Giving Compass' Take:

• In this NPC story, Nicola Pritchard discusses why charity trustees are risk averse and offers advice on how they might take more risks in the right ways.

• Philanthropy is often seen as the risk capital when an idea or program isn't a sure bet. While not every risk pays off, success can mean additional funding from other sectors, like the government.

• To learn more about risk in the philanthropy sector, click here.

Charity trustees are not normally associated with risk taking. In fact, they are notoriously risk averse. Of course there are legitimate reasons to see risk as a bad thing to be avoided where possible. It inherently has the potential for bad outcomes so the consequences of not doing due diligence can be dire.

Quite rightly, the Charity Commission has focused its guidance ... on mitigating potential catastrophes. The downside of this approach is that charities can be discouraged from seeing risk through a positive lens and pursuing benefits with attendant risks.

For trustees embarking on risky put potentially transformative moves it is important to be able to weigh up individual organisational risks against the potential benefit to beneficiaries. It is a hard job and so trustees must continue to have good due diligence and judgement.

However, the onus is not just on individual trustees—the industry needs to be encouraged to re-categorise risk as a positive force and the Charity Commission needs to play a role in this. It might not be as simple as renaming the ‘risk register’ to the ‘risk and opportunity register’ but there does need to be a shift away from tying all discussions about risk to long and arduous, and potentially destructive scoring mechanisms. Jonathan Bell from Sayer Vincent shared the ‘big 5’—a framework to help embed risk into all strategic decision making which trustees may find useful.

While covering the essential risks is obviously still absolutely critical, the sign of risk being managed well from a strategic point of view is whether we are still thinking audaciously about what we can do for our beneficiaries.

Read the full article about risk-taking by Nicola Pritchard at thinknpc.org.