Foundations Don’t Know What They’re Risking
Critical gaps exist in philanthropy’s definitions of and approach to risk management. This article describes the scope of the problem and a framework for philanthropists to adopt risk-management practices that better equip the sector to address the challenges of our time.
In 2015, the Open Road Alliance surveyed hundreds of funders and grantees to explore questions about risk and contingency funding. The next year, Open Road partnered with Arabella Advisors for a qualitative analysis of existing foundation policies and procedures related to risk. The combined results suggest a need for contingency funding – and a lack among most funders and nonprofits of the basic structures, systems, and policies to address risk, which in turn leads to a breakdown in communication between funders and grantees.
The world is unpredictable; no amount of planning can prevent disruption by unscripted events. This article, through quantitative and qualitative research coupled with illustrative case studies, highlights the importance of risk management and encourages its adoption throughout the philanthropic sector.