Expert View: Fundraising - Has your charity planned for when recession hits?
Third Sector, 6 August 2008
Risk assessment is vital for fundraisers if they are to ride out an economic downturn; hoping for the best simply will not do.
Findings published by research company nfpSynergy last month suggest the impending recession will leave the voluntary sector relatively unscathed - or at least that the 56 charities with the highest incomes will escape the worst effects.
The nfpSynergy study mapped the income of the 56 charities against the economic climate during the past 25 years. Did the charities know, through their own planning and risk assessment, that they were inoculated against the effects of recession? Did they even carry out risk assessments?
The concern over a recession should prompt our sector to take risk assessment and contingency planning in our fundraising strategies seriously.
Most charities won't have any contingency planning to deal with a recession. Even those that ride out the storm are as likely to do so by chance as by design.
NfpSynergy predicts that voluntary income will slow or remain static, and that it could take 10 months for the impact of the downturn to filter through to the sector.
Most charities I know have planned for growth. Yet news of the US sub-prime market losses reached the UK last autumn, when many charities were signing off budgets for 2008/09. If charities have done risk assessments, they'll have had time to plan for this.
Risk assessment is usually an annual activity that's quite rigid and not sufficiently flexible to accommodate contingencies such as foot-and-mouth disease, terrorist attacks or an epidemic.
We've twice had warnings this decade about the dangers of not having a plan B when something disrupts the fundraising strategy.
The first was during the foot-and-mouth outbreak in 2001, when many charities that relied on challenge events, such as country walks, were hit hard. The second was a more obvious signal. The response to the 2005 Asian tsunami led to significant concern among charities that people were diverting their regular giving to tsunami relief and no longer responding to their appeals.
Now, once again, many charities are facing a potentially seriously damaging situation, whatever nfpSynergy's research suggests, with little clue about how to deal with it.
Without adequate risk assessment first, then contingency planning, charities can only hope they will escape the worst effects of the recession.
Fingers crossed, the voluntary sector won't suffer if the recession bites. But can we really rely on the hope that charities will be ok? nfpSynergy says there is still time to "create the resilient action plan to protect against income volatility before the onset of any possible recession".
Assuming nfpSynergy is right and we do have the time, do we have the strategic foresight?
- Fiona Duncan is senior consultant at Think Consulting Solutions.
5 MORE THINGS ...
- Individual donations rise or fall on average 10 months after a change in gross domestic product growth, but the effect of this on charities can be seen only after another seven months, according to the nfpSynergy research.
- Charities' income growth has slowed, according to the Charity Market Monitor 2008 by Cathy Pharoah, visiting professor at Cass Business School, based on research from Caritas Data.
- The Charity Market Monitor also revealed that the Motor Neurone Disease Association reported a record income year in 2006/07, raising more than £10m in funds despite the overall economic slowdown.
- Eighty-seven per cent of social entrepreneurs who responded to a recent survey by the Social Enterprise Coalition were not worried about the credit crunch and felt the current business situation was either good or satisfactory.
- Forty-five per cent of the 182 respondents said conditions in the credit markets had not affected them in the past six months and 12 per cent said their financial position had improved.
- Fiona Duncan is a senior consultant at Think Consulting Solutions 