not for profit Archives - World Risk Management

The Promise and Risks of Receiving Appreciated Assets

Feb 27, 2019 | RIsk Management News

It is not a risk-free proposition for nonprofit boards to make investment decisions that meet philanthropic goals. This is all the more difficult for those trustees without a background in finance. The simple answer is usually to allocate the investments conservatively and rebalance periodically to at least beat inflation and preserve capital. Large charities like university endowments turn to more sophisticated methods of portfolio diversification, expanding beyond stocks and bonds into vehicles like hedge funds, private equity, venture capital, and real estate.

The Conversation’s detailed article cautions that it is not enough to focus only on returns; in fact, it’s more important to consider risk-adjusted returns. In the case of digital currencies, it would have required nerves of steel for trustee investment committees to commit to pre-established decision-making processes to avoid the bitcoin crash in early 2018, after it rose by 1,318 percent against the US dollar in 2017.

These gains gave way to massive losses in the first eight months of 2018, when digital currencies plunged more sharply than the dot-coms crashed in the early 2000s.
Some charities that received massive cryptocurrency donations in 2017 may not have been able to convert them into regular money before they lost much of their value the next year. Silicon Valley Community Foundation, for example, disclosed in its 2017 audit report that for more than 45 percent of its investment assets, restrictions would prevent them from being converted to cash at any point in 2018.
The fact that charities only disclose their financial data once a year means that the scale of their at-risk wealth, as of now, is unknown.

There are more reasons than volatility to be concerned about holding onto investments of cryptocurrencies. Wallets and exchanges used to hold the investments can be hacked. Compliance issues abound. Regulators are still catching up to the IRS ruling in 2014 that treated digital currency as a form of investment property. The sweeping new tax billpassed into law last December may bring more change. Inasmuch as digital money ledgers for transactions are owned and maintained by the users of the systems rather than controlled by a government or a central bank, it is difficult to predict how government will eventually choose to manage this revolutionary type of money.

The Conversation article goes on to examine other forms of appreciated assets being given by a shrinking group of ever-wealthier donors and the “charitable middlemen” needed to help facilitate these donations.

Fidelity Charitable got 61 percent of its donations in assets other than cash in 2017. Other prominent donor-advised fund sponsors saw a similar result. Schwab Charitable obtained over 70 percent of its 2017 donations in non-cash assets. In the last month of the year, that figure was 80 percent for Vanguard Charitable.
These fast-growing charities bring a key skill: harvesting capital gains. That is, they accept tax-advantaged donations, hold onto that wealth, and—in most cases—transfer the money derived from those assets to the donor’s charities of choice when the donor asks.

For nonprofits, it could be said that today’s donor classes are creating as many challenges as solutions. As government funding continues to diminish for many of the issues addressed by the nonprofit sector, private philanthropy becomes all the more important, and along with it, the skills to properly raise, receive, and manage the forms and flavors in which it is given.

Author: Jim Schaffer
Source: Nonprofit Quarterly

6 Essential Tips for Getting Through Any Nonprofit Crisis

Aug 17, 2018 | Informative

Is your nonprofit ready to be tonight’s breaking news?

You don’t even have to be guilty of something to become the daily news. Bad things happen even to worthy nonprofits.

During my nonprofit career, organizations I have worked for have experienced a client’s death; a product tampering that threatened the biggest fundraiser; an athletic scandal; and a mass shooting on campus.

We learned the hard way to be prepared or prepare to suffer more than necessary.

Here are six suggestions for better crisis management by your nonprofit.

01. Don’t Wait

Many organizations only get their crisis plans underway once a disaster has struck.

Instead, brainstorm possible scenarios or types of disasters that could happen and start planning for them.

Educate yourself about nonprofit crises and talk to those who weathered them. Invite a veteran of disasters to speak to your staff and your board. Assign your public relations staff to draft a crisis plan and give them a deadline.

Advocate for real emergency preparedness. Many people in nonprofits, especially small organizations, don’t think anything bad will ever happen. They don’t want to think about it. They don’t believe that they have the time to prepare.

And they might even resent staff who push on this topic. Speak up anyway. If that crisis happens, people will appreciate your forethought.

02. Realize That Crises Take Many Steps

Crises come in all flavors. Some are high profile. Others might be more low key. But, in a time of 24/7 news, thinking you can keep the situation out of the public eye is a fantasy. If nothing else, local media will likely be all over it. Have you built up good relationships with local media outlets?

Like a fire, quickly getting on top of a crisis can make a huge difference in the outcome.

Your crisis might be an accident involving a volunteer, the death of a client, embezzlement by your chief financial officer, a lawsuit by a former employee, or a hack attack that threatens the privacy of your donors and clients.

They all require different responses. Prepare for as many as you can imagine, and do your best to put plans in place to minimize the damage to your nonprofit’s reputation.

Even if something happens that you didn’t think of, your preparation for other types of emergencies will help. The planning may reveal gaps in security, insurance coverage, inadequate human resource policies, or the shortage of people with particular skills.

Practicing any emergency response is likely to make your organization better prepared for others.

03. Develop a Logistical Plan and a Communications Plan

A logistical plan has to do with getting everyone out of the building in case of an earthquake, texting staff and clients that a gunman has been spotted in the building, or handling a medical emergency.

Develop a risk management program to deal with the loss of life, property, and insurance issues. Identify point people who can go into action quickly, notify appropriate help, and manage evacuation plans.

A communications plan involves identifying spokespeople, assigning someone to gather the facts as they emerge, writing press releases, and locating a place to have a press conference.

04. Get Your Social Media House in Order

Social media can be a blessing during a crisis IF it you handle it well.

Almost all nonprofits use some level of social media. Decide now who will manage that media during an emergency situation. Set up a dashboard (here are nine to consider) where you can monitor all social media platforms and respond quickly.

Because of social media, there is little chance of controlling information in a way that used to be possible. So don’t try. But you can give useful information, fight rumors with fact, and express concern.

Don’t just let your social media pages sit there. Use them. One study found that nonprofits often do not respond to social media questions or complaints.

However, social media may be the best way to show the human face of your organization and shore up its reputation for being kind, sympathetic, polite, accurate, and a source of unbiased information.

05. Prepare to Speak

Every minute counts after a crisis. Don’t waste any of them. Silence is deadly. Get out with appropriate statements and messages immediately, even if it is only to say that you know about the situation, you’re working on it, and that few facts are known at the moment.

Then keep it up with updates as events develop. For many situations, you may have already prepared statements.

In all communications, be concerned, show concern, speak concern, and always tell the truth. Don’t be afraid to say, “We don’t know.” That is better than guessing. Add that you are working as quickly as possible to get all the facts.

Far more is lost by refusing to speak to the media than is risked by doing so. A vacuum of information breeds media hostility and public loss of confidence.

06. Provide Media Training

Media training will be your best friend during a crisis. Don’t risk a media meltdown.

Put together a media training program before disaster strikes. Train anyone who might need to be a spokesperson. That might be your board chair, your CEO and other key staff, such as a media relations person. Also, consider your top fundraiser, your volunteer coordinator and, where applicable, your security person or facilities manager.

Media training need not cost a lot if you have someone on your board who works in public relations or someone who is a member of the media. The key is to do it regularly so new people become trained, and others don’t grow stale.

Author: Joanne Fritz

Source: The Balance, Small Business

Risk Leadership: A Necessary Embrace for Nonprofit Leaders

Aug 3, 2018 | Informative

Generally, when we talk about risk management for nonprofits, there is a note of panic in the conversation, as we hold the image of organizations teetering with the uncertainties of government policies and funding, philanthropists changing the focus of their giving, and increasing demand for services. In fact, grantspace.org quoted the Alliance for Nonprofit Management as defining risk management as a discipline intended to identify and protect against any threat to an organization’s ability to deliver on its mission. It is a definition based on fear: fear of loss. A report covered by NPQ in 2016 represents another example of this approach.

In 2017, NPQ devoted an entire issue of its print journal to the subject of risk management in the nonprofit sector. The focus was on how to move from risk management to risk leadership, with an interview with David Renz providing focus for what that actually means. Not only do nonprofits live in a world of risk, but at times it is important to acknowledge that risk fully and even use it as a way to move forward.

A recent article in the Greenwich Sentinel by Michele Braun builds on this idea and proves some very simple how-to’s for nonprofit boards and leaders. Braun, director of the Institute for Managing Risk at the Manhattanville School of Business, argues that if nonprofits do not take any risks at all, they cannot grow, adapt, or respond to the needs of their clients. The question, instead, is how to be intentional about which risks to take on and how to avoid ones that could be detrimental to the organization’s survival.

Nonprofit leaders should ask a few key questions:

What risks do we face that can derail our mission?
What risks can we take that would help us accomplish our mission?
What processes do we have in place for assessing and managing risk?
Why haven’t we committed to be a risk-aware and risk-savvy organization?

Two easy steps to take, according to Braun, involve annually having a look at risk and your organization. A conversation among staff and representatives throughout all strata of the organization could lead to clearer understanding of what has changed internally and externally that might alter the risk landscape. Are there new threats or opportunities the organization should be aware of and act on? People from outside the organization should be included in this discussion, as they may see things from a different angle and set of experiences.

In addition, also on an annual basis, the organization’s insurance carrier should be asked to review coverage and services. Periodically, the organization should ask an insurance provider that is not their current carrier what they would propose as coverage. There may be something that the current provider is overlooking.

Inherent in what Braun is saying is that although we need to be aware of and prepared for risks, we need not always live in fear of them. A risk management policy can include more than simply how not to be devastated by a negative risk. It can also include ways to be aware of and take advantage of risks that will help us grow. By managing the process of taking a strategic risk, and with some forethought, your nonprofit can have the courage to do something new while minimizing the potential downside.

Source: Nonprofit Quarterly

Author: Rob Meiksins