Close Search
 
MEDIA, JOBS & RESOURCES for the COMMON GOOD
Opinion  |  Charity & NFPGovernance

Heads down. Eyes up. Leadership in volatile times


25 March 2020 at 6:34 pm
Ushi Ghoorah
In times like this the job of a for-purpose board director is not only to guide management in dealing with the crisis, but also to lift their gaze and contemplate the long-term impacts on beneficiaries and organisations, writes Shamal Dass, with a postscript for philanthropists.


Ushi Ghoorah | 25 March 2020 at 6:34 pm


0 Comments


 Print
Heads down. Eyes up. Leadership in volatile times
25 March 2020 at 6:34 pm

In times like this the job of a for-purpose board director is not only to guide management in dealing with the crisis, but also to lift their gaze and contemplate the long-term impacts on beneficiaries and organisations, writes Shamal Dass, with a postscript for philanthropists.

Like all of you, my colleagues, my team, my family, my community and myself, we have been, and will continue to be affected by the current health crisis created by the spread of COVID-19, now officially recognised as a pandemic. Facing the challenges it has created as a leader within JBWere has me thinking about the safety of my colleagues and their families, and the assets that have been entrusted to us for prudent and professional management by our clients.

However, as I work remotely (appropriately socially distanced) my mind turns to what this really means for our JBWere clients: the for-purpose organisations to whom we provide tailored governance and strategy advice in addition to our investment management services. By this, I mean, what it really means beyond the impact of reduced portfolio values and income generated from those portfolios in the short to medium term (as important as that is to our clients).

So, in the spirit of practising what I preach (literally!) I am today taking the time to lift my gaze from the crisis response and reflect, as a board director of multiple for-purpose organisations, on what we must do next. Perhaps it will prove useful to you as you prepare for your next board meeting.

Context is everything

This is a health crisis first and foremost and it seems likely that we have yet to see the worst of the impact. The varied, and escalating responses by governments, businesses and communities around the world is resulting in an economic downturn. The million-dollar question is: how long and how severe will this economic downturn be?

A recently released KPMG report said in the best-case scenario we are looking at a 0.9 per cent drop in economic growth in 2020 with a slow recovery in 2021 – that is the best case. However, the report states there is a “very real” risk that current supply side disruption to business will spill over into a demand side problem – if that occurs in any serious way, the Australian economy could take almost a decade to recover.

We know that in such a scenario there will likely be (amongst other impacts) significant increases in unemployment, and underemployment. This will have a substantial impact across the economy and flow on effects to those organisations that support those in disadvantaged and marginalised communities – they always feel the full force of an economic downturn. We know that over the last 20 years, in a time of unprecedented growth in the Australian economy, the demand for services from the for-purpose sector has increased substantially. Those of us involved in the sector understand the potential tsunami of escalating and desperate need in the context of a real, prolonged economic downturn.

Governance is about asking the right questions

The AICD has recently published a list of pertinent questions for those serving on for-profit boards to ask in the current circumstances – these are a good starting point. 

What follows are some additional key questions a director on a for-purpose board should be asking at this time (among many others specific to your organisation):

  • How are our CEO and our staff coping in this stressful situation? What processes do we have in place to know if something is wrong or policies aren’t being adhered to?
  • Are volunteers a big part of our operational model? If so, what is our plan to deliver services sustainably when we should be practising “social distancing” where possible?
  • How will we deliver our services if our beneficiaries have to practice “social distancing”? Do we understand the mental health impacts?
  • What is our framework for making decisions about changes to staff employment? Are we practicing our values when engaging with any “casual staff” we might have who don’t have access to certain benefits?
  • What does our theory of change say is essential in delivering outcomes for beneficiaries? What is non-negotiable, and alternatively what can we stop and say no to?

The answers to the above questions are important and will have repercussions on your organisation’s financial health. Turning our mind to that we must ask:

  • What is the impact of the health crisis on demand for our services? This will be acutely felt in medical and care providers and have repercussions for many others.
  • What is the impact of social distancing on demand for our services? Will we see a large fall in demand and revenue because people are simply staying at home? Or will there be an increase in demand as people seek more assistance as the economy falters?
  • What is the impact of an economic downturn on our revenue? What would we do if our revenue fell by 30 per cent?

Why would revenue fall by this much? 

Well there is a very plausible scenario where there is a reduction in all three primary sources of incomes: a reduction in consumer demand for services; a reduction in government funding as budgets move into deficit (reduced taxation revenue and/or increased government spending) and lower charitable giving.

Clients have this week started asking about this last point – what will happen to charitable giving? Well, I do not possess magical abilities to read the future, however history provides some insight. In the Great Recession of 2008 (that’s what the rest of the world calls the GFC) we saw immediate drops in giving – down 6.3 per cent in real terms in the USA; 11 per cent in the UK; and 10.8 per cent in Australia. These short-term impacts were likely driven by the real and perceived loss of wealth and income experienced by individuals and households at this time.

However, consider the long-term impacts and trends. A recent analysis found that in the US, overall giving falls relative to the levels seen in the mid-2000s (peak of the business cycle) are not explained by “shocks to income and wealth” but are potentially better explained by “broader shifts in attitudes towards giving or increased uncertainty”. In the context of what we have already observed in the worrying long-term downward trend in Australian giving this might create an existential crisis for organisations reliant on philanthropy.

Many for-purpose organisations with reserves and endowments need to reconsider the purpose of their assets and how they can best serve the mission in the context we find ourselves in. For those that have been accumulating reserves for a “rainy day” and banking significant investment returns over many years, I would suggest the clouds have opened and we must think deeply about what our beneficiaries need and our role in the system. We must reassess the most effective use of our assets through the lens of mission performance.

Concluding comments

We are all now part of a global pandemic, the likes of which may disrupt what we do and how we do it not just for a few months, but perhaps forever. As board directors, it is clearly our job to ask incisive questions and guide management on what needs to be done now. But, we must also lift our gaze and see what’s coming around the bend. Only by doing this can we ensure that our organisations are not just reacting appropriately and effectively to this crisis, but also evolving to better deliver on mission.

Postscript: Philanthropists… the time is now

It would be uncharacteristically reticent of me to ask the for-purpose organisations to reassess their use of capital when we also have billions of dollars of philanthropic capital in Australia. Through experience, I understand that for trustees of longer-term philanthropic structures (including PAFs) the inclination will be to preserve capital as markets fall and grow the corpus as markets recover. 

But is this really the time?

If we do have a prolonged slowdown, then we need to adequately fund the for-purpose organisations who do the work. No one will thank us for our savvy management of philanthropic capital if it isn’t deployed when it is most needed. So my very simple ask is this: if you have the capability to deploy some or all of the capital under your stewardship, then truly consider that option – and the opportunity cost of not doing so.

If we do finally have the long, lasting recession that we have avoided for more than two decades, then we must apply everything we have to help those most in need. We must do everything we can, now… because in many of these entrenched issues, winning slowly is losing.


Ushi Ghoorah  |  @ProBonoNews

Dr. Ushi Ghoorah is a lecturer in accounting at Western Sydney University.


Get more stories like this

FREE SOCIAL
SECTOR NEWS


YOU MAY ALSO LIKE

Salary Survey reveals pay rises across the board

Danielle Kutchel

Monday, 29th May 2023 at 5:00 pm

Your essential guide to a successful NDIS Internal Audit

Maz Nabavi

Tuesday, 21st March 2023 at 7:00 am

New president for ACOSS

Danielle Kutchel

Wednesday, 15th March 2023 at 3:22 pm

ATO cracks down on NFP misconduct

Danielle Kutchel

Monday, 6th February 2023 at 12:02 pm

pba inverse logo
Subscribe Twitter Facebook
×