What lays ahead in 2024? Sam Burne James speaks to charity sector leaders for their predictions, insights and advice on how to reduce risk, remain resilient and prepare for the future.
The myth of ostriches burying their heads in the sand when scared or sensing danger has been around for centuries. It is, of course, completely false; why, after all, would anyone hide from upcoming risks?
We know that no Charity Finance Group members will be guilty of emulating that mythical avian trait. But you could be excused for feeling tempted, given the bleak macroeconomic picture.
Then there's conflict in Ukraine, Israel and beyond; a climate crisis and ever more complex tech and cybersecurity landscapes.
Closer to home, there'll be the fun and games of a UK General Election; ongoing industrial action; post-pandemic changes to working habits, and warnings arriving on a near-daily basis of the third sector’s precarious position.
Reasons to be cheerful
But is there some light at the end of the tunnel?
"We’re seeing in our surveys,” says Jack Larkham, a senior research and policy analyst at Pro Bono Economics, “that on balance, more charities are still saying that their financial position is deteriorating, but not to the huge extent that it was a year or two ago.”
Larkham hopes that two measures in December’s somewhat gloomy Autumn Statement, namely widening the criteria for Local Housing Allowance and raising benefits in line with inflation, can “take the edge off some of the demands on the sector”.
The Autumn Statement may not turn out as bad as it appeared, he adds.
“Nobody thinks that either possible future government will actually stick to that level of real-terms austerity. It was, after all, a political statement. Either way, that’s still uncertainty,” Larkham says, highlighting that this puts charities with a high proportion of income from government contracts at particular risk in 2024.
Whoever you are, it’s no time for complacency.
Jack Larkham, Pro Bono Economics and Naziar Hashemi, Crowe UK
Instability and uncertainty
“The theme for 2024 is going to be instability,” says Naziar Hashemi, Head of Social Purpose and Non-Profits at Crowe UK who recently delivered CFG’s Annual Round-up to more than 300 charity leaders.
“There are a large number of elections around the world. We’re living in a time when large corporates potentially have more power than the government and are having to ask for more regulation in areas like AI, we’ve got strike action by charity sector staff, NHS waiting lists which will continue to impact national wellbeing and productivity, and the ongoing pressure for charities to do more, but with less.”
Chris Sherwood, CEO of the RSPCA, agrees . “We are living in an age of uncertainty. What is the biggest risk? It’s uncertainty,” he tells CFG. “I’m very much of the school of thought that you can’t just wait for ‘normal’ to return.”
One certainty is a UK General Election at some point this year, and Sherwood hopes the sector can counter the “lack of political interest in our sector” demonstrated by the civil society portfolio being “tacked on to the ever-expanding brief of a junior minister ”.
Not that the sector can count on an incoming Labour government improving that – nor should we even assume it will be a Labour administration. Whatever the result, expect attacks on the sector to continue from one quarter or another, Sherwood predicts.
“I’m talking beyond the legitimate criticism, the attacks on charities just doing their core work," he says. "Stonewall has been very much in the firing line for standing up for trans rights, people like Refugee Action or Refugee Council are in the firing line in the press, and it looks more like climate change is becoming a contested area.”
This hostile environment makes planning for election campaigning, or indeed any campaigning, more complex than ever. Nonetheless charities must, Macmillan’s new CEO recently suggested, resist the temptation of being too timid.
Chris Sherwood, RSPCA and Zoe Amar, Zoe Amar Digital
Technology tests
Sherwood says that cybersecurity should increasingly be on the sector’s mind. “I know of two organisations who have had attacks. It has really consumed so much of their senior leadership time. It’s one of those risks where if it is well managed, you don’t see the benefit,” he reflects.
Digital consultant Zoe Amar, who has recently spoken to the CFG podcast, agrees, adding that charities she knows are indeed “becoming more and more vigilant” on this matter, prompted by the experience of lockdown and remote working. “But,” she adds, “cybersecurity risks are going to become more widespread and complex with the growth of AI.”
There are certainly reasons to be worried about AI’s influence ahead of a year of many global elections. Amar also flags an incident last year, in which ChatGPT seemingly leaked code it had been given by Samsung engineers, to demonstrate the importance of not putting confidential or sensitive information into such tools.
Such tech presents opportunities, but it is a balancing act. “Be mindful on the one hand of allowing innovation, and on the other of the checks and balances you need within the organisation,” Amar advises.
Another digital topic needing attention is inclusion, Amar says, urging charities to “meaningfully, not just performatively”, understand the needs of different communities, and ensuring EDI (equality, diversity and inclusions) strategies flow through into digital workstreams.
Sustainable operations
EDI will remain a focus in 2024, although the sector must never assume it occupies the moral high ground on this topic, nor on broader workplace topics. These are not just ethical but business imperatives. Chris Sherwood reflects that charity people used to be more tolerant of long hours and being treated badly, on the grounds that it benefited the mission. Not so much, nowadays, however – and rightly so.
“We have looked to improve our [employment] deal; we’re doing flexible working, hybrid working, we’ve not mandated a return to the office, we’ve increased maternity, paternity and adoption pay, and invested in mental health support, leadership and management development,” he says, adding that staff retention has improved since he became CEO.
Many workplaces have settled into new, post-pandemic routines, but that’s not the end of the story, warns CFG's CEO Caron Bradshaw: “None of us know what that picture will look like in 10 or 15 years, but we need to think about what we lose or gain from certain models, what skillsets we need to make this work, and how easily people with experience gained in one type of working environment might be able to move.”
Another long-term picture that Bradshaw urges the sector to consider is fundraised income. “A lot of the sector is set up for long-term giving from regular donors, but nowadays there is a lot more casual giving. What is the model for moving on from the older-style baby boomer donor, into the next pipelines?”
It’s tempting to count the environment as another ‘long-term’ risk, although Ruth Jenkins, Director of Finance at environmental charity Keep Britain Tidy, expresses frustration at this topic so often being seen as something that can wait until later.
She says: “A lot of people still seem to think of the environment as something separate to the everyday, rather than being the thing which sustains all of us and all of our beneficiaries. Ultimately, whatever you do as a charity, if the environment that we rely on fails, then everything else fails and you can’t operate.”
Jenkins urges the sector and its finance directors to review the environmental credentials of the investments, pension schemes and banks we use, and to be more mindful of carbon footprints.
“As finance people, we are actually best placed to think mathematically about those dilemmas, and add it all up and work out what difference, positive or negative, our actions will make,” she adds.
There is, clearly, plenty of big picture thinking to be done. On top of this, finance leaders have more nitty-gritty topics including a tightening audit market, which CFG examined in the Autumn and continues to monitor; a new SORP, and access to banking services.
2024 may be many things. Dull, it will not.
Reserves and robustness
Daniel Chan, who leads PwC UK’s charities audit team, as well as chairing ICAEW’s Charity Committee, adds that many charities face strategic decisions around reserves, commenting: “I am seeing more charities adopt a reserves and liquidity policy, and monitor these together, to give a fuller picture for the charity.”
Chan adds that a charity wanting to think afresh about resilience should begin by focusing on their charitable purposes. This could enable the charity to be more selective and targeted, he says, pointing out that charities sometimes “struggle to say ‘no’ when asked to do something new”, due to a natural inclination towards being helpful in whatever way they can.
Chan also suggests that in a volatile world, charities would do well to check whether their governance protocols enable agility. “This may mean clearer processes or protocols for decision-making, including being more innovative with when and how groups meet,” he says.
Risk registers only do so much, adds Naziar Hashemi. Having a good sense of what your risks are, she argues, “only helps so much if you don’t take the time to properly think through what they mean [in practice]”.
“Yes, you should have a good risk register,” Hashemi says, “but it’s more than that, you should be considering risk appetite and also risk velocity, in other words, the speed with which a risk can hit you, and also making assessments of emerging risks.”
Dan Chan, PwC and Alison Taylor, CAF Bank
Stop! Step back
Alison Taylor, CEO of CAF Bank, considers it more important than ever for leaders to take time to step back from the everyday.
“It is easy for people, and by no means is this just in the charity sector, to get into firefighting mode and think you’ll just deal with whatever is in front of you, and it’s very laudable in the short term,” says Taylor. “But you can’t manage any organisation long-term in that manner.”
Taylor continues: “Have clarity about your future financial options, making sure that you’ve scenario-planned for different outcomes and options.” With many charities likely to have already realised what Taylor calls the “‘quick-win’ cost savings”, logical next steps may be service reductions, amalgamations with other charities and mergers.
Sherwood at the RSPCA says he looks at the big picture by trying to “read as much as I possibly can”. He has a mentor, recently completed a leadership programme, and encourages his team to network and collaborate across the sector. He concludes: “Our sector on a good day is really collaborative. On a bad day: really introspective.”
Ruth Jenkins, Keep Britain Tidy and Caron Bradshaw OBE, CFG
Leadership and risk
“Leadership is not just about seniority and job titles,” says CFG’s Bradshaw. “In effective organisations, people on the frontline and across the organisation are empowered to make good decisions.”
Often, she says, risk-related conversations involve “debating whether a particular risk is a five or a 10 out of 10, or a green or a red”, making the topic a limited, dry issue of compliance and documentation. “We should be trying to embed thinking about risk, and opportunity, as an inherent part of everything we do.”
Bradshaw recommends the thinking of Kaplan and Mikes, and embracing the fact that “on the one hand you have a negative risk of failure, on the other hand there is the possibility of success”. This approach should lead to “much more dynamic conversations about choices and leadership skills”.
“Ultimately, we want to get to a place as a sector where we don’t lambast people based just on the outcomes. It could be that an organisation’s failure was completely out of their hands, and that they had made good decisions,” she says.
One of the sector’s most high-profile failings, Kids Company, is back in the spotlight following the recent death of its founder Camila Batmanghelidjh.
“The charity sector should be valued for how it reduces risks to society,” Pilotlight's CEO Ed Mayo wrote on LinkedIn following news of Batmanghelidjh’s passing.
As such, “seeing some charities close could be a signal of the health of the wider sector, and not one of its failing” Mayo suggested. It is often portrayed as a scandal if a charity fails, “but it would also be a scandal if at a time when we most need them to take risk, no charities fail”.
It is a somewhat unsettling and uncomfortable reality. Obviously, no charity finance director wants to be leading a charity which goes under. But nor should charity leaders seek to avoid risk entirely.