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GuideStar Blog

The world seems to have more black swans these days.

 

That was the observation from a speech I heard this week by Dr. Sherry Cooper, Executive Vice-President and Chief Economist, BMO Financial Group.

By now, you should be familiar with the term. Nassim Nicholas Taleb, a finance professor and former Wall Street trader popularized using “black swan” as a way to describe as Wikipedia puts it as “the disproportionate role of high-impact, hard to predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology.” The real estate melt down would be one. The collapse of the stock market in late 2008 would be another. Dr. Cooper was thinking about the surge in oil and food prices and the triple whammy of an earthquake/tsunami/ and nuclear accident in Japan when she talked about black swans. And who could have predicted a democratic revolution in the Arab middle east?

What are some black swans in your world? Sometimes it can be a drought or flood or other natural disaster. The tenacious unemployment rate may be one. The continuing drama over federal and state government funding may be another one. Sometimes they are closer to home: the departure of a CEO, the loss of a major funder, maybe an event in your community.

So how can a high performing organization prepare for this influx of black swans?

Three quick ideas:

  1. Undertake an annual Risk Assessment. Assume the black swans are coming. Take a clear-eyed analysis of every part of your organization’s business and examine what you are doing and what might happen and how to prepare. At GuideStar, we look at a wide range of risks every year:
    1. Risks related to the nature of assets and liabilities
    2. Risks related to the sources of revenue
    3. Risks related to the nature of expenses
    4. Risks related to financing arrangements
    5. Risks related to related party transactions
    6. Risks related to regulatory environment
    7. Risks related to political or social environment
    8. Risks related to environment
    9. Risks related to our brand name and reputation
    10. Information Technology Control Environment

i. Availability of http://www.Guidestar.org site

ii. Access Control

iii. Backup and Recovery

iv. External Access

  1. Internal Controls

i. Environment

ii. Communication

iii. Control Monitoring

  1. Diversify your funding sources. Strive for a variety of sources of funding so you are never too reliant on one type of funding. There was a time when GuideStar depended on a handful of foundations for all our support – a precarious position to be in. When planning your revenue mix, think like an investor would plan a retirement account – blend of bonds, stocks, with short and long term plays, and an ever-changing formula.
  2. Work towards developing a sustainable business model. Earned revenue isn’t for everyone, but every organization can work towards building a business model that identifies longterm, predictable, and reliable sources of revenue. If we really care about the mission of our organizations, we’ll build sustainable business model that not only help us fight off the black swans but give us the resources to thrive.

 

Bob.jpgThe preceding is a guest post by Bob Ottenhoff,  Chief Executive of the Center for Disaster Philanthropy. With an entrepreneurial spirit, strong technology focus, and a quest to make an impact in the world, Bob has the ability to take an organization and lead it into strong performance, sustainability, and industry leadership.

Topics: Just Because Nonprofits