During press coverage of the ongoing and unfolding Penn Statescandal, reporters have also written extensively about The SecondMile Foundation.

The Second Mile, a nonprofit organization serving the youth ofPennsylvania, has been pulled into the scandal because JerrySandusky, the former Penn State defensive coordinator, set up theorganization. As of Dec. 8, all 10 of Sandusky's accusersreported meeting him at The Second Mile.

Even as The Second Mile prepares to cease operations, a teachingmoment should not be allowed to pass.

Although it's unclear how this tragedy will end, we canspeculate on a few of the potential outcomes:

1. The damage control work done by the foundation through theprofessional advice received limits the damage and the impactof the events, avoiding all lawsuits and allowing thefoundation to discontinue operations in an orderlymanner.
2. The trustees and the foundation are sued by a number ofplaintiffs and their families for the damage and harminflicted. The foundation's risk management program hasadequate insurance limits and appropriate terms and conditionsto trigger coverage and fund the potential future settlementof all claims.
3. The more than 65 trustees and executives who support thefoundation as board members are sued as a group andindividually for their service to the foundation. Eitherthe terms and conditions exclude coverage or the limitavailable in the D&O liability policy is inadequate toprotect the directors, requiring the foundation to sell assetsto satisfy claims. With a little less than $9 millionin assets (according to the foundation's 2010 annual report),this asset sale may limit the foundation's ability to satisfyall claims.
4. The potential worst-case scenario from a director'sstandpoint is the insurance policy excludes coverage for theclaim allegations. After not being satisfied withthe proceeds from the sale of assets, the plaintiffs then suethe directors for their personal financial assets tosatisfy the claim. This is not unprecedented: Ask theEnron directors.

This is a chilling reminder to well-meaning and well-intentionedmembers of our business community and the non-profit sector inparticular to review their coverage before an event. Boards shouldexercise a healthy “what if” mindset, developing scenarios todeepen awareness of vulnerabilities and support structures withinthe organization.

Whatever the outcome, social service organizations will be ableto learn on The Second Mile's dime. The greatest lesson from thiscrisis is that it should have been stopped long before it spun outof control.

Following are risk management principles to help make this areality for social services organizations:

1. Since the actions of one individual can bring down a socialservices organization, no one should be placed above the interestsof the organization. Checks and balances must be put intoplace, even (especially!) for a charismatic leader.
2. Individuals under the care or guidance of social serviceorganizations must be encouraged to report any violations. Clearguidelines must be published and disseminated. An easy-to-followcommunications mechanism must be established.
3. When it comes to putting a stop to a potentially ruinoussituation, now is always better than later. And the later it gets,the worse it gets.
4. Whenever a situation does not look right, all roads should leadto counsel. In the case of Penn State, the attorney has said itwould have been his sworn duty to go to law enforcement had he beenalerted to any wrongdoing.
5. Moral authority helps to clarify all situations. Doing what isright is always the right decision. Upon reflection, it is alsooften the easiest decision.

Executives and senior staff at social services organizationsmust select insurance support to maximize coverage andknowledge against a gamut of exposures. And they must do so evenwhen controls have been set in place. As this event has againproven, humans are flawed creatures and their actions and inactioncan lead to terrible consequences.

The greatest risk may be to not recognize this soberingfact.