Building a resilient charity

The last couple of years have been extremely challenging for the charity sector with the COVID-19 pandemic. The sector has shown incredible resilience, but there are now more uncertainties ahead with the cost of living crisis and the war in Ukraine.

Charities once more may be being asked to do more, with less income. The financial squeeze could see a close to £5bn shortfall in charity income in 2022 compared to what might have been expected back in 2019, according to Pro bono Economics¹.

Resilience is about coping with an uncertain future. Charities need to ensure that the work they do and the social impact they have, can continue regardless of what challenges lie ahead.

The word resilience has been used a lot since the start of the pandemic. We also often think of being robust and resilient as the same thing, but they are actually quite distinct. Consider the difference between an old oak tree and a reed bed. An oak tree is robust and may have been around for hundreds of years, but one bad storm could have it crashing to the ground.

Contrast this with a reed bed. When a storm comes along they can flex and bend in the wind, but once it’s over they stand upright once again. This is a good metaphor for what a resilient organisation looks like. A storm can pass and the charitable work continues.

So how can organisations assess its resilience? Below are the key building blocks for resilience and some of the things charities need to be thinking about in each area:

Governance and strategy

When charity governance is done well it’s a vital support for resilience. Charities could assess themselves against the Charity Governance Code² to understand the effectiveness of its governance. Areas to consider include meeting formats; speed of decision-making; diversity and succession; scenario planning and risk management.

Trustees should also always have in mind their overriding responsibility for the sustainability of the charity’s work as opposed to the charity itself. Board should be questioning whether the current structures and ways of working continue to be best or would the charity’s work be more sustainable and more resilient under a different model (collaborative working, mergers etc).

Culture

A positive organisational culture will increase a charities resilience. By a positive culture I mean on that is innovative, open and encourages people to come up with new ideas. It embraces learning and feedback. A resilient organisation is more likely to be able to move on quickly from a mistake and change direction if necessary or stop a project. This open culture though does need to be set against a backdrop of established policies and procedures.

People

Well-being of staff has never been higher on most employer’s radar these days. A resilient organisation also benefits from a multi-skilled flexible workforce.

Many charities will struggle to create the resources to be able to carry spare capacity in its staff team. But the focus on cost reduction and being as efficient as possible (where ‘efficient’ is code for everybody working flat out) runs counter to the principles of resilience as there is no slack in the system to respond to shifting priorities. This is something that funders would do well to consider.

Information management

With remote or hybrid working, access to information management systems has now become the key risk associated with business continuity.

Charities need to be using smart technology, as well as think about accessibility and who needs access to what information. They must also ensure they have adequate security and are making the best use of the information they have, and/or aren’t collating information they have no use for.

Finance

From a financial perspective, resilience comes from the risks within the business model. These include income diversification, the level of fixed cost, working capital requirements and the existing levels of reserves.

Actions for charities to take now

How resilient is your charity in light of the factors outlined above? What immediate actions can you or should you take? As a minimum we recommend the following actions in the first instance in the context of the five building blocks above.

1. Self-assess against the Code of Governance
2. Right work in the right way? – ensure the board regularly discusses if the charity is doing the right work and in the right way, and considers alternatives
3. Scenario preparedness – charities should plan for the future under different scenarios and discuss what the organisation would do in each case
4. Check out CIPD resources (or equivalent) on wellbeing and other people’s strategies
5. Ensure the organisation has Cyber Essentials accreditation or equivalent. This will also help in giving confidence to other stakeholders such as donors.
6. Do a business model review – including looking at income and expenditure and reserves policy)

This article was originally published on the Sayer Vincent website, click here to see it.

Learn about this and more at The Charity Accountants’ Conference 2022 from 21-22 September.