A very important article. From the nonprofit point of view it is essential to have an effective risk management system. Being a practitioner in the area of financial management of nonprofits I can testify that this is quite a challenge.
The following link presents a methodology that I have been using for some time in order to deal with the uncertainty that characterize nonprofits’ income stream. My organization have gone significant financial challenges in the past 3 years, and I was able to keep it financially sound using this methodology. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2732052
Is true in emergency but i have seen even in regular programs that donor starts a project extend it for another three years and close it abruptly with out thinking what will happen to work already done. they leave its continuity on government or NGO. Both of them can not do it that’s why the donors support was asked for the project. how they can continue it on their own now. Donors needs to have proper withdrawal strategy .
Hi Elli, Thank you for your comment and for sharing your paper on cash flow management! The most common question we get from our peers is whether there are any tools or resources to help organization tangibly mitigate not just financial, but other program risks as well. We’re working on a Tool Kit ourselves which will be released later this fall and look forward to incorporating your methodology.
Thank you Kimani,
We agree with you. The first step of risk management is identification and assessment. Yet many non-profits we speak with are hesitant to share these findings with their funders, for fear that it will negatively affect their funding. Identifying specific risks to a project does little good if you can’t follow it up with a conversation about what to do next.
Great article, Maya and Laurie! And such an important topic to work on. At my organization, we’re building a contingency fund for just an occurrence as we work in relatively volatile political environments. It’s not always easy to explain that to funders or even one’s own staff, sometimes, but we’re determined to do it. Helps that most of our revenue is self-generated, so that gives us unrestricted-funds flexibility. If we didn’t have that option, I can see it being much harder to create.
Thanks Roshan, and congrats on your internal contingency fund! You highlight a very important point that a non-profit’s ability to create contingency funding is often dictated by the amount of unrestricted assets available, as well as the necessary prioritizing and commitment from leadership. While increasing unrestricted funding overall would help, we think there is also room under the tent for restricted funders to build contingency funding mechanisms into their restricted grants. Having insurance and making a Plan B is common sense. Let’s do more of it!
COMMENTS
BY Elli Malki
ON June 23, 2016 01:25 PM
A very important article. From the nonprofit point of view it is essential to have an effective risk management system. Being a practitioner in the area of financial management of nonprofits I can testify that this is quite a challenge.
The following link presents a methodology that I have been using for some time in order to deal with the uncertainty that characterize nonprofits’ income stream. My organization have gone significant financial challenges in the past 3 years, and I was able to keep it financially sound using this methodology.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2732052
BY Ikramullah Jan
ON June 25, 2016 08:25 PM
Is true in emergency but i have seen even in regular programs that donor starts a project extend it for another three years and close it abruptly with out thinking what will happen to work already done. they leave its continuity on government or NGO. Both of them can not do it that’s why the donors support was asked for the project. how they can continue it on their own now. Donors needs to have proper withdrawal strategy .
BY Kimani
ON June 27, 2016 12:17 AM
I think the most critical is to identify and mitigate specific known risks up front. This is key to formulating risk mitigation strategies
BY Maya Winkelstein
ON June 28, 2016 06:56 AM
Hi Elli, Thank you for your comment and for sharing your paper on cash flow management! The most common question we get from our peers is whether there are any tools or resources to help organization tangibly mitigate not just financial, but other program risks as well. We’re working on a Tool Kit ourselves which will be released later this fall and look forward to incorporating your methodology.
BY Maya Winkelstein
ON June 28, 2016 07:01 AM
Thank you Kimani,
We agree with you. The first step of risk management is identification and assessment. Yet many non-profits we speak with are hesitant to share these findings with their funders, for fear that it will negatively affect their funding. Identifying specific risks to a project does little good if you can’t follow it up with a conversation about what to do next.
BY Roshan Paul
ON July 6, 2016 06:44 AM
Great article, Maya and Laurie! And such an important topic to work on. At my organization, we’re building a contingency fund for just an occurrence as we work in relatively volatile political environments. It’s not always easy to explain that to funders or even one’s own staff, sometimes, but we’re determined to do it. Helps that most of our revenue is self-generated, so that gives us unrestricted-funds flexibility. If we didn’t have that option, I can see it being much harder to create.
BY Maya Winkelstein
ON July 6, 2016 07:06 AM
Thanks Roshan, and congrats on your internal contingency fund! You highlight a very important point that a non-profit’s ability to create contingency funding is often dictated by the amount of unrestricted assets available, as well as the necessary prioritizing and commitment from leadership. While increasing unrestricted funding overall would help, we think there is also room under the tent for restricted funders to build contingency funding mechanisms into their restricted grants. Having insurance and making a Plan B is common sense. Let’s do more of it!