Guest blog: Charities need funders to fail more – and keep learning
In this guest blog, Annie Caffyn from IVAR explores the concept of risk and how foundations might approach it.
‘Recognise value in learning from failure and risk-taking’
An intriguing idea from ACF’s Impact and Learning report. It resonates with our recent observation that too much caution can narrow the range of people and organisations funded and what funding can achieve. We are finding that, increasingly, charities need funders to take more risks: to work with them to try new things, or to stand by them in this climate of persistent turbulence.
However, for funders, asking the question ‘are we taking enough risk?’ may require a deep look at current practice. IVAR has recently been collaborating with five funders – of different scales, purposes and ways of working – to better understand the varied approaches grant makers take to risk. We had three starting points:
- Balancing benefit and risk. Grant-making decisions can be understood as judgements about a balance between benefit and risk – the aim being to select applications that funders reasonably believe will make the biggest difference against their funding priorities, while being confident that the proposed work is achievable and that the funded organisation is capable of delivery.
- Appetite for risk. There can be a lack of alignment within trusts and foundations in terms of understanding ‘what risk means to us’ and how it is best measured and managed. Due diligence processes need to be proportionate to the size of the organisation being funded and the size of the grant.
- The invisibility of risk can produce processes and behaviours that are problematic to applicants and grantees – and that impede the flexibility and agility that the moment may call for. We saw a need for more trusts and foundations to move from a deficit to a strengths-based approach, placing greater emphasis on where potential lies to deliver a positive outcome and how to work with organisations to manage and live with risk.
We found that risk is not a static concept. A funder’s risk tolerance will fluctuate over time and between different projects or programmes, and appetite for risk relates strongly to organisational or programme purpose. However, in practice, processes are not always aligned with ambition. Without explicit agreement about the approach to risk at a strategic level, and a clear vision of the potential rewards from risk, staff lack clear structures and authority to develop tailored processes. They may then fall back on unnecessarily onerous requirements, designed to anticipate all possibilities.
We have developed a framework for thinking about risk, designed as a bridge to create greater alignment between strategy and practice by providing a structure for interrogating the balance between ‘the things we care about’ (positive risk) and ‘the things we worry about’ (risk mitigation). It supports funders to think about things like attitude to innovation; certainty and clarity of outcome; and the importance (or not) of public opinion.