Authors: Malcolm Garrow (Social Ventures Australia) & Anandini Saththianathan (Paul Ramsay Foundation)

The COVID-19 pandemic has exacted a heavy human toll across the world. The external shocks of 2020 also caused disruption within both the for-profit and for-purpose sectors locally. In April 2020, the Paul Ramsay Foundation launched the Sustaining Our Partners Taskforce with the objective of supporting our partners in a considered, agile, and strategic way, to help protect their short- and long-term viability.

For those of us working on the Taskforce, it has been a privilege to work with so many of the Foundation’s partners who have remained committed to delivering on their mission while creatively responding to the operational and financial challenges posed by the pandemic.

Not surprisingly, an important part of our work has been to understand the operational and financial vulnerability of the Foundation’s 80-odd partners. We developed a due diligence diagnostic framework to identify which partners might need support, and have since received feedback from the Foundation’s staff, Board members and partners that this diagnostic framework is a valuable tool that should be shared with the sector.

To determine how we could best sustain our partners, we undertook three types of due diligence:

  1. Financial due diligence to assess the financial vulnerability of an individual partner.
  2. Operational due diligence to understand the impact of COVID on the partner’s operations.
  3. Capability due diligence to assess the organisation’s response to the disruption caused by COVID-19.

To undertake financial due diligence, we developed a series of financial metrics and then used the latest financial data available from the Australian Charities and Not-for-profits Commission to complete an initial scoping assessment of our partners’ financial health.  This “outside in” analysis at the beginning of the crisis meant that we were able to identify specific partners who might be at risk without having to request information from them directly at a time when resources were stretched and staff were adjusting to working from home. Once a potentially at-risk partner was identified, we engaged them in a discussion to get a better understanding of their financial health.

Naturally, the financial health and resilience of our partners varied significantly. Below, we have outlined the metrics that informed our evaluations:

  1. Partner Funding Source(s) – each of which had different levels of volatility/uncertainty because of the pandemic
    • Government funding
    • Philanthropic funding
    • Fee For Service revenues
    • Partner balance sheet investment income
  1. Partner Business Model
    • Social Enterprise – often delivering impact through who they employ
    • Independent Change Agent/Intermediary – operating in the for-purpose sector
    • For Purpose entity residing in, or associated with a University or Research Institute
    • Service Delivery organisation – delivering impact through the services they provide to a target client group
  1. Partner Cost Compressibility
    • In response to a reduction in revenue, how easily is the partner able to reduce its costs and what are the implications of this cost reduction on their impact and mission in both the short term and long term?

The Sustaining Our Partners Taskforce yielded several important lessons for us. Prior to COVID-19, the Foundation had a primary focus on the financial status of a specific grant with lesser emphasis placed on the overall financial health of the partner. COVID-19 has taught us that shared understanding of partner financial, operational and capability “health” is an important input to the overall relationship. Having an agreed framework for understanding that health helps standardise the analytical work and reporting. Importantly, sharing this information builds greater levels of trust and transparency – partners should feel comfortable with appearing vulnerable to their funder.

Download the Tools to Assess Organisational Resilience PDF here.

For a one-page summary of the Taskforce’s work during the pandemic, click here.