Philanthropists Unnecessarily Risk Averse – Study
Thursday, 28th June 2012 at 10:50 am
Philanthropists are unnecessarily more risk averse with their philanthropic assets than they are with their personal financial assets, a new study has found.
Risk and Philanthropy, commissioned by the Resource Alliance and the Rockefeller Foundation, is based on 27 detailed interviews with development philanthropists, philanthropic intermediaries, grant-makers from leading international foundations and sector academics in April 2012.
The study found that some 26 per cent of philanthropists are not willing to take any risks with their philanthropic assets, compared with only 10 per cent who take a similar view of their other financial investments.
Those interviewed are working in more than 10 different countries across five continents, including Singapore, Brazil, the Netherlands, USA, UK, India, Russia, Kenya and Indonesia.
The study looked at why so many individuals and foundations are currently risk averse with their philanthropy and how successful philanthropists and grantmakers conceptualise, assess and manage risk in the context of international development.
The report said that to take more risk philanthropists need to be encouraged to reflect on why their philanthropy is intrinsically motivating to them and thus identifying all the gains it delivers.
The report recommended that philanthropists can also learn much from the field of social marketing and in particular from a shift in focus from a sales-oriented philanthropy to a market-oriented approach.
“Rather than sell ideas to communities, it is better to embed themselves or their organisation in those communities and take the time to learn about the genuine needs of the beneficiaries and any risks they might experience as a consequence of engagement with the initiative,” it said.
“Philanthropists should therefore consider spending a significant portion of their time building personal and professional networks related to their philanthropic interest, so they can more accurately identify the relevant parties.
“A network of philanthropists working in similar fields should be established, to permit those new to the profession to learn from the experiences of others and to be supported in their decision making. The ability to reach out and discuss with others would improve the quality of decision making through the transfer of knowledge, but the process itself would also lower perceived risk as people are facilitated to share the issues that concern them."
The report concludes that the time may well have come for development philanthropy to be considered a profession, with its own curricula, professional association, credentials and support networks. Individuals exposed to the relevant thinking and body of knowledge will be much better placed to avoid the pitfalls of the past and to engage successfully with appropriate development risk.