Foundations and Risk: CriSeren Foundation
In this series, we are taking a closer look at foundations’ attitudes to risk. We will include perspectives from across the UK and from funders with a number of specialisms and approaches.
The sixth article in this series comes from Chris Llewellyn, Director of CriSeren Foundation.
This series first appeared as feature in April 2017’s Trust & Foundation News. Read the magazine here.
Our biggest risk is not making the optimal use of the resources we have. We are relatively new and still really operating in a pilot phase. We consider the time and expertise we offer to be much more beneficial than our relatively small grants.
Our purpose is to support successful small and medium-sized UK charities to develop their scope and impact, so a big risk is choosing the right organisations to work with. CriSeren is the foundation of the CriSeren Group of investment companies, so with a background in private equity, quoted investment and venture capital we are very comfortable with conducting due diligence.
But it is about more than project outlines and checking the books – it is about building relationships. Before we make any decisions we get very close to the organisations, meet key personnel, make sure the right people are in place, and the offer is well defined. One of our common findings has been that the organisation itself does not have a clear idea of its own risk. Often we can help the senior leadership look at its risk register before, or sometimes instead of, making a grant. For example, we started scoping out an organisation recently and discovered it did not have a reserves policy. We have since helped it to develop one but will probably not enter a direct funding relationship at this stage.
We can also use our networks to help organisations manage their risk. I am a trustee of Octopus Giving and one of our grantees, the Campaign Against Living Miserably, has used the risk managers within Octopus Investments to develop its own risk register. The process was incredibly useful and the provision of these sorts of specialist introductions is an important part of our toolkit as an engaged funder.
In choosing programme areas, our trustees are very proactive, and with our venture capital background, we are very willing to take risks. The security provided by our endowment ensures that we can accept risks that might not be open to others.
We deal with organisations at different stages of development, but generally do not get involved in those with turnover of more than £400,000. We find we can have more impact among smaller charities and at an early stage. They need to have some proof of concept but it doesn’t need to be completely mapped out.
For example, we are involved with an organisation called CleanConscience, which recycles hotel toiletries, collecting the packaging from hotels and taking it to a warehouse where people with learning disabilities process it for resale or donations. It’s a great idea but was at a very early stage. So we are looking at funding, but more importantly to help develop the offer. For example, the organisation was already planning to start social franchising and we helped identify that it would be better to wait. That strategic assistance is more important than the relatively small amount of funding we provide, and cuts down their risk of failure.
Reputational risk is important but not our highest priority. We want to make sure our profile isn’t damaged, but as an endowed foundation we can be quite subjective about how we measure our impact. We obviously have targets for our grantees, but in terms of our own impacts we can take the long view and are not tied by enforced metrics.
Another major risk for us is maximising the resources available to us by looking at our overall return on our own investments. We have a fairly small endowment and are managing it ourselves, but right now it is so difficult to get a good return. Currently, we do fairly basic screening to avoid unethical investments such as tobacco but we also want to include some element of social investment. It’s only small so far, but I am a member of the Social Impact Investors Group. Balancing the risk/return ratio on both financial and social returns is an interesting exercise and one that we are currently developing.
I did an MSc at Cass Business School in Grant-making, Philanthropy and Social Investment. Analysing risk in an academic context has been useful, in particular the lectures from Kate Sayer. I found the publication from Sayer Vincent Rethinking risk very helpful. It breaks risk down into operational, programme or strategic. Strategic covers some of the contextual/ external risk that you cannot mitigate – Brexit, for example. The challenge is to work out how to roll with those uncertainties.
Brexit is undoubtedly having a direct impact on our investments. We seek long-term dividend yield and that is very difficult with the current market uncertainty. We are concerned that we are probably due a stock market correction and with Brexit and Trump there is an argument to keep liquid. That is not ideal for generating revenue for the foundation, but is encouraging us to be more agile in our operations.
Other articles in this series:
Foundations and Risk: Lloyd’s Register Foundation
Foundations and Risk: The RS Macdonald Charitable Trust
Foundations and Risk: The Wolfson Foundation
Foundations and Risk: Spirit of 2012
Foundations and Risk: The Sylvia Adams Charitable Trust
Foundations and Risk: Webb Memorial Trust