Do your grantees have a defined process in place to identify and respond to risks before it is too late? If you're not sure, keep reading.
Nonprofits need risk management. Funders need to help.
You want to maximize the impact of your donations. You want to fund nonprofits that are effective and resilient. You don't want to have programmatic funding to fail to achieve objectives because of unanticipated reversals in the program itself or within some other area of your grantee's operations.
Furthermore, you don't want to be associated with failure – particularly high-profile failure. You may invest in some risky ventures as part of your mission, but with the benefit of hindsight, few funders would want to have committed resources to the Wounded Warrior Project, FEGS, Goodwill Omaha, or other nonprofits making headlines without at least having asked – before funding – whether the nonprofit had a solid, high-functioning risk management program in place.
If you're a private foundation, you want to be able to assure your board that your funds are used effectively and minimize the chance of wrongdoing or unforced error by grantees. If you're a community foundation, in addition to board scrutiny, you face public and donor second-guessing over your investment decisions. And if you're a Corporate Social Responsibility (CSR) funder or corporate foundation, the issue is especially critical: you answer to a board, shareholders, and customers. Why put your company's reputation on the line without assurance that the nonprofits you fund are following best practices – including effective risk management?
Nonprofit advancement organizations and commentators now recognize that nonprofits should adopt risk management. But if funders don't make grantee risk management a priority, most nonprofits won't, either. Most face chronic funding issues, and demand for their services routinely outstrips supply. They are leery about spending money on themselves when the communities they serve are under stress. As a result, funders play a crucial role in building nonprofit risk management capacity. This is fully explained in our downloadable report below, which can be shared with program officers, board members, and stakeholders so that you can make a reasoned, thoughtful assessment of how you make protect your funding efforts and help the nonprofit sector thrive.
If you want to learn more and consider concrete steps for current and future grantees, download our free report: Because You Don't Know What You Don't Know.