Nurturing Financial Resilience

I started working in resilience building just before the pandemic hit. Over the past 6 years, I have found that at its heart, organisational resilience is not just a technical capacity, it is a relational one. It is the ability to anticipate and prepare, so that we can adapt and respond to change in ways that sustain both our mission and care for the people who carry it. Below, I share some observations on what has served well in my own work and what I have witnessed when working with others.

Liz Pepler. March 26. 

1. Seeing financial resilience as a living system

A truly resilient organisation sees its money as part of a wider ecology. One in which financial health is inseparable from people's well-being and clarity of the charity's purpose. When one of these three pillars - purpose, people and money - is depleted, the others are affected. When they are held in balance, the whole system becomes more adaptive, more creative, and better able to respond to change.

Resilience insight. The budget is not an add-on. A full-cost recovery plus budget is an integral part of the annual planning process and brings the delivery plans, the people plans and the fundraising plans together.

2. Anticipating possible financial futures. Looking up and looking out.

Resilient organisations continuously make time to look up and out. In resilient organisations, curiosity is a superpower. By taking time to map the inevitable ebb and flow of resources, and how they might change over time, leaders can predict when pressure points will come and, more importantly, predict them in time so that they can respond calmly and with control. Our options are more numerous, and more creative, the longer the window of opportunity we have. 

Resilience insight. The cashflow forecast is a live 12 month rolling document that is revised and reviewed monthly. Plotting confirmed income and committed expenditure gives us a mirror to look at our leanest future. Does this version of the future we are heading towards balance purpose, people and money? What corrective action might we need to take?

3. Preparing for financial uncertainties. Creating space to breathe.

In a resilient organisation, reserves are a rainy-day fund, yes, but they are also breathing space. Organisations with reserves adopt a different psychology from those without. Reserves provide the organisation with time;  time to reflect, time to adapt, time to act with intention, rather than urgency. 

Resilience insight. A resilience-building reserves policy sets a minimum and a maximum, which act as guardrails to keep our decision-making within a protective range. It supports us in reflecting a deeper commitment to protecting the organisation’s capacity to serve its purpose without exhausting its people. This is true even when we are working towards our policy and reserves are lower than we might need them to be. 

4. Adapting. Staying open to multiple factors. Actively shaping a more flexible future.

The future has never been and will never be singular. The organisations I work with recognise this and think in multiple possibilities. Scenario planning enables them to explore different pathways. Even a simple worst case with secured income and committed expenditure - and a best case with additional target income and contingent expenditure - can elevate a small charity's resilience.

Resilience insight. Monthly finance review meetings are locked in. At each one, key decision-makers pause and ask three straightforward questions, keeping focused on the three resilience lenses of people, purpose, and money:

• What are the numbers?
• So what do they mean?
• Now what should we do?

5. Responding: Paying attention to signals within the noise and using them as cues to take timely action

Financial stewardship is seen as an act of collective care. Transparency and communication are used judiciously to reduce fear and confusion. In a living system, signals matter, and it is the same in financial resilience building. Signals help alert leaders to what is happening under the surface of organisational activity. 

Healthy signals - green flags - might include stable or growing unrestricted income, strong reserves, a positive cash flow outlook, and a balanced mix of income sources. 

Whereas warning signs - red flags - might appear as increasing uncertainty in income, recurring shortfalls, dependence on a single funder, diminishing reserves

and growing financial pressure.

Resilience insight. Resilient organisations have a handful of key early warning signals that they monitor on a simple 2 x 2 dashboard, and they have agreed in advance how to respond if/when the time comes. This is a pretty significant resilience asset because it is the coordination and timeliness of the response which prevent a pinch point from becoming a crisis.

6. Being explicit on what we are working towards.

All of this to say that financial resilience is not really a destination. It is not something that can ever really be once and done. It is something we continually cultivate through our choices, behaviours, and relationships. 

Resilience insight. Resilient organisations are designed and led with an awareness that change is evergreen and everything is connected. Resilience leaders actively balance their purpose, the reason they exist, their people, the staff, volunteers, and communities who bring that purpose to life and their money, the resources that actively sustain the work. They recognise that they are operating in - and are comfortable operating in - the messy middle. They own the tensions and they accept the trade offs. 

7. Being explicit on what we are moving away from 

This approach means that they don’t extract more from people than can be sustained, they don’t pursue income at the expense of purpose and they don’t protect finances in ways that diminish wellbeing. Instead, they create the conditions where each element supports and renews the others.

Resilience insight. So much of resilience building then is knowing when to - and having the confidence to say - 'no'. Knowing what to continue, what to stop and what to grow is a core financial resilience building capability.

8. Being realistic about what this means in practice

So many of the traditional ways of working no longer serve small charities well. Traditional strategy formation is arduous and slow-paced. Traditional risk registers rarely capture the elephant in the room and never tell us when to act. Static budgets are expensive to prepare and maintain in a world that is in constant flux. What is needed now is: 

• a simple, easily communicable theory of change; 
• a dynamic budget; 
• up-to-date cashflow forecast; 
• a reserves policy that allows for the ebb and flow of funds, and 
• a set of red flags that tell us not just what the problem is and how bad it might be, but how close it is and how long we have to respond. 

Resilince insight At the same time, we simply cannot keep adding more jobs. Resilience leaders recognise that for every new task we add to our list, something needs to come off our list. They are super strict about the systems and processes they use to lead and manage the organisation and they question them continuously. 

Which of our current practices are actively supporting us to evolve? What is essential for us to continue? What should we really start to nurture? What do we let go of to make room? 

In short, financial resilience building is not about eliminating uncertainty. No one can do that. It is about accepting that it is an evergreen part of organisational life and cultivating ways to manage it functionally and relationally, in ways that support rather than overwhelm us.