The harsh realities of the pandemic have not only resulted in a global economic slowdown and seen many businesses struggle but it has become clear that this is not a short term crisis. The outlook for future funding seems bleak due to the worldwide economic downturn and NPOs need to take decisive financial action and ensure their governance is up to date if they are to beat the odds and survive.
Introducing the latest NPO Collaboration Dialogue on Tuesday 22 July, Nedbank Private Wealth’s Head of Philanthropy, Noxolo Hlongwane, said: “It is pretty evident and clear that we are all alive to the harsh realities of this current health pandemic that has resulted in an unprecedented global economic slowdown. Business activity has come to a halt during the various lockdown periods, which have seen a lot of businesses struggle to recover from the loss of income, resulting in some closures and loss of jobs. We have all been impacted by the economic environment in some way at a personal level and through people who are known to us or close to us.”
Since launching in 2012, the NPO Collaboration Dialogues have provided a platform to facilitate sharing and learning across the non-profit sector, with curated content featuring a broad range of topics and specialists.
However, this NPO Collaboration Dialogue was different. It took place online to a virtual audience – and participants were enthralled, challenged and inspired when the session began with a virtual performance by the Healers, a group of professional drama theatre performers, led by Warren Nebe, Drama for Life, with whom Inyathelo worked in the past.
Woven into the performance, participants shared how the pandemic had impacted their lives and their organisation.
“We’ve all been impacted in some ways,” said Cathy Masters of CMDS financial services. Financial distress, we learnt from Cathy, is when a company, organisation or individual is unable to meet financial obligations, and cannot generate revenue or income or raise sufficient funding. Section 128(1)(f) of the Companies Act describes the state of being in financial distress as being “reasonably unlikely to be able to pay all debts as they become due and payable within the next six months but is likely to become insolvent in the next six months”.
What can be done? Action steps in a time of financial distress include:
1.Know your current financial position and current minimum future commitments – calculate your survival ratio.
2.Consider and reconsider your financial plans (revised budgets and cash flow forecasts) – short term and longer term.
3.Make difficult decisions.
4.Communicate with your stakeholders.
Then, in the second session, the focus turned to governance and NPO Boards. Inyathelo Operations Director Feryal Domingo and Financial Director Soraya Joonas shared some valuable experiences and advice.
“The pandemic has led to many shifts that organisations have made in order to survive. Some decided to work on the front lines, for some this was a case of survival and repurposing their skills,” commented Feryal. “We also noticed a big shift in mental health issues; we have not given enough attention to wellness. People are working in the same space they used to relax in so you can’t just adapt. People are so busy finding ways to remain relevant, and they don’t have the right support.”
In a number of organisations. HR management is seen as a ‘nice to have’ that could be outsourced. Now there is the growing realisation that learning and development includes wellness and is performed by people. “As the sector we need to do some work to convince donors of the importance of staff development and wellness as an important budget line item,” said Feryal.
In Inyathelo’s experience, based on clients reaching out regarding health issues and asking for support, organisations were ill- prepared for the sudden upheaval wrought by COVID-19. Policies need to be put in place over a period of time, with Board engagement. “A clear strategy with realistic goals and objectives helps to keep an organisation on course,” said Feryal.
In Inyathelo’s experience, based on clients reaching out regarding health issues and asking for support, organisations were ill- prepared for the sudden upheaval wrought by COVID-19. Policies need to be put in place over a period of time, with Board engagement. “A clear strategy with realistic goals and objectives helps to keep an organisation on course,” said Feryal.
Commenting that Inyathelo’s Board had been integral in shaping the organisation’s own strategy, beginning about 12 months previously, Feryal commented that having a clear plan provides comfort. “It helps to keep people calm and focused…good sound policies and procedures provide clear guidelines and keep things together.”
She urged sub-committees to develop such material – “Don’t roll it over from one meeting to another.”
Soraya referred participants to a Deloitte report on the impact of COVID-19 on the economy titled Respond, Recover, Thrive – see the report here. Five guiding principles to help one thrive in these volatile times are:
1.Think about multiple futures.
2.Be decisive and specific.
3.Get a clear view on the end goal and the journey.
4.Act as soon as possible.
5.Remain curious and flexible.
soraya joonas“Document the lessons, at the end of the day it’s your organisation’s story that you are navigating,” advised Soraya. Both Cathy and Soraya emphasised the importance of getting to grips with your cash flow situation, and having a policy regarding your cash reserve. Protect it, don’t dip into it. If necessary, close your organisation and exit gracefully while still in control of the situation.
“A big challenge is working virtually and preparing to go back to the office,” concluded Feryal. “Unplanned costs will be incurred from putting safety measures in place and ensuring staff can work well, remotely. Make decisions around that, and maintain a good cash flow.”
Finally, governing bodies need to ensure a system is in place to attract diverse Board members and it is important to have a Board manual for new members so that they understand their roles and exactly where the organisation is going.
To access practical Inyathelo guidebooks on governance for NPOs, see here.
View a selection of slides from “The role of good governance in times of financial distress” here as well as the recording of the session here.
