Planning for Risk in Philanthropy

The Open Road Alliance—provides contingency funding grants to nonprofits that face project disruptions because of unexpected events. Two of their recent publications (Contingency Funding in Philanthropy: Open Road Alliance Survey; and Risk in Philanthropy: A Framework for Evaluation) highlight the need for those in the non-profit sector to plan properly for the unexpected.  Their report offers a “framework” for both funders and NGOs so that they may incorporate risk management in their grant applications, planning and budgeting processes.


(figure below) What happens to projects when a
for additional funding is denied?

What happens to projects when a request for additional funding is denied?

Only in the non-profit sector do investors expect organisations to deliver every project on time, on budget, and with no reduction of impact in the event of a budget shortfall. 

Yet, in the Open Road Alliance survey, both funders and grantees reported that roughly 20 percent of their projects had required extra funding due to unforeseen events.

The survey's key findings include: 

   *   It is not a common practice for Funders or Grantees to address these risks before they happen.

   *  When contingency funds are needed, most Funders do have the operational and financial capacity to respond. When asked, the majority of Funders do approve additional requests.

   *  Grantees are hesitant to communicate with Funders about potential obstacles.

   *  Funders’ and Grantee’s perceptions regarding the effects of their actions on each other are often misaligned.

In light of such trends, the Open Road Alliance published its report, Risk in Philanthropy: A Framework for Evaluation, to provide grantmakers and NGOs with tools to conceptualize and describe risk and its implications within the scope of their philanthropic work.

Report Reccomendations:

   1. Funders should ask grantees about the potential risks their project could face.

   2. NPOs should tell donors about potential risks, even if they don’t ask.

   3. All parties need to talk about what can be mitigated and what may require contingency planning. Have this conversation before project activities begin.

   4. Plan for contingencies: What happens if (insert crisis here)? Create and document processes for the following:

     a. Communication: who is in charge of telling whom what?

     b. Decision-making: how will decisions be made and what will the timeline be?

     c. Action: who is responsible for providing additional resources, time, training, and scope adjustments? 

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