From risk aversion to risk wisdom

From childhood, we hear the word risk only as a negative – it’s risky to cross the street, talk to strangers or ski into trees. As adults and organizational leaders, we hear lawyers, insurance brokers and accountants speak of minimizing and mitigating against risk. Risk is BAD. Yet in our personal lives, we often ignore the risks and fall in love, buy a house, change careers, make online payments and take up mountain biking. Our expectation of joy or worthwhile returns outweighs our fear of the risks.

In modern business thinking (excluding certain professional advisers), risk is not a negative. It’s a neutral term, meaning that options should be analyzed to choose which risks are worth taking and which aren’t. We know that minimizing all risks is a sure route to business failure.

But as leaders of nonprofits, we usually take our responsibility to safeguard the organization’s assets very seriously – so seriously that we find it hard to take the risks needed to make the organization successful. Programs continue past their time because implementing new, probably better, programs means taking a risk. Organizations operate without the capacity to track, evaluate, fundraise and more because it’s risky to take monies away from services. Yet over time, those services will decline without capacity building, and the organization will fail to meet the changing needs of its community or members.

So what would it take to help more boards and senior managers be ready to identify and take wise risks?

I’ve found that resource-focussed discussions lead to ever more reluctance. The people who enjoy deaGroucho_Marxling with budgets and financial reports are usually the voice of caution. And nonprofit leaders are very conscious of the fact that they have been entrusted with public monies intended for public good. Unlike Groucho Marx, who famously was willing to spend money until it was clear that “Now you’re talking about MY money”, they may take more risks with their own money than with the resources of their nonprofit.

What would it make possible if an in-depth discussion about the future was held with resources completely off the table?

I always say our resources don’t decide our dreams, they decide how fast we can achieve our dreams. Help boards and staff dream, out loud, about the community they want to create, what needs to change and their role in making the changes happen. You’ll find the enthusiasm for action becomes palpable. They want to bring out the highest potential of their organization so those changes are expedited. In my experience, agreement on strategic priorities then happens astoundingly quickly.

If this type of discussion is new to the organization, I can safely predict that at least one of those priorities will represent a major shift. The group has agreed—usually unanimously—to take a risk! The careful thought on the details, including how to take those risks, and minimize negative consequences, will follow; they aren’t being reckless. They are being wise – the risks are necessary for the outcomes they want.

Now money comes back on the table. All their resources need to be allocated to those new strategic priorities, It’s a rare nonprofit that has enough resources to make progress at the speed they now desire. Maybe now the cost of setting up planned giving, soliciting corporate sponsorships or other means of revenue generation looks like a reasonable investment rather than a scary risk. Maybe shifting volunteer effort from galas to community engagement looks so logical they can’t imagine why it didn’t happen sooner. The group now has risk wisdom not risk aversion.

skydivinggroupNo, it won’t be quite that simple. Readiness levels will vary. It might take several iterations and some backward steps, especially without an external facilitator to periodically keep them on track. Sometimes the risks won’t work out, and they’ll have yet another learning experience. They’ll manage that type of risk better next time. But overall, they won’t return to their prior level of risk aversion, because they realize that just won’t achieve the outcomes the community needs and deserves.

Consider your next steps carefully. Has it been a while since a well-facilitated, future-focussed discussion? Is your board sufficiently dissatisfied with the current situation to agree to spend a morning on a new approach? If you need to move from administering scant resources to creating a vision that encourages large investments, then seek out a facilitator who can focus the conversation and help you build that vision.

Be prepared for more willingness to commit than you’ve ever seen from your board before.

As published by Hilborn Charity eNews on February 18, 2016.

3 thoughts on “From risk aversion to risk wisdom”

  1. Jane, very nicely framed. I also talk about risk in terms of commitment. The risk is that we can’t or don’t deliver on our commitment or promise. This can often allow people to see risk in the positive. Rather than the risk of someone getting hurt and suing us and then thinking about how we stop all the bad things that could cause harm, we can re-frame it in terms of what is the commitment we want to make to people and what will it take to make that commitment come true.

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