “safe rooms” in their offices. Unfortunately, as the Commission advises, trustees should ensure this is taken into account in their social media planning. Many charities are working together to develop best practice and to provide a community of support. The risk assessment also reports concern from sector stakeholders about the emerging issue of technology in safeguarding harms, such as by the use of deepfake photos and videos. The Commission comments that, whilst this has not to date been seen in its casework, it may be of concern to charities, particularly in education settings.
  • Fraud and other financial risks – the Commission urges trustees to consider risks of fraud, both internal and external. The Commission refers to evidence that around half of the frauds against charities are internal. Its casework analysis suggests that external frauds are mostly opportunistic and targeted against high-income charities. The Commission raises the concern that risks of weaknesses in financial governance may be increased when resources are stretched, particularly amongst small and medium-sized charities.
  • Emerging technology and cyber risks – the Commission recognises the opportunities and challenges posed by the use of new technologies, and is committed to working with the sector in this area. With the backdrop of recent high profile cyber-attacks, the Commission also highlights the risk of cyber-harms to charities. It reports that it has seen limited evidence of this to date in its casework but, in its engagement with sector representatives, concern over ‘phishing’ and ‘social engineering’ attacks is highlighted. For more information on this subject, see our blog on ‘Digital repression as a barrier to doing good’ and ‘Cybersecurity: recent attacks are reminder of importance of getting it right’.
  • Social tensions – the Commission sees a number of factors as contributing to a challenging climate for charities. The risk assessment refers to the proliferation of mis/disinformation and the polarised nature of social media. This can result in charities becoming targets for criticism or being drawn into inappropriate social media engagement. Whilst noting that charities are usually best placed to counter incorrect information, the Commission states that, in appropriate cases, it will also step in. The latter is very helpful and we have seen some supportive statements by the Commission. Inevitably, the day-to-day risks are mainly managed by charities and the 24/7 nature of social media means it has to be responded to in “real time”, thus adding to the pressure and risk of “burn out”.
  • Charities operating overseas – the Commission’s casework over the last year has covered charities operating in high risk areas of the world. The Commission refers to the increased risks of these operations, including difficulty with monitoring and oversight, safeguarding in politically unstable regions and financial management.
  • Geopolitical turbulence – the risk assessment refers to heightened tensions in the UK against the backdrop of wars and political unrest. The impact of the events in the Middle East has been seen in the Commission’s casework. The Commission reports that over 300 regulatory cases have been opened and over 70 referrals have been made to the police where it is thought a criminal offence has been committed. In addition to its recent guidance for charities operating in the Middle East, the Commission signposts trustees to its Charity Engagement Team’s programme of briefings.
  • Hostile foreign states – a related threat comes from attempts by hostile foreign states to use charities to gain influence and promote their views. These risks were highlighted in MI5’s October 2024 assessment of risks to the UK. The Commission is alert to the threat to the sector and is working with other agencies to guard against this type of exploitation. In this respect, please see our blog on ‘Understanding the UK's Foreign Influence Registration Scheme (FIRS): what it means for charities and NGOs’.

Conclusion

At Stone King, we understand the difficult context in which your charity is operating, and we are here to support you in navigating the risks it faces. Please see a sample of our resources below:

Resources:

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