Foundations and Risk: The Wolfson 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 third article in this series comes from Paul Ramsbottom, Chief Executive of The Wolfson Foundation.
This series first appeared in April 2017’s Trust & Foundation News. Read the magazine here.
Like every foundation, we follow statutory guidelines on reviewing risk and have dozens of itemised risks, of varying degrees of importance in day-to-day management. But taking a step back, I see three major existential risks faced by foundations.
The first is significant financial risk – that the endowment loses all or a large proportion of its value. This is increased in times of uncertainty, as with Brexit. The best thing we can do is to be diversified into different asset types and classes, and diversified geographically – ever more important with the dramatic fall in sterling.
Second is reputational risk. At Wolfson we have a communications policy that aims to be proactive in talking about what we are doing and why, what our aims are and the reach of our funding programmes. For example, we try to be proactive in making the case for why we fund sometimes undervalued parts of the cultural world – for example archives and libraries, humanities research, and our History Prize - and why they are so important to British society, and not a luxury. We make all our data available through 360Giving, ensure our spokespeople are well briefed, and that the board is signed in to policy statements in areas that might be potentially difficult. The challenge is always to make sure that we are not so worried about possible reputational risk that we become unadventurous in our funding.
Third, and I would argue the most fundamental risk for our sector, is that your funding is not doing what you hoped it would – not having any meaningful or lasting impact. I’m not talking about grantees being fraudulent, but something more subtle. You set out your task to achieve x, y or z, and you simply don’t achieve it, or have no way of knowing whether you do or not. This is a greater danger for foundations than most operational charities, where it is slightly easier to measure and assess what they are trying to do.
For a capital funder there are additional short-term risks that are practical and immediate – delivering on budget and on time, for example. These are probably greater than if you are funding programme or revenue costs, but then there are also subtler and more difficult risks to manage in terms of the aims of capital projects, which are long-term. Those risks can be mitigated by having a really strong and open relationship with the partner organisation, and working closely with them, not necessarily sticking rigidly to the text of the original application.
When funding infrastructure projects, we are providing a platform through which the activities of an organisation – or often in our case a research group – can flourish. Outcomes will only be seen over a long period. The infrastructure is not the end in itself and the capital funder’s role is not over and the risk not mitigated when the building is complete.
A large proportion of our funding is going into research buildings and inevitably – and desirably – over the construction period, research will have evolved. As a funder we have to be flexible and fund on the basis of a broad vision, and the track record of the groups going into the building, knowing that scientific research is intrinsically unpredictable. The key thing is to think carefully about the extent to which we are able to assess over a long period what is going on within that building. Of course, all is not lost should expectations not be met – the infrastructure is still there, so it is always possible to ‘repurpose’ the building.
Similarly in the charitable sector, if a social enterprise for adults with learning difficulties, say, morphs from a café to a workshop, as long as the charitable objectives of the organisation are being met in an imaginative and intelligent way, we are generally satisfied.
Risk also includes being willing to ‘fail’. In research, failure is part of scientific endeavour – not every line of enquiry is going to be productive and learning from that helps to make a flourishing scientific community.
We are able to extrapolate some of the models of our academic funding across to our charitable funding – areas such as grassroots charities working in health and disability or cultural organisations. Even there as a funder we have to go into projects being aware of what the risks are, and our own risk tolerance, but recognising that we can put money into imaginative projects, and therefore run a higher possibility of failure. But that apparent failure could be useful learning for the whole sector, so it is not necessarily wasted. How that is perceived largely depends on how it is communicated to the wider world.
In the wider social and political context some risks are hard to mitigate as by definition they are beyond our control. With Brexit, for example, we do not know how the cards are going to fall. Our core partners are research-intensive universities throughout the UK, and they face significant risks as we leave the EU, creating risks for us as a funder: the future of EU Horizon 2020 funding for research – which often comes alongside Wolfson funding – the movement of people, which is critical to university research, and the business model of universities which is based on a flow of funding from international students. We have to be able to live with that measure of uncertainty.
The Wolfson Foundation
Other articles in this series:
Foundations and Risk: Lloyd’s Register Foundation
Foundations and Risk: The RS Macdonald Charitable Trust
Foundations and Risk: Spirit of 2012
Foundations and Risk: The Sylvia Adams Charitable Trust
Foundations and Risk: CriSeren Foundation
Foundations and Risk: Webb Memorial Trust