Use reserves to ride out recession, charities told

It's time to take more risk, argues author and consultant

Charities have been urged to take a less cautious approach to using their reserves during the recession.

Mike Hudson, author of Managing Without Profit, said the benign economic climate of the last decade had allowed charities to maintain reserves at an exact level or formula - but times had now changed.

"Now is the time to take a bit more risk," said Hudson, director of the Compass Partnership, a group of not-for-profit management consultants.

"Board members and managers must recognise that reserves exist to cushion organisations when times are tough.

"If income is one of the determinants of a reserves policy and the organisation is anticipating a temporary fall, then reserves can be dipped into to ensure long-term success."

Hudson said charities usually felt the impact of a recession between six and 18 months after it hit businesses, so the worst was yet to come. But he said the long-term outlook was brighter for charities.

"The third sector is better placed to overcome the recession than the private sector because its business model is based on holding reserves, not on borrowing," he said.

Hudson will talk in more detail about the impact of the recession on the voluntary sector at health think tank the King's Fund in London on Thursday next week.

Mary Marsh, director of the Clore Social Leadership Programme, is also due to speak at the event, which is being held to mark the publication of the third edition of Managing Without Profit.

The guide, which has new sections on winning work from the public sector and tracking corporate performance, costs £24.95 and is published by the Directory of Social Change.

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