Non Profits: Managing in uncertain times

Pesh Framjee, Global Head of Non Profits

Charities and other non profit organisations are facing much uncertainty

This comes in many shapes and forms and goes beyond the question of Brexit. There are new laws and regulations on fundraising, new expectations from different stakeholders, new demands for services, a changing funding landscape, foreign exchange volatility, cost escalation and much more.

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Focus

Strategy and scenario planning

It is important to recognise that rigour in decision making is not the same as ponderous and charities need to be nimble and agile in their decision making. Care needs to be taken to examine some of the projects and programmes that have been planned.

Risk Management

Unprecedented events require a new awareness of the importance of remote events that can have a significant impact; this casts some question marks over the way organisations have traditionally identified and scored risks and adopted procedures to manage them.

Reserve and liquidity

As income levels are threatened, cash flow and reserves management inevitably demand more attention. Charities should reassess their reserves policy and ensure it meets operational needs. Unfortunately many reserves polices are often created to justify the existing level of reserves rather than what is realistic and operationally necessary.

Working it through

Charities need to avoid knee jerk reactions whilst recognising that change is inevitable. There are a number of steps before launching into responses to matters such as Brexit, new fundraising requirements or any of the many drivers of change that the sector will be facing.

Some key messages

Strategies have to become more dynamic and focused on the short-term.
Monitoring and measurement of progress against the strategy is more frequent.
Strategies and tactics have to be developed on the premise that several different outcomes are possible.
Scenario planning is valuable in helping cope with the uncertain environment and can help identify the drivers of change
There is a need to put values and analysis on different scenarios and this requires out of the box thinking from different perspectives. Horizon scanning is important.
Scenarios are often wrongly treated as forecasts and the range of scenarios is too simplistic.
Charities should develop action plans for different scenarios by setting and monitoring trigger points along with trend analyses.
Look beyond the obvious - consider both direct and indirect drivers and short and long term implications.
Be aware of the importance of remote events that together can have a significant impact.
Probability has less value for risks that occur outside the norm and the past is not the best indicator of the future
Lower significance risks can escalate to a very high impact risk because of risk interactions.
It is important to understand the core processes and sub processes and their role in achieving strategy.
Governance structures, board and management competencies and frameworks for decision making may need to be revisited.
The reserves policy should link with the risk management and forecasting process.
Understand what the reserves represent and look at the ease with which they can be made available in times of need.
The continued uncertainty and volatility of income has dramatically increased the exposure to liquidity risk.

Pesh Framjee

Partner, Global Head of Non Profits

London

+44 (0)20 7842 7228

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