Confidence is vital for Charities
01/26/2022
Charity is a status not an activity. How organisations with charitable status operate is very nuanced. But one thing they all have in common is they require the trust and confidence of their benefactors and beneficiaries to operate effectively and fulfil their core purpose.
The challenges faced by these organisations, from large charities like the National Trust, Barnardos, and Shelter, to smaller charities and community groups, are many and varied. However, a challenge common to all is the economic environment in which they operate, and the urgent need for certainty to build financial resilience.
In our whitepaper, The future of the public and voluntary sectors, funding and fiscal challenges came top or near the top for all sectors. Financial resilience remains a priority for all organisations as COVID-19 impacts continue to threaten operational sustainability.
This year the financial strain continues. As we start to see higher levels of inflation, it is likely charities will experience a negative impact loop.
“A lessening of public confidence in the economy is likely to mean donors are much more conscious of the pound in their pocket. The more inflation rates increase, the less confident people will be, yet charities will see increased running costs, and many will experience more demand for their services. Whilst upward movements in interest rates may boost income generated for charities with large reserves or investments, an increase in the cost of borrowing will add further pressure to operating costs” Gordon Wilmott, Head of Charities and Social Organisations, Zurich Municipal.
Organisations skewed towards fund-raising or public donations may find themselves more at risk.
Charities’ ability to obtain peoples’ pound may suffer immediately due to pandemic advice to work from home and the transmissibility of Omicron. Peoples’ unwillingness for exposure will limit both members and volunteers. Omicron and the economy have heightened public anxiety, which is likely to be fuelled by growing work absences and the next energy price hike in April.
Pressure on services
Those who provide care and specialist care support may also feel the pressure of workforce issues, with retention, recruitment, and training. The pandemic has presented real challenges for those providing care – with increased workloads for staff and volunteers, alongside an increase in costs for resources, including people, PPE and IT equipment.
With the foundation of most charities built on the basis of volunteering; those with an extensive reliance on volunteers in relation to paid staff, have felt some acute pressures through the pandemic. Whilst the Nations’ vaccination programme and NHS charities have seen an influx of volunteers, other parts of the sector appear to have been less fortunate. Retaining volunteer bases presents a key challenge for many organisations.
Humanitarian charities will continue to experience an uptick in demand. For example, those providing mental health support have reported a notable increase in requests, and there has been increasing usage of food banks.
All charities have an underlying mission to help their beneficiaries, and this must remain their core business focus. Charities are the vehicle through which money flows to communities, people, and animals in need, and the environment. “Society is built on the success of charities,” says Gordon.
Business transformation
Zurich’s research shows that for most organisations across all sectors financial resilience will continue to be top of the risk register for the next 12 to 18 months.
Confidence in sustainability through ongoing pandemic conditions is tied to the ability to respond effectively to operational challenges. Business transformation and change will be ongoing in response to the economy and the pandemic.
Many organisations have taken bold and brave decisions to change the way they do business. For example, the RSPCA have announced an intention to increase the extent of hybrid working and intends to sell its head office in Southwater, West Sussex.
Charities who previously relied on event and shop-based fund-raising have moved to digital engagement and e-tail. The pandemic has sparked innovation and those charities who have embraced new ideas, new trading and delivery solutions and collaborations, may fare better in the coming years.
Digital platforms provide new routes for charities to engage with the public.
“Many organisations have found more commercial and entrepreneurial ways to create income,” says Gordon. “For example, one charity invited its high-profile patrons to host webinars and sold tickets to attendees, which proved popular and worth repeating as part of regular fund-raising activity.”
Levelling up
The future for charities includes shaping government policies and guidance and supporting action on the ground.
One upside is the opportunity that the levelling up agenda provides.
“Charities can create a platform to help build communities that people want to live in - they just need to ensure their seat at the table,” says Gordon. “Smaller charities can get overlooked. It matters how charities can come together to present a stronger front, and associations like NAVCA for example, are absolutely vital in aiding more collaboration.”
Gordon: “There are many great examples of Local Authorities working with the Third Sector to improve life chances for their communities – with the work of Croydon Council a great example of that.”
The Social Value Act is ten years old this year and continues to be deployed in various ways. Although mandated for national government contracts, local government is instructed to give it ‘consideration’ only. This is open to interpretation by commissioning bodies. It can offer charities opportunities, but at present these are limited.
“Local government should take advantage of the knowledge and networks of small community groups and grassroots charities,” says Gordon.
Cyber security
With new projects, new partnerships, and increased online activity, comes increased cyber security risk. This is one area where charities and public bodies have struggled and will inevitably continue to do so. A frightening figure is that around one in four charities have suffered a recent cyber attack.
“The level of charities’ resilience to sophisticated cyber-attack is considered low in comparison to other sectors,” says Gordon. “It makes charities exciting targets for criminals. The focus for all charities should be on governance and IT security - simple steps can help and the National Cyber Security Centre has great guidance for charities on measures they can take to reduce the likelihood of falling victim to criminals.”
Further guidance from Gordon and his team is available by contacting us on 0800 232 1901 or info@zurichmunicipal.com.
