The COVID-19 pandemic impacted the work of charities just as much as it did other sectors, according to a recent study. Charities were operating in an unprecedented environment, which has had a potentially lasting impact.
The Charities Aid Foundation (CAF) worked with ICAEW on a research project that collated views from charity trustees about the biggest challenges they faced as we emerge from the pandemic.
One of the biggest is financial resilience. This is top of the agenda for charities – particularly long term – after a turbulent 2020 and 2021, says Louisa Burton ACA, a trustee for several charities.
“There were a lot of one-off projects and COVID funds, but obviously a lack of long-term grants,” she says. “Long-term income gives us financial stability. Looking at how we can make more long-term purchases is high on the agenda.”
Some charities are looking at investments, particularly ethical ones, Burton explains. There’s a balance between ensuring those investments provide a good return as well as being ethical, which is the biggest consideration when deciding where to put charities’ money. From a scenario planning perspective, the risk involved requires careful planning around that return.
Charities are becoming more aware of risk, though, and are more adaptable as a result. Big emerging risks include fundamental relevance – how charities fit within their communities and the relevance of their purpose.
“There might also be sudden changes to available funding or available resources, including volunteers, or there might be a sudden increase in demand for our services,” says Burton. “We need to be able to react more quickly to assessing our risks. We need to discuss our risks more often and adapt more quickly to what the risks are.”
Charities should consider adding these to a risk register and discussing the approach to these risks regularly in order to increase their resilience in a more unpredictable operating environment. They shouldn’t assume that the risks they faced a year ago are still relevant today, says Burton. And when the worst does happen, they should have contingency plans in place to help to deal with the situation.
Those charities that have emerged from the pandemic with a strategic plan are a little more robust and resilient and prepared for risk, says Burton. Additional funding has been sporadic and heavily restricted over the past two years, which hasn’t particularly helped with charities’ running costs, so strategic thinking has been essential for charities’ survival.
“It's really important to keep that strategic approach to risk,” says Burton. “I hope this will be a lasting impact from the pandemic. People have seen how quickly the environment can change. Hopefully risk management will be at the forefront of trustees’ minds going forward.”
Charities also need to be willing and ready to work with other charities and organisations to help build financial resilience. The sector is not necessarily ready to look at shared service centres or shared finance function resources, but it would make sense to take steps towards more collaborative relationships with other organisations, says Burton. “When something happens, we can work together with other charities and organisations in how we respond to it.”
Internally, more collaboration needs to take place, too. For effective budgeting and forecasting, everyone in the organisation needs to provide input into the process, with all trustees – not just those with a financial background – responsible for safeguarding resources and managing risk. Says Burton: “We need wider involvement from everyone.”