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Posted by:

Tatyana Mursalimov

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4 minutes

Tatyana is a Senior Investment Advisor at PMCL Consulting with expertise in holistic financial planning, investment strategy and governance, asset allocation, portfolio construction and investment selection.
She has developed long-term relationships across a diverse range of clients, including UHNW individuals, charities, philanthropic organisations and public sector institutions.
Tatyana is also a regular speaker at industry events on portfolio governance, investment strategy, and sustainable investing.

Risk Investment Governance, legal and compliance Financial sustainability Charity finance policy Accounting and reporting

8 April 2025, 14:36

Joined-up thinking: The importance of a holistic approach to financial management

At the recent Charity Finance Group Investment Conference, Tatyana Mursalimov, CEO of PMCL, delivered a session on a subject of growing significance within the sector: the importance of a holistic approach to financial management in charities.

Drawing on practical case studies and lessons from client work, the session examined the interconnectedness of cash, investments, reserves, and debt - and why these elements should not be managed in isolation.

Moving Beyond Silos

Many charities continue to manage their financial assets in distinct silos. Investment committees focus on portfolios and asset allocation, finance committees monitor cash and budgeting, while property and debt considerations are often addressed separately. This fragmentation can lead to unintended consequences.

There are examples where investment strategies have been developed without due consideration of liquidity needs or debt obligations. In one instance, a charity discovered it needed to liquidate a third of its portfolio to meet a debt repayment - something not communicated to, or factored in by, the investment committee.

The key message was clear: financial sustainability requires joined-up thinking across all aspects of financial management.

Horizon planning: A critical but not fully appreciated exercise

A useful framework for financial horizon planning involves grouping financial needs into short-term (typically less than 12 months), medium-term (often 1–5 years), and long-term (generally over five years) categories. While individual charities may define these periods differently depending on their specific circumstances, this approach can help bring clarity to decision-making.

While short-term cash flow is generally well understood, the medium term often lacks clarity. This is the zone in which many charities hold excess cash, unsure whether to invest or retain it, or, conversely, invest over-aggressively without allowing for upcoming obligations.

Long-term funds, such as endowments, require a truly long-term approach. But this necessitates clear planning and communication across the organisation so that assets are not called upon prematurely.

Liquidity and volatility: Not the same thing

Liquidity is frequently misunderstood as a proxy for safety. In reality, liquidity refers to how quickly an asset can be converted into cash, while volatility refers to fluctuations in its value. Assets such as equities may be highly liquid but also highly volatile - meaning they can decline sharply in value at the wrong moment.

The early stages of the COVID-19 pandemic offered a sharp lesson in this distinction. Charities with well-structured liquidity reserves avoided the need to sell investments during the downturn. Others were forced to realise losses that could have been avoided with more robust planning.

Understanding risk in its full context

Investment risk is often oversimplified. Risk questionnaires commonly ask trustees to classify themselves as low, medium or high risk, without adequately reflecting the broader range of risks charities face.

These include:

Volatility risk, particularly relevant for short-term or near-term needs.
Permanent capital loss, which can result from poor diversification or counterparty failure.
Inflation risk, which erodes the value of cash and low-yield assets over time.
Reputational risk, where investments conflict with a charity’s mission or stakeholder expectations.

It's important to emphasise the need to adopt a more nuanced, contextualised approach to risk, taking into account the purpose of funds, time horizons, and operational requirements.

Five case studies: Common themes, practical solutions

The session featured five anonymised case studies from PMCL’s recent advisory work:

Deposit Management - A charity holding significant cash across multiple bank deposits achieved higher returns and reduced counterparty risk by reallocating to a money market fund. This also reduced administrative burden and improved transparency.
Dynamic Risk Management - A high-growth investment strategy remained unchanged for years, despite declining reserves. When cash needs increased, the strategy no longer aligned with the charity’s risk profile. A reassessment led to a more balanced, phased approach - linking investment risk to evolving liquidity needs.
Strategic Liquidity Planning - Another charity faced the possibility of liquidating long-term investments to bolster short-term liquidity. However, the organisation owned property, which could serve as collateral in the event of an emergency. By considering the full asset base, the charity preserved its investment strategy while maintaining resilience.
Ethical Policy Review - A charity with a restrictive ethical policy applied it only to equities - despite holding most of its portfolio in cash and bonds. By applying ESG criteria more consistently across all asset classes and providers, the charity achieved greater alignment with its mission, while improving portfolio efficiency.
Integrating Local Impact Investments - A larger charity sought to support community development through a local private debt initiative. The investment was integrated into the wider portfolio by replacing similarly yielding assets, ensuring that impact objectives were met without compromising financial resilience.

Recommendations for trustees and finance leaders

Review policies regularly: Investment and reserves policies should be reviewed annually and in tandem, not in isolation. Even when no changes are required, confirming alignment is a valuable exercise.
Foster integrated governance: Ensure that committees and the board as a whole have visibility of all financial assets - cash, investments, property, and liabilities. This enables better-informed decisions and avoids surprises.
Simplify investment discussions: Avoid excessive jargon. Investment strategy should be accessible to all trustees, not just those with financial backgrounds. A focus on purpose, time horizon and expected use of funds often brings greater clarity than technical asset allocation models.
Seek advice where needed: Independent, objective advice can help trustees align their investment strategy with their broader financial objectives, manage risk appropriately, and ensure good governance.

If your organisation is grappling with any of the issues discussed above - or simply wants to ensure its financial strategy is fit for purpose - please get in touch.

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Knowledge Hub

Tatyana Mursalimov

4 minutes

Joined-up thinking: The importance of a holistic approach to financial management

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