Importance of Financial Crisis Simulations with Multiple Stakeholders
Ari Betof (Ed.D.) is a respected presence in the Boston consulting community who provides sustainable roadmaps toward expanding nonprofit organizations and increasing productivity. In the article “Fiscal Fire Bubbles - The Case For Financial Crisis Simulation,” Dr. Ari Betof compares financial-crisis preparedness to fire drills and similar exercises in schools and the war games conducted by military forces in preparation for potential conflict.
With active-shooter exercises an unfortunate reality for today’s schools and workplaces, the reality is that a financial crisis is much more likely to occur than a mass shooting. However, few organizations take a close look “under the hood” and seek to understand potential occurrences that could impact their financial futures. These include a major grant drying up or a combination of recession and tax-law changes resulting in a dramatic decrease in annual giving.
Planning for such exigencies should move beyond the abstract and include determination of how an organization would respond with agility in a crisis. Ideally, the financial-crisis simulation should involve senior leaders and the board, as well as the finance committee and a trusted outsider who can provide perspective on potential scenarios. This outside consultant should be familiar enough with the organization to understand financial fundamentals while objective enough to emphasize accountability and help avoid the cardinal sin of false optimism.
With active-shooter exercises an unfortunate reality for today’s schools and workplaces, the reality is that a financial crisis is much more likely to occur than a mass shooting. However, few organizations take a close look “under the hood” and seek to understand potential occurrences that could impact their financial futures. These include a major grant drying up or a combination of recession and tax-law changes resulting in a dramatic decrease in annual giving.
Planning for such exigencies should move beyond the abstract and include determination of how an organization would respond with agility in a crisis. Ideally, the financial-crisis simulation should involve senior leaders and the board, as well as the finance committee and a trusted outsider who can provide perspective on potential scenarios. This outside consultant should be familiar enough with the organization to understand financial fundamentals while objective enough to emphasize accountability and help avoid the cardinal sin of false optimism.
