Contingency funding in philanthropy
A Philanthropist is a person who seeks to promote the welfare of others, especially by the generous donation of money to good causes. To obtain the desired outcomes it is necessary take into consideration the risk and the return of the philanthropic investment. In the recent years, philanthropy has made big efforts to build monitoring and evaluations systems that are useful to measure the return of the philanthropic investment, normally described as impact. Unfortunately, philanthropists have not invested the same amount of resources in measure and risk mitigation.
There are different tools for risk management. In this blog, I would like to talk about contingency funding. Funder should set aside contingency funding as part of their organizational and budgeting processes. A good practice for foundations is having contingency funds depending on its risk profile.
Once you set aside contingency resources, it is recommendable at least once per year to assess how your contingency funds have been used and whether the resources you set aside were sufficient. For doing this it is necessary to review your grantees’ reports to find out the challenges they have faced, and if there is any way to be more effective in future budgeting processes. To do so, there is one question that can be useful: what additional impact could your grantees have accomplished if you had more contingency resources available for them?, getting that answer can give you a good idea about what needs to be improved.
Finally, The Rockefeller Foundation, Open Road Alliance, and The Commons created an amazing toolkit called “Risk Management for Philanthropy” that provides tools to incorporate risk management policies and practices into your communications with grantees, budgeting processes, and internal governance. I encourage you to learn more about it, downloading Risk Management for Philanthropy toolkit from the link below: