Call your long shots – before you make them.

Does your foundation’s stated acceptance of risks and failures align with your actual advance designation of investments as risks?  Do you call your risky shots before you make them or are your failed investments labeled as risky after the fact?

By categorizing an investment as risky from the get-go, you consider whether there are proportionate benefits and adequate staff time and resources dedicated to the investment. When the risk isn’t recognized, you miss significant opportunities to learn and support those projects. Similarly, when staff doesn’t admit that a very successful project was highly risky and got lucky, the foundation does not build resilience to bear risk and the capacity to manage risk. Designation of grant’s riskiness opens the door to discussion of the nature of that risk such as leadership, technology, external factors, or unforeseen costs and its mitigation.

Some years ago, I analyzed a large portfolio of grants and compared the risks identified by the grant recipient, by the grant’s external reviewers, and by the Program Officer with the actually realized risks during the project.  Not surprisingly, it was the funding recommendation of the responsible Program Officer of the final proposal to the Grants Committee that best predicted risks. However, the grant approval and implementation process did not require the “loop to be closed” by providing the grantee with the analysis and the tools and resources to mitigate the identified risks.

One of the hallmarks of private, strategic philanthropy is the freedom of foundations to bear risk and adapt to risk.  Building a language, skill, toolkit, and culture that makes risk management a core competency of the program team may yield large rewards.