Philanthropists and foundations can often be unnecessarily risk-averse when making decisions about development funding, according to a report published today.
Risk and Philanthropy, commissioned by the Resource Alliance and the Rockefeller Foundation, is based on 27 detailed interviews with development philanthropists, philanthropic intermediaries, grant-makers from leading international foundations and sector academics.
One of the findings is that many philanthropists prefer "easy wins" that bring evidence of success quickly, rather than giving more difficult projects a better chance of long-term success.
"Philanthropy has the potential to assume risk and, after successful interventions have been identified, the resources of the state can then be mobilised to bring them to scale," the report says.
"Unfortunately, there is evidence that philanthropists are not willing to take the risks they could with their philanthropy," it says.
It says that a Bank of America study of 2010 found that 26 per cent of philanthropists were not willing to take risks with their philanthropic assets, and 10 per cent were not willing to take risks with their personal assets.
"Virtually no high-value philanthropists want to take substantive risks with their philanthropic assets (a mere 3.8 per cent)," it says.
The report stems from a summit on the future of philanthropy at the US-based Rockefeller Foundation’s Bellagio Center last November. The summit concluded that philanthropy needed to become better at understanding the relationship between risk and opportunity.
The report asks why philanthropists and foundations are risk-averse and examines how successful philanthropists and grant-makers conceptualise, assess and manage risk.
Adrian Sargeant, professor of fundraising at Indiana University and Bristol Business School, who co-authored the report, says in the publication that people should have access to a body of knowledge that would help them to engage in an appropriate risk assessment and optimise risk management.
"The time may well have come for development philanthropy to be considered a profession, with its own curricula, professional association, credentials and support networks," he says.
Neelam Makhijani, chief executive of the Resource Alliance, which runs the International Fundraising Convention, said: "One of the key points that resonates with my experience would be to see philanthropists identify projects that have a better fit with the levels of risk they are comfortably used to taking.
"The supporter can then be encouraged to take rational small steps out of their comfort zone."