Covid-19 provides a watershed moment for the charity sector

The adoption of more corporate practices is required in the charity sector to just survive in a pandemic world.

This is not a short-term issue and the “new-normal” may take a while to establish, hence charities find themselves in serious financial uncertainty.

The old adage “It is not the strongest of the species that survives but rather the one most adaptable to change” applies now more than ever.

The Covid-19 outbreak has left vast swathes of the global economy in financial trouble and charities are no exception.

Research conducted by Pro Bono Economics has highlighted that one in ten UK charities is facing bankruptcy by the end of 2020 as they struggle to cope with a staggering £10 billion shortfall caused by surging demand for their services and lost fundraising income. I suspect the number of casualties in the sector will unfortunately be a lot more than 10%. We will lose good charities and not all the survivors will be the ones most needed.

In this extraordinarily challenging environment, it’s clear that charities have to tear apart their rulebook, to review their purpose, role, services and funding models.

The behaviour and choices of donors, who will be less able to be generous, will have shifted during this time too. Organisations providing more current and direct requirements (food banks, mental health and domestic abuse support etc) will benefit. The local donkey sanctuary, for example, will suffer.

As with any crisis environment seen historically, those that adapt, anticipate, think creatively and take rapid action will not only survive but be able to build post-crisis.

Consolidation and collaboration. There are more than 185,000 registered charities in England and Wales alone. Over 600 of these are cancer charities, while more than 200 work with homeless people just in London. In my view, charities with the same or similar causes must consolidate. As it currently stands donations are too thinly spread across the charities. If consolidation were to happen, wouldn’t the outcomes for the cause be better?

Consolidation would generate synergies and reduce the eye-watering total percentage of donations spent on administrative functions, providing greater funds to be directed towards services and the communities the charities serve. Trusts and foundations should increasingly insist on charities to work more collaboratively and those who do consolidate or partner are likely to attract more serious and substantial supporters.

Diversification of income streams. Covid-19 has also shone a light on the dependency charities have on certain events to raise funds. A commercial enterprise would not depend on a few customers to generate sales, yet for a significant proportion of charities events such as The London Marathon represents the largest fundraising event of the year. However, with mass events cancelled for the foreseeable future and the inability for face-to-face collections, charities are encountering chronic financial pressure. Urgent strategies are needed to diversify their income streams and reduce dependency on one or a few channels. Pivoting a fundraising strategy from community events to a digital platform is likely to be central to any solution. It requires different skills and investment but failure to evolve could have existential implications.

Governance. Charity boards need to have their worst-case scenarios fully worked through given the unknown period of uncertainty. Thorough reviews of cost structure and beneficiaries with a view to prioritising and unfortunately culling support in some areas. Boards should review their size and breadth of capability ensuring experience of steering organisations through unchartered waters is amongst the skillset.

Charities are a vital part of society. With increased unemployment, severe economic downturn upon us, charities are needed more than ever. It is imperative that they more than survive. Failure to do so will hurt all of us in the community. Charities are at a juncture where self-initiated intervention is required. The choices made will have existential consequences.