A National Imperative: Joining Forces to Strengthen Human Services in America (Jan 2018)

developed by the Human Services Council of New York, can help CBOs make well-informed decisions. 21

Limited capability to implement financial risk management best practices. Leveraging external and internal data is crucial for financial risk management yet many human services CBOs struggle to do it. When comparing the top third of organizations by solvency and the bottom third among those responding to the National Imperative Survey, stronger CBOs were 21%more likely to plan for financial stress, 29%more likely to perform environmental scans for potential risks, and 26%more likely to produce financial targets to better coordinate spending and investment. Among all CBOs responding to the survey, one-third have no plans in place to deal with financial challenges. One half have no plans laying out steps to return to financial stability in the event of a crisis. These and other risk management practices are important to maintaining financial health, but they require time, resources, and expertise to execute properly. Many CBOs simply do not have the resources or bandwidth to spare. “The current system doesn’t provide the flexibility to absorb risk,” a public agency leader for Connecticut observed. “We need to become better at calculating risks and rewards as a system, and we need to make sure the resources are available to support these activities. Only then will we see more financially stable organizations confidently managing risks” Limited in-house financial risk management and cashmanagement expertise. According to a human services CBOCEO inWashington State, “Finding the right people who canmanage risk and who can really grasp what our financial picture should look like in the long-run is really hard. We’re a complex organization with a complex financial situation. Really understanding us like that at our very core and building effective defenses for, say, another recession – that’s not easy.” Only 38% of CBOs in the National Imperative Survey indicated that they had risk management training for their program leaders and executives. FINANCIAL RISK MANAGEMENT CBOs were asked to report whether they were currently employing 15 different financial risk management strategies and whether they felt confident in their current ability to do so. These 15 strategies were previously outlined in the 2016 report by Oliver Wyman and SeaChange Capital Partners on risk management for nonprofits. 22 For only 4 of the 15 strategies did at least 50% of CBOs responding to the survey report that were currently employing the strategy and doing so confidently. These strategies included setting formal financial targets, delegating risk responsibilities to an executive, making long-term strategic investments that mitigate risk, and reporting financial results and risks to stakeholders. Just 1 in 5 CBO respondents reported confidently providing training to staff on financial risk management. Comparably low percentages of CBO respondents reported confidently planning for severe financial stress, including planning to recover from severe financial stress (28% of respondents), to maintain essential operations during periods of financial stress (25%), and to wind-down operations or pass them off to other organizations in the event of failure (6%). NATIONAL IMPERATIVE SURVEY RESULTS:

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