Managing Fundraising Risk
Howard Lake | 3 May 2019 | Blogs
Fundraising can be a risky business and so it is important for fundraisers and trustees to be aware of the risks and take action to mitigate them. So what are the key fundraising risks and what can be done about them?
1. Lack of a robust fundraising strategy – so that fundraising is conducted ad hoc with no real targeting of investment in the most promising areas. The answer here is to develop and maintain a costed fundraising strategy, linked to your organisational business plan, that focus on the future growth areas you have identified as your best future opportunities.
2. Over reliance on a few income sources – such as too much funding from statutory sources. The answer to this is diversification, which can take time but is usually possible and makes your organisation more sustainable. The risks of not diversifying are financial decline and even organisational closure.
3. High staff turnover – This can be very damaging for your income, as new staff take time to learn about the organisation and possibly to develop their skills. Departing staff can also take their contacts with them. If your organisation is affected, find out why people are leaving and seek to win greater loyalty – it will pay for itself in the long run. If you have an effective fundraising team, try to keep them at all costs.
4. Compliance issues – In recent years especially, data protection has been a major hygiene factor for fundraising charities, so it is imperative to have someone who understands your obligations in handling personal data – GDPR is here to stay, Brexit or no Brexit. Other compliance risks include late filing with the Charity Commission, which funders will notice, so ensure your finance team is on track to file on time.
5. Accounting problems – If your accounts show a recent deficit or high reserves, this can limit your support from institutional funders, such as trusts, the National Lottery and statutory funders. If there are such issues in your accounts, have you explained and justified them? It may well be possible to overcome them, if you get it right.
6. High fundraising costs – Are you aware of the benchmark ratios of return for the different fundraising techniques? If so, how does your charity compare? If you have unusually high costs, some funders and donors will spot this and you will miss out. If there is an issue, you need to explain and justify it, for example if you are investing in a new area of fundraising, which has yet to yield results.
7. Bad publicity – This is not directly a fundraising issue, but it will hit your income if your image is tarnished in the media (think Oxfam and sexual abuse). So is your organisation prepared for the worst and able to react quickly to deal with bad news?
8. Growing competition – There is not much you can do about competitor risk except to make sure you are staying ahead of the game. E.g. are you up to speed with new developments in digital fundraising? Are you investing in training your team to keep their skills up to date? Do you encourage innovation? If not, you could be left behind.
9. Lack of a fundraising culture – Some charities miss out on valuable income because the management and trustees take no interest in fundraising and delegate it all to the fundraising staff. This attitude risks missing out on opportunities, particularly in corporate, trust and major donor fundraising. So try to foster a climate where everyone takes responsibility for representing your organisation externally and for helping bring in the funds. This takes support from the top, so try to make friends with your trustees if you can and engage them in fundraising.
10. Activity specific risks – such as those associated with public events. These should be addressed via thorough risk assessments, detailed planning and by carrying sufficient insurance.
Risk can never be completely removed from fundraising and so needs to be managed and mitigated as far as reasonably possible. Just as trustees are required to review organisational risks annually, so it is good practice for fundraising teams to review their specific risks on a regular basis, as these will change over time.
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About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.