23rd December 2020
A year ago today, no one could have predicted that 2020 would provide so many new challenges, and I wager that few charities had ‘global pandemic’ listed within their risk register. We have seen huge changes in behaviours since the start of the pandemic with charities adapting overnight and changing their services quickly to meet the guidance requirements while still providing community support at this difficult time. But how has the pandemic impacted the financial governance in the future?
Like so many others, I am writing this article sitting at home in my new ’office‘, still adjusting to the remote working life. No doubt we have all spent more time in virtual meetings than we ever imagined and suddenly we all feel more familiar with the likes of Zoom and Microsoft Teams. Embracing these new technologies has not only been vital in getting through the pandemic so far, but it has created new possibilities for future governance. We have seen rapid decision-making in response to the pandemic; new technologies facilitated the change in governance and allowed board meetings to take place virtually. We have also seen an opening for more frequent communication between Trustees and staff as the sector has come together to navigate the pandemic.
One aspect of the pandemic that is likely to continue indefinitely is remote working. The implications of working from home are wide ranging for staff, volunteers and beneficiaries, as well as Trustee boards. Charities should consider whether it is necessary for all staff to be based locally, or if there is an opportunity to better serve beneficiaries with support staff in different parts of the country. Remote working and utilising cloud-based systems will allow charities to access a greater range of staff which can help bring fresh perspectives and experiences to guide the charity through the uncertain times ahead.
From a leadership perspective, the ability to find diverse talent for Trustee positions has never been greater. The same way that staff working remotely may be an opportunity to serve beneficiaries, it also provides ample opportunity for leadership to widen their pool of Trustees and increase diversity on boards. Trustees will no longer be limited by geographical location, and it may encourage those who do not have the time to travel and attend meetings in person to volunteer. Opening opportunities to a greater breadth of individuals is important for governance, as it will bring new skills, processes and behaviours to the boards. The Governance Code has highlighted the importance of a diverse board for years, with the need for different perspectives and voices around the table, and I know from my own experience of governance reviews that this is one of the more challenging benchmarks to meet. Beyond the Governance Code, there has also been increased public scrutiny on boards that do not reflect the diverse communities they serve, and so reputation is also at risk on this matter.
Charities have shifted their traditional service delivery for beneficiaries as well, from opening new online service and telephone support lines to implementing social distancing measures. This will increase the reach of the charity as the beneficiary base grows, demonstrating the public benefit of the voluntary sector further. When these shifts are implemented, a review of the overall working behaviours should be undertaken to assess where savings could be made such as reduced rental costs if office space can be condensed (or removed altogether), and how these savings could be used to better support the charitable objectives.
The pandemic has shaken us all into a new way of thinking, and it has highlighted the need for planning ahead where the worst case is more likely than previously thought. Risk management must become an ongoing process and more than a cursory review of the risk register and being seen as a ‘ticking the box’ exercise. Charities should ask themselves whether their risk management process was fit for purpose before the pandemic and take on board learnings from the past year. Risk management should account for the financial sustainability of the charity and become a helpful tool to steer the charity in stepping forward. It will remain the responsibility of the board to set the strategic direction of the charity and how to ensure financial sustainability, but there’s plenty of opportunity for input from staff and as well as the Trustees, and perhaps providing for wider scope for feedback on risk strategy would be useful for some organisations.
We’ve finally seen the ‘end of the tunnel’ as vaccines are approved at breakneck speed, but there remains so much uncertainty in the charity sector, even after we move past the urgent danger of the pandemic. Cashflow planning will remain crucial for charities to continue to survive, and with potential future austerity, charities must establish a culture of strong governance to transition into the next economic phase, whatever that may be. Trustees must have the right information available to make decisions, set strategy for 2021 and respond to any new legislation or budgetary limits imposed. Prudent and fastidious financial oversight, including a thorough understanding of the financial health and position of your organisation and an airtight risk management process, are some of the most important measures charities can take to ensure their longevity in the long term.
Charities have played a significant role throughout the pandemic, supporting more people than ever, and it is clear that the voluntary sector has helped to lessen the impacts of the biggest crisis this decade. While charities will certainly face obstacles to maintain momentum as we move into recovery, the particular attention on the charitable sector is both an extraordinary opportunity to expand charitable activities, and a risk for those with weak governance structures and oversight.