A few days ago, we discussed how major for-profit corporations admitted they aren’t doing all they can to manage their business risks. Turns out, non-profits aren’t confident they’re doing much better.
According to a June 2014 survey of 150 U.S. nonprofit foundations and endowments conducted by SEI’s Institutional Group, 44% of them are not confident that they are spending enough time assessing the impact of potential market shocks, and 49% don’t believe that their investment committee has identified all key portfolio risks. Nearly a quarter (24%) said they lack confidence that the committee is provided with enough information to conduct substantial risk analysis.
However, these nonprofits are recognizing the importance of risk management; 46% of those surveyed said “they place greater value on positive risk-adjusted returns than on overall portfolio returns when evaluating investment success,” and that “Managing the risk/reward balance is a huge priority.”
Non-profits can use software tools such as @RISK to quantify the magnitude and probability of risks in funding streams, and enhance risk management in portfolios. Risk analysis helps non-profits develop effective strategic contingency plans, and communicate challenges to board members and other stakeholders.