. Irrespective of the size of a charitable organization, effective governance of the trust is based on its ability to identify and mitigate risk associated with its daily operations and build its internal capacities to capitalize on its resource utilization for optimum results (Fremont-Smith, 2004).
Charities are evenly exposed to risk as compared to any commercial organization because of changing economic conditions, scare availability of funds and conservative approach towards operations due to limited resources. Regeneration through Education Limited (RTE) also has to be prudent in its business operation as its supporting adult education and training facility in deprived localities. For this purpose trustees must ensure prudence in their business operations. RTE is faced with the situation of tight funding and new supplier for their huge investment of £100,000 in furniture and fittings. To mitigate the risk management of the trust has to follow two important components discussed below:
Creating a Contractual Agreement with Bank guarantee
When contracting purchase with the Vital Office Furniture Limited, RTE needs to ensure that:
The supplier confirms to provide the assets of specified quality within the specific time period.
Fluctuating economic conditions and market price changes will have no effect on their agreed pricing structure.
Ensure that the price they are charging is not above the market prices with comparing rates.
The quality of the material provided is as per agreed terms and conditions.
The supplier has to provide a reference for their previous deliveries with other clients to prove their service authenticity.
Have to guarantee free after-sales service for at least a year.
Have to make arrangements for installing the deliveries to the location and charges included in the price already prescribed.
Third-party bank guarantee is created by the supplier that in case of failure to deliver goods within the specified time, the bank will repay the down payment amount to RTE.
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