Proactive steps for protection
According to the Scottish Third Sector Tracker, the percentage of organisations identifying financial challenges as one of their top three concerns has risen dramatically, from 47% in August 2021 to 77% in Spring 2024 [1]. Add to this rising service demands and escalating operating costs, and Edinburgh charities are likely to experience significant strain.
Ansvar Insurance, the expert provider of insurance for the charity, not-for-profit, faith and care sectors, has identified the five risks charities are expected to face in 2025, and is providing expert advice on how organisations can protect themselves.
Adam Tier, Head of Underwriting at Ansvar, commented: “In 2025, charities will have to deal with rising operational costs, growing service demand, and monetary donations continuing to be affected by the cost-of-living crisis.
The impact on the sector has been significant, particularly for smaller, local charities, where resources are already stretched.”
1. Financial instability
Charities are struggling with declining donations and rising costs, including increased utility bills and the upcoming living wage increase to £12.21 per hour. To maintain financial sustainability, charities must prioritise financial planning and seek alternative funding sources like corporate partnerships and grants.
2. Increased demand for services
Whether it’s foodbanks, hospices or mental health support, charities across Edinburgh are on the front line. While government funding for social care and healthcare is expected to help, local impact will take time. Strategic partnerships with local authorities and other charities are key to managing demand effectively.
3. Declining income from donations
Changes in Inheritance Tax and Capital Gains Tax in the recent budget may encourage legacy giving. Therefore, charities should invest in donor engagement strategies to address any ongoing decline in donations.
4. Cybersecurity threats
Cybercrime is on the rise in the charity sector, with a third of charities that responded to the Government’s Cyber Security Breaches Survey 2024 [2] reporting they have fallen victim to an attack. Charities need to implement strong cybersecurity measures, educate staff on safe online practices and ensure they have insurance coverage specific to the charity sector that addresses cyber threats.
5. Regulatory and compliance risks
The government has announced that new charity tax regulations will come into effect in April 2026, which is in addition to the Data Protection and Digital Information Bill (DPDI) which may impact data protection, fundraising, and safeguarding. Ansvar urges charities to regularly review compliance strategies to avoid financial and reputational risks from regulatory breaches.
(Charities also face a hike in employers’ National Insurance contributions – Ed.)
Adam Tier added: “It’s vital that charities take proactive steps to ensure their resilience, from reviewing their financial strategies to securing adequate insurance cover to protect against emerging risks.
We’re committed to helping charities understand the hazards they face and take the proactive steps needed to protect themselves, so they can continue making a difference in their communities.”
Ansvar is part of the Benefact Group, a charity-owned specialist financial services organisation. The Benefact Group is the UK’s third-largest corporate donor, underscoring Ansvar’s dedication to supporting the wider charitable community.
