How Foundations and Grantees Can Talk About Risk

Many nonprofit leaders believe “risk” is a dangerous word when talking to grant makers. Securing grants and wooing donors is difficult enough without discussing the potential challenges that even the most successful nonprofits regularly face.

But conversations about risk foster positive long-term relationships. Being candid about the complexity of your work and the challenges you face might initially seem scary, but it can give donors more confidence in your nonprofit and spur them to increase their support. Conversely, failing to disclose risk could turn a grant maker off for good.

Here are a few tips from a nonprofit executive and a foundation leader to make conversations about risk easier to start and more productive in the long run.

Tips from a Nonprofit Leader

Talk about risk as part of the learning process. Approach risk from a positive perspective by using the vocabulary of testing, learning, and improving. This will allow you to discuss potential challenges openly and encourage the view that facing risks helps nonprofits learn and grow.

Start these conversations early. Don’t wait until after you get a grant to discuss the complexity of your work. Start during the application process and carry the conversation through to the final report. If you build a dialogue about risk from the get-go, donors are more likely to react with patience, tolerance, and a will to help when an unforeseen problem or delay occurs. Use these discussions to establish realistic expectations that will set everyone up for success.

Remember that your donor is human, too. We all have different appetites for risk, in our lives and in our investments. Foundations are no different; some are willing to take risks while others are more conservative. Rather than pushing your funders to change, ask questions so you can understand their approach, using language that characterizes risk as a learning process. For example:

• Are you willing to help us “beta test” this approach?
• How often do you want to hear about new challenges we faced and what we learned?
• Have you ever worked with a grantee that had to pivot midstream due to new information and insights?
• How important is learning and continuous improvement in your grant-making strategy?

Tips from a Foundation Leader

Be prepared for the conversation. Securing a grant maker’s support for a program should include addressing the risks involved. Nonprofits should be able to answer questions like these:

• What obstacles do you foresee with implementing this project?
• What could happen to weaken the intended impact?
• What about this project keeps you up at night?
• What can a potential grant maker do — now or later — to help you mitigate risks?

Be honest. As a grant maker, when I hear about risks upfront, I assume joint ownership of them. I feel more jubilant when a grantee navigates obstacles successfully, and I’m more understanding when problems cannot be avoided. When I’m not informed, I feel misled, and a grantee’s lack of honesty about foreseeable risks is often my primary reason for discontinuing a relationship.

Ask me questions. When a nonprofit broaches the subject of risk, it gives me more, not less, confidence in the potential partnership. I want to invest in organizations that actively solve problems and treat our foundation as a partner. To broach the subject of risk, ask your funders these kinds of questions:

• What is your appetite for risk?
• What types of risks are you more comfortable with?
• What’s the right balance between risk and reward?
• Have you ever funded a project that encountered a major obstacle? How do you like to be approached in these situations?

Tell me when things go wrong. I can’t help with problems I don’t know about. Decision makers at foundations know that things don’t always go as planned. So when a hiccup happens, tell us — quickly. Don’t wait until the final report. Being honest about obstacles as they arise builds trust, and inviting grant makers to help craft potential solutions makes them feel like partners.

Donors and grant makers want to help, and they want to feel that they’re valued for more than their money. When properly informed about a major obstacle, a funder may be willing to grant vital contingency funds, provide insights, or tap powerful networks of organizations, experts, and donors to help with the problem.

Mauricio Lim Miller is founder and president of the Family Independence Initiative. William Moore is executive director of the Eleanor Crook Foundation. Both are members of the Commons, a coalition of nonprofit leaders working to produce practical methods for assessing and planning for risk.