More American non-profits are prioritizing the implementation of effective risk management strategies to preserve the longevity of their organizations and missions.

A survey by SEI finds that 46% of respondents place greater value on positive risk-adjusted returns than on overall portfolio returns when evaluating investment success.

Despite emphasis on risk management, 44% are not confident that sufficient time is being spent assessing the impact of potential market shocks (e.g., a 20% market decline) on the ability to spend/achieve mission. In addition, 49% lack confidence that the investment committee has identified all key portfolio risks.

“Non-profits today face an increasingly challenging investment landscape,” says Mary Jane Bobyock, director, non-profit advisory team, for SEI’s institutional group. “Many are taking steps to improve their risk/return balance through risk analysis and portfolio diversification.”

The survey also finds that many non-profits are looking to utilize the investment committee in a more strategic manner. Areas of focus include the following:

  • better aligning the portfolio with organizational spending needs (40%);
  • better leveraging the committee in the organization’s financial planning (21%); and
  • building donor confidence in investment strategies (23%).

Adding to the need for increased fiduciary oversight is the continued use of alternative investments by non-profits. Fifty-eight percent reported having 11% or greater of the portfolio allocated to alternatives. Less than one-quarter had 10% or less, and 18% had none.

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Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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