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PEAK Grantmaking

Risky Business: Monitoring and learning from risks in the social sector

Can you remember a project you worked on that went perfectly according to plan? If you can, you are one of the lucky few. 

The world is an unpredictable place. As businesses, communities, and individuals, we each have our own way of thinking about and preparing for the unexpected, even if we don’t realize it. In the social sector, however, discussions about risk are left out or included as a side note to normal management conversations. Keeping risks in the shadows prevents us from planning for, understanding, and learning from the risks our organizations encounter every day.

As an example, we can look at the status of risk management in philanthropy, provided by our partners at Open Road Alliance.

  • 76% of funders said they don’t ask applicants to assess, either in written or verbal form, what circumstances could lead to a need for additional funding.
  • 83% of funders don’t have a specific allocation in their budget for contingencies.
  • 65% of funders said they don’t have a policy to govern grants off-cycle or provide additional funds to existing grants following disruptive events.

Overall, most funders are not prepared to be able to respond to unexpected events. Funders are a crucial part of the social sector and set many of the expectations for their grantees and partners. This is just one side of a complex sector, but demonstrates the need to prioritize risk management more often and more consistently.

If we identify those risks early and plan for them, we can determine how risky a project really is, prepare for issues before they arise, and have contingency plans in place in case a risk event does happen.

Many risks can be prevented, avoided, or mitigated with the right tools and approach.

Where to start?

Risk management can mean different things to different organizations. For some, it may mean identifying large categories of risks – financial or impact risks, for example – and tracking them at an organizational level. For others, risk management may be a detailed analysis of individual investments or projects. As with any change to business strategy, it is crucial to make the change sustainable and attainable for your organization.

Moving an organization towards a more open and conscious risk management approach may require changes to business processes, new partner engagement strategies, and/or adding new tools to support the teams responsible.

Amp Impact includes a concrete, transparent, and useful risk management tool – developed with input from leading grant-making organizations, including Skoll Foundation, Rockefeller Foundation, and Vitol Foundation – that can support organizations looking to improve their risk management practices.

A new, flexible tool to manage risk

Amp Impact covers a lot of ground: from managing a project lifecycle and tracking disbursements to structuring impact measurement data. With the addition of structured risk management functionality, Amp Impact can now track an even more holistic approach to managing social sector organizations and their portfolio of programs, projects, or grants.

[Watch Amp Impact’s risk functionality in action in the PEAK2020 Online breakout session, A New Data Infrastructure for Measuring Risk here.]

There are four key areas where Amp Impact is starting to change the way the social sector thinks about risk:

  1. Get risk management out of your head and into the cloud

Ask you colleagues what risks they see in your organization’s plans, and you will probably get some surprising answers. Documenting these risks in a centralized location allows you to not only track their progress over time, but also promotes building institutional knowledge. A centralized, cloud-based database gives your team access to previous risks, mitigation strategies, and final outcomes so your team can learn from the past and become a more sustainable organization in the future.

  1. Structure your risk data

Rather than using purely narrative data, Amp Impact leverages structured data in a user-friendly format (no more Excel spreadsheets!). This allows your risk data to become reportable. That means you can create specific reports and visualizations to understand the status of your organization’s risk at whatever level you need.

  1. Improve transparency

When all stakeholders are aware of the risks they face in advance, conversations become more informed and effective before a risk event occurs. Mitigation strategies can be enacted, and contingency plans can be put into place. When risk conversations are documented and centrally managed, that data can become available to anyone who might benefit from it.

  1. Normalize risks in the social sector

Risks are not necessarily a bad thing: They are a fact of life. Just because we are not talking about them in the social sector does not mean they do not exist. By including risk management functionality alongside portfolio management, impact measurement, financial management, and all of the other functionality Amp Impact provides for our clients, we hope to make these discussions a normalized part of planning and delivering social impact projects globally.