Revealing Risk in Philanthropy – part 1

Inviting Your Feedback!

Hey there – The National Center for Family Philanthropy and I are asking for your thoughts on risk in philanthropy.

  • For donors and grantmakers: What type of risk most concerns your board and staff? When does philanthropy feel most risky to you?
  • For nonprofits: What types of risk seem to most concern your funders and donors?

By October 11, I encourage you to add your response to the comments below, or via the social hashtag #NCFP15Risk on Twitter, Facebook, or LinkedIn.


Philanthropy is often described as society’s risk capital. However, grantmaking and giving are highly influenced by the risk tolerances of the people involved. Those personal risk tolerances and personal assumptions about risk usually remain obscure during grantmaking conversations.

Our views on risk are partly hidden because all of us are lousy at understanding the mental shortcuts and hidden biases influencing our decisions. Many books and articles have been published in the past few years on this subject. Two recent publications related to philanthropy include Understanding Risk Tolerance in Grantmaking and How Shortcuts Cut Us Short.

Our views on risk are also hidden because grantmakers and philanthropic families rarely take the time to fully discuss risk in a strategy or in individual grants and investments. Those groups lack a common internal understanding of the individual members’ views on risk and how those views add up to a collective picture.

One challenge to creating a common understanding of risk is terminology. Philanthropy doesn’t have a shared framework for discussing and assessing risk. Some terms and ideas are borrowed from corporate culture, others from strategic planning, and others from specific issue areas such as the environment. Many overlap. A few definitions of types of risk I’ve found in grantmaker publications include:

  • Evidence – the ability to measure results, let alone attribute them very directly to an organization
  • Idea – the idea’s track record and the logic connecting the activities to the desired result
  • Implementation – some board members may perceive this as performance risk – “Will the organization do what it said?”
  • Industry – the likely stability and trajectory of a market segment
  • Investment – the likelihood that a funder will lose some or all of the intended social impact of their investment as a result of disruptive events
  • Project – the likelihood of disruptive events occurring which interfere with the successful conduct of a project or program (businesses would call this assessing externalities)
  • Operational – risk of not having the right operational approach to support sustainable impact
  • Strategic – risk of not having an accurate strategic perspective on the social problems
  • Reputation – the perceived potential damage to the reputation of a board or staff member, or to the organization, because of a decision

I’m facilitating a session on risk in family philanthropy at the 2015 National Forum on Family Philanthropy. John Bare, VP of The Arthur M. Blank Family Foundation, wrote a terrific article as a preview of the session. Laurie Michaels, founder of the Open Road Alliance, and June Wilson, Executive Director of the Quixote Foundation are participating in the session. Members of all three foundations have been terrific resources in shaping the session.

We’re hoping to use the session and your feedback to begin shaping a common framework, or at least a good set of revealing questions to ask internally. I’ll keep you posted on our progress after the session!