Right-Sizing a New Risk Toolkit for Your Needs

By Maya Winkelstein, Open Road Alliance, and Henry Berman, Exponent Philanthropy

risk-toolkit-title-page-2The world of funders and philanthropists is quite diverse. Yet regardless of our size, focus, or decision-making process, we all have two things in common: First, we all want our dollars to result in real impact and change. Second, no matter how we deploy those dollars, the impact we seek is not a sure thing. In other words, every grant and investment we make carries risk.

As described in an earlier blog post, The Missing Piece of Modern Philanthropy, few funders think about, discuss, or plan for the unexpected in their work. As a 2015 survey shows, 76% of funders don’t even ask their grant applicants ‘what could go wrong,’ and when funders don’t ask, grantees don’t tell. This missed communication matters deeply, because when funders and grantees ignore risk, we jeopardize the impact we seek to achieve.

Now there is a tool to help.

In 2016, a 25-member group, called The Commons, spent six months working to create a baseline Risk Management Toolkit including how-to guides, templates, and sample protocols that any funder can adapt or adopt for its own uses.

To help small-staffed foundations, families, and individual donors more easily navigate the toolkit, we offer the following key takeaways and three “top tools” to consider to bring a greater risk awareness and practice to your work.

Continue reading

The Missing Piece of Modern Philanthropy: Part II

How funders and nonprofits can proactively manage risk at a project’s earliest stage

By Laurie Michaels & Maya Winkelstein, Open Road Alliance

Question: What does any broker, 401k advisor, or wealth management professional want to know from clients before they invest? Answer: Their risk profile. Some investments are riskier than others, and successful financial advisors need to know in advance how comfortable the client is with risk.

But what about our philanthropic dollars, the grants given to others to create social impact? These funds are also investments with ROI measured in social impact rather than dollars. The world of philanthropy is a $358 billion industry with thousands of projects happening simultaneously. Yet currently, philanthropists invest without knowing their risk profile or what to do if a project encounters an unforeseeable problem. As discussed in part I of this 2-part series, philanthropy doesn’t account for the unexpected.

From independent research, we know that 76% of funders do not ask potential grantees what could go wrong in the course of the project. Only 17% set aside funds for emergencies or other unexpected events, which their grantees might encounter. And yet, funders also report that 1 of 5 projects runs into an unforeseen disruption that threatens its successful completion.

Much like traditional investments, all philanthropic outcomes are affected by known and unknown risk factors, and no matter how much due diligence is conducted, there is no guarantee that any intervention will produce the impact expected. More important, most of the variables that could derail such a project lie outside of our grantee’s control. For example, a student’s responsibilities outside of school or problems within their own household can prevent even the best after-school program from being effective. The same problems apply on a macro scale as well, ranging from weather conditions to infrastructure to currency fluctuation to changes in government regulation.

Whether it’s micro or macro, some deviation is inherent. And not having a Plan B in place to manage disruption is a recipe for diminished returns.

At Open Road Alliance, we are in the business of the dealing with the unexpected. All our money is designated to provide contingency funds when some unanticipated disruption happens. We advocate for grantmakers and nonprofits to take a proactive approach to risk management at the earliest stages of the project, and we recommend some basic steps to assess and mitigate risk involved in each project:

Continue reading

The Missing Piece of Modern Philanthropy: Part I

By Laurie Michaels & Maya Winkelstein, Open Road Alliance

Oscar Wilde once said, “To expect the unexpected shows a thoroughly modern intellect.”

Many philanthropists these days consider themselves at the cutting edge of innovation and problem-solving. Perhaps at a programmatic level we are, since through philanthropy we have eradicated age-old diseases, supported mass social movements, and turned around entire cities. Yet despite our modern successes, philanthropists do not have a habit of expecting the unexpected.

In a recent survey of 200 funders, 76 percent reported that they do not ask potential grantees what could go wrong. Only 17 percent said they set aside funds for emergencies or other unexpected events, which their grantees might encounter. And yet, in the same survey, funders reported that 1 out of 5 projects they fund runs into an unexpected disruption that threatens its successful completion. In short, funders acknowledge that 20 percent of their portfolio is at risk, but the vast majority do nothing about it.

If you’re like us, these numbers are scary because they threaten the reason we exist: achieving impact.

Continue reading