Organisational resilience and the cost of living crisis
10/31/2022
There are great pressures facing charities across the sector. Many are dealing with both a significant increase in demand and a decrease in funds. The political and economic climates are unstable and the cost-of-living crisis and the climate emergency dominate the news.
Matt Hardwick, Senior Risk Consultant at Zurich, shares his observations about the current situation and how to prepare for what lies ahead. He explains that building organisational resilience including identifying risks and opportunities is key.
A perfect storm
"We are in a perfect storm. As the cost-of-living crisis hits, charities are being leaned on as never before. Charities who work in healthcare, disability, older people, food banks, homelessness, debt advice, addiction, mental health are all seeing an increase in demand, stretching their budgets. All charities will themselves be feeling the cost-of-living pinch as their energy prices, mortgage payments and employer costs all increase while the value of investments and assets reduces.
At the same time, income is reducing fast. The cost-of-living rise means that fewer people have disposable income to give away. In addition, many organisations used their reserves during the pandemic when their incomes dropped, and they had to pivot to adapt to the changed world. They no longer have a healthy rainy-day fund to rely on.
This is a significant area of risk. But, with planning and discussion, you can ride the storm.
Surveying the landscape
If the culture of your organisation is to operate in a fire-fighting mode, only dealing with the here and now, it can be easy to be surprised by big factors which give you another crisis to deal with. Organisations which spend time reviewing the landscape and identifying potential risks will be better prepared.
Some of the current high-risk factors include the climate crisis and the war in Ukraine. Both have implications on energy prices and the financial markets. These events can feel very far away but do have an impact on us all.
For example, I’ve spoken to a number of organisations who are having to rethink their hybrid working provision as staff want to come back into the office due to the cost of heating at home. Most charities have reconfigured or reduced their office space at great cost so changing back is not easy. Some are looking at practical solutions to help staff keep warm at home. What have your staff told you about this? How might this change as we move into winter?
The big financial squeeze is another significant factor which will affect everyone. Rising operating costs caused by inflation, mortgage rate rises, energy prices, increase in demand, coupled with a reduction in donations means that charities who are already running on doing more with less, will be stretched further. It is a harsh reality, but some charities will have to make the difficult decision to close. Others will have to reduce costs by stopping services or shrinking the staff team. Good financial planning, forecasting and monitoring can help to stay ahead of a crisis and make smart decisions.
How do you support the wellbeing of your staff, volunteers, trustees and senior managers? The last few years have been intense for everyone. New personal worries and pressure can feel overwhelming when personal reserves have been run down due to the pandemic. This has an impact on output and retention.
Covid now gets less news time and there is a perception it is over. Yet infection rates are on the rise and new strains are appearing. What might this mean for staffing levels in your organisation or health care provision across the country or potential new prevention measures?
Finally, in times of economic hardship, crime levels increase. Organisations may see increases in cyber attacks or fraud. Good practice in the office may be more relaxed across home workers. Criminals tend to target people who are busy or stressed who may click on a link without thinking. Are your security systems and processes clear and up-to-date?
NCVO’s Road Ahead report, issued each January, is a good place to start when thinking about the landscape and how to plan ahead.
Organisational resilience
Looking after yourselves as an organisation is key to getting through this time. People are at the core of any organisation, supported by processes and shaped by the environment you are operating in.
Organisations which make decisions based on risk are generally more resilient. They have already identified potential situations, put contingencies in place and considered the options. Some disruptions are sudden and shocking. Some are more gradual and prolonged and can be predicted by horizon scanning. How disruption and change is managed is down to the leadership and culture of an organisation and its appetite for risk.
Agreeing what level of risk you are prepared to accept as an organisation is key. This may be at board level and Senior Management Team (SMT) but must be a collective and documented decision. This helps future planning and risk-based decision making.
The current climate is very volatile. Disruption of this type brings risk but also opportunity. Your attitude to innovation vs stability, agility vs consistency will influence the decisions you make and how resilient your organisation is to a changing landscape.”
Useful links
- How to manage risk - NCVO
- PESTLE analysis - NCVO
- A wellbeing guide for charity comms professionals – Charity Comms
- Cost of living crisis – ACEVO library of reports, surveys and important data
