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"Risk"
After that first blog, I’ve had a lot of good feedback, some of it offline so be sure to pipe up and post your comments online too!
One thought that Garrison Kurtz’s (www.thrivebyfivewa.org) post raises for me is this issue of “risk” and what it means in a nonprofit / philanthropic context. SVP was asked to submit input for an upcoming issue of Alliance Magazine (www.alliancemagazine.org), which is a very good publication covering international topics. The magazine issue will address risk from a number of angles, including: Do foundations actually take risks as they claim to be able to? How are these risks assessed? What are the reasons for taking risks (innovation is only one of them)? Do systems for measuring performance and/or impact limit innovation and risk-taking?
Risk: it’s a term that has lots of different meanings and contexts. The piece SVP submitted to Alliance begins like this … “Words like “risk,” “innovation,” and “outcomes” get bandied about by for profit and nonprofit management and boards alike. The for profit world has defined and measurable parameters for risk. Understanding risk and how it affects a business can be measured—the service or product either makes money or it does not. In the nonprofit world, risk, measurement, and outcomes are more ephemeral—we aren’t as sure what failure is because we don’t have as clear a method to measure success. If we are unsure of how to measure success, it is difficult to assess risk."
And is risk even relevant when the ultimate purpose is more positive social outcomes, whatever the risk? I wonder what others think about risk – how you define it, what it means, how you use it?
Paul S
"Risk"
But I take exception to your last question. I do believe that the concept of risk is very relevant to our purpose, for the very reason you have cited; positive social outcomes. If you think about it, no one (not even the billion dollar Gates foundation) has the ability to finance the changes needed to make our world a positive experience for all inhabitants. Poverty, poor education and healthcare access problems (to name a few) are greater than the monetary or human capital resources we as individuals can give to solve them. So then the issue becomes where do we allocate our limited resources to do the most good? And that’s were risk comes into play; as one of the dimensions in our decision process for allocating what we have to affect positive social outcomes. If I believe that agency x has less of a chance of successfully using the resources I have provided to them, as compared to agency y then I believe I am bound to choose agency y simply as a matter of good practice and responsible stewardship. In fact, the idea behind SVP is a pooling of partner resources with allocation based on our belief in partner rationality in distributing those resources in the face of multiple choices to accomplish our goal of increasing the common good in our community. Part of that process is making a determination (assessing the risk) of who can best use our offered resource to accomplish our mutual objectives to affect positive social change.
I think its right to question how one arrives at a meaningful risk calculation when awarding grants along with the corollary argument about what is the proper risk tolerance for our partnership. But the concept of grantee risk being irrelevant to our work is, well, irrelevant.