Jeff Ubois, Vice President of Knowledge Management at Lever for Change, considers perspectives on risk in philanthropy and how it might be rethought.
One of the surest ways to start a revealing conversation with a donor is to ask them how they think about risk.
Relative to global needs, the funds philanthropists control are small, so it is critical to avoid wasting philanthropic dollars. Sometimes, fear of wasting funds on projects that might fail drives donors to make large—but perhaps unimaginative—awards for projects with tangible, ‘low fail’ outcomes such as new buildings at well-known schools.
At the other end of the risk spectrum, some funders seek breakthrough approaches to global problems whether it is focusing on big bets to truly scale a proven model, investing more dollars in local leaders, or making the decision to combine all of a foundation’s assets into one pot of mission-driven investments. These risk-taking approaches are needed urgently, yet most truly bold projects fail. More than ever, there seems to be a need for bolder philanthropic funding. But the drive to be a careful conservator of foundation money makes it difficult to take chances, and the field, as a whole, is still learning to think about these issues.
Modern, large scale competitions, such as 100&Change, and other competitions managed by Lever for Change, aim to reconcile these concerns—they aim to make breakthroughs of various kinds and to do so, in part, by rethinking risk. And some of the best participants push donors to think differently about the risks that are appropriate to take and about strategies to manage those risks.
Rethinking risk has been the mission of the Open Road Alliance since its inception, and one that MacArthur and Lever for Change have tried to learn from and build upon.
During the inaugural round of 100&Change, MacArthur did this by thinking about the kinds of risks we were actively seeking—risks associated with scaling—and the kinds of risks that, given the size of the $100 million award, we would avoid—such as funding a proof of concept, clinical trials, or untested innovation.
We then asked the 100&Change applicants for a risk assessment: “Please describe the principal risks or threats to the short- and long-term success of the proposed solution and your plans to address them…”
The answers we received were revealing and thought provoking. The responses ranged from what insurers used to call “acts of God” (a potential outbreak of Ebola) to a lack of popular support or management capacity (“The ability to recruit and mobilize a massive movement of volunteers”) and from difficult political environments (“Our highly inclusive approach may anger incumbents and lead to unlawful repercussion”) to techno-social concerns (“The typical objection for cryptocurrencies is the volatility”).
The answers also included generic operational issues (“misappropriation of project funds, lack of standard and modelling and fraud”). And sometimes we saw useful structures in how these risks were described. One project simply listed “Anticipated Risks,” “Level,” and “Mitigation Strategy” in a table.
The responses and discussion provided by 100&Change applicants were as diverse as the applicants’ identification and ranking of risk. Their planned strategies to address those risks highlighted the ingenuity, depth, and realism (or in a few cases lack of it) associated with each project. And they reflected a kind of honesty and courage: when making a proposal, it is never clear how a funder will receive a frank discussion of risks.
In the course of reading hundreds of proposals and reviews of them by outside judges and technical experts, we noticed some other things: that the level of risk is not identical to the likelihood of failure; risk does not disqualify a project for consideration; the risks and potential benefits of a project are linked in complex ways; and funders should encourage grant applicants to face, accept, and embrace risk.
In discussions with other funders, we found the risk frame illuminating. Some were concerned about project failure; others worried that a given project might not be distinctive, and thus, their funding would not be important.
Over the coming months, we hope to do a deeper, more systematic dive into the answers received from applicants in the second round of 100&Change. In the meantime, we encourage readers to view the Open Road Alliance’s risk management toolkit and to consider revisiting their own approaches to understanding and communicating risks in their work.