Trustees and risk taking

Charity trustees are not normally associated with risk taking. In fact, they are notoriously risk averse. Of course there are legitimate reasons to see risk as a bad thing to be avoided where possible. It inherently has the potential for bad outcomes so the consequences of not doing due diligence can be dire.

Quite rightly, the Charity Commission has focused its guidance (CC26) on mitigating potential catastrophes. The downside of this approach is that charities can be discouraged from seeing risk through a positive lens and pursuing benefits with attendant risks.

At our recent seminar hosted at the Clothworkers’ Hall trustees shared the way they approach risk, and how their management and acceptance of it was advantageous to their charities. We’re sharing some of the insights from the day here.

Getting caught out and dealing with it: Drinkaware

Sir Leigh Lewis, non-executive chair of Drinkaware, shared his experience when it decided to partner with Public Health England to promote Drink Free Days. The campaign featured on Heineken no-alcohol product advertising and involved partnerships with Asda, The Armed Forces and others. But controversy arose as Drinkaware is funded overwhelmingly by the alcohol industry and the partnership caused people to believe that the industry was disproportionately influencing Public Health England to shift the public debate.

The attack came not just from individuals but the health community, and it came very publicly; via the Lancet, the Scotsman, the Today programme and others.

The charity was taken by surprise. Sir Leigh explained that the charity had been nervous about criticism from its donors, rather than its peers and target audiences. Their strategy was to respond to fury with fact and analysis, reinforcing the positive impact of the campaign, and the realities of funding and governance of the charity (no industry people sit on Drinkaware’s board). They made use of their medical advisory panel and committed to publishing the full results of the evaluation.

The lesson

Drink Free Days were a success, and one that might not have happened if the charity had been more cautious about its perception in the media and sought to duck scrutiny. While the PR storm might have been avoided had the charity consulted peers and opened up a broader discussion before launching the campaign, it also might not have been. Ultimately Drinkaware learnt they could handle the risk and survive bad publicity if they needed to for their mission.

Preparing for controversy: National AIDS Trust

In 2016 The National AIDS Trust won a legal battle with the NHS after it said it did not have the legal power to fund pre-exposure prophylaxis (PrEP) as a preventative drug.

Jonathan Bell, Trustee of the Trust explained that they were very aware of the financial and reputational risk of entering into the legal battle. The size of the Trust is modest and the financial risk was considerable so it was critical to secure the services of a supportive team of solicitors with reasonable fees and apply to court for a protective costs order.

Reputational risk was harder to manage. The Trust suspected media outlets would not like the campaign and could portray the case as ‘pitting gay men against people with cancer’. Having spent decades working carefully and quietly with public bodies and government and the NHS—and the UK having developed one of the most sophisticated frameworks for managing HIV as a result— it was a big decision to rock the boat. They knew that they needed to take a soft approach, with the backing of clinicians within the NHS, before going ahead with the legal challenge.

Again, the risk was high but worth it. Chelsea and Westminster announced recently that HIV diagnoses have fallen by 80% at their testing centres and numbers are falling at a similar rate across the UK. There have also been collateral benefits—for one, the Trust’s profile is higher than it has ever been.

The lesson

Simply knowing that you’re right isn’t good enough. The Trust had to work hard to consider and manage the financial and reputational risks attached to their decisions. They prepared themselves and were confident they could withstand the worst case scenario if they had to. Jonathan described embarking on a judicial review like ‘building work—it’s always longer and more painful and not what you thought you’d end up with’. He added that knowing trustees were up to the job and capable of weathering the storm was also a critical factor.

How can trustees do better?

For trustees embarking on risky put potentially transformative moves it is important to be able to weigh up individual organisational risks against the potential benefit to beneficiaries. It is a hard job and so trustees must continue to have good due diligence and judgement.

However, the onus is not just on individual trustees—the industry needs to be encouraged to re-categorise risk as a positive force and the Charity Commission needs to play a role in this. It might not be as simple as renaming the ‘risk register’ to the ‘risk and opportunity register’ but there does need to be a shift away from tying all discussions about risk to long and arduous, and potentially destructive scoring mechanisms. Jonathan Bell from Sayer Vincent shared the ‘big 5’—a framework to help embed risk into all strategic decision making which trustees may find useful.

While covering the essential risks is obviously still absolutely critical, the sign of risk being managed well from a strategic point of view is whether we are still thinking audaciously about what we can do for our beneficiaries.

The Charity Governance Awards celebrate risk in trusteeship. Find out more about Coventry and Warwickshire Mind, the recent winner in the Embracing Opportunity and Harnessing Risk category.