What We’ve Learned After Five Years of Risk Management in Philanthropy
The world is unpredictable. Unforeseen events occur that can jeopardize the success of otherwise well-conceived projects and programs. Awareness of this problem inspires the work of Open Road Alliance, which provides one-time funding to meet unforeseen obstacles that threaten the impact of promising social sector initiatives. Though providing this type of assistance is vital, the need for it suggests that both funders and nonprofit organizations would benefit from a more comprehensive understanding of the role of risk in the social sector. After five years of providing contingency funds and researching the issue, we have a clearer sense of what works and how planning for risk can save money, time, and social impact.
During the first year of our grantmaking, we worked to define our funding criteria so that our grants would build a body of evidence supporting the importance of contingency funding in the sector. We decided to select projects that were already fully financed, mid-implementation, and presented a one-time funding emergency that a single grant could solve. These parameters continue to be our definition of contingency funding.
We also added one more condition, one which we included to underscore just how much social impact funders were ignoring. We looked for projects that had the potential for some level of catalytic impact. These projects have the potential to be system-changing by creating an amplifier or multiplier effect. For example, Open Road will fund a project that is running a clinical trial for vaccines, but not one to finish a wing of a hospital. While we think that completion of a hospital is absolutely a worthy funding opportunity, we want to demonstrate the scale of the impact that can be preserved when donors are ready to provide a relatively small amount of contingency funding to system-changing projects. What this translates to, for our team, is managing risk to protect impact, as opposed to managing financial risk, reputational risk, or governance risk.