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02.23.21

Questions and Concerns Board Members Should Consider in the Current Environment – Fiduciary Responsibilities and Investments
James Quaid

In my recent Not-For-Profit newsletter, Questions and Concerns Board Members Should Consider in the Current Environment, I shared some items and questions that not-for-profit organizations should consider in 2021.

We then shared Questions and Concerns Board Members Should Consider in the Current Environment – Cybersecurity, a blog from Mishaal Khan, Cybersecurity Practice Leader and Solution Architect at Mindsight, on the items organizations should consider regarding cybersecurity.

Today’s blog, authored by Jim McColl, Clare Golla and Margaret Borrasso, financial and wealth advisors at Bernstein, focuses on the issues related to fiduciary responsibilities and investments that board members should consider during a time of transition.

Critical Issues for Not-For-Profit Organizations in a Time of Transition

Is fiduciary duty subject to change as the economic and investment landscape shifts? The answer is no. Responsibility remains the same, but the fiduciary duty itself may require that decisions made by fiduciaries change with the environment. Now may be one of those times.

Having experienced enormous uncertainty from a policy, economic and capital markets perspective, we now look toward transition on all fronts. Looking ahead these are some of the best practices for fiduciaries of not-for-profit organizations.

  1. The Cash Conundrum
      • Issue: Investors, including not-for-profits, are holding historically high levels of cash for a variety of reasons.
      • Questions Fiduciaries Should Be Asking Themselves: How much cash is enough? And, in a historically low-interest-rate environment where cash may not likely keep pace with inflation, how much cash is too much?
      • Solutions to Consider: Bernstein provides a framework to assist fiduciaries in making more informed cash-management-related decisions. Read more in Bernstein’s recent blog.
  2. Investment Policy in a Transitioning Environment
      • Issue: Expectations of returns across traditional publicly-traded asset classes are low. Volatility is higher than it has been historically.
      • Questions Fiduciaries Should Be Asking Themselves: How are we defining success? How are we measuring success? How should we, as not-for-profit fiduciaries, position our portfolio to be successful looking ahead?
      • Solutions to Consider: Align the portfolio with the mission by investing responsibly and accounting for it in the organization’s investment policy statement. Incorporate alternative investments leveraging best practices and avoiding potential pitfalls from the field, as outlined in further detail here in a Bernstein blog. (Foundation-specific solution to consider: Have we explored Program Related Investments (PRI)? Stay tuned. Bernstein PRI thought leadership is in the works.)
  3. The Role of Fundraising and Development
      • Issue: The fundraising landscape is not immune to the vast uncertainty of last year or the transitions on the horizon. Not-for-profit organizations that already run so lean need to boost the efficiency and effectiveness of their development strategies and adapt them to be appropriate for our rapidly-changing world.
      • Questions Fiduciaries Should Be Asking Themselves: What is fundraising’s role when considering current and future cash flow? What is the board’s involvement in fundraising? How are you communicating your mission internally and externally at a time of transition?
      • Solutions to Consider: Engage in strategic fundraising conversations around donor development and design an action plan. Discern how to call on your board of directors and activate other top advocates. Reevaluate the structure of the board’s committee. It all starts with board engagement and donor development: Who do you need/want to talk to? What do you say once people are listening? How do you make effective asks in this environment?

For more information, contact Jim McColl, Clare Golla and Margaret Borrasso, financial and wealth advisors at Bernstein, or contact James Quaid at jquaid@orba.com. Visit ORBA.com to learn more about our Not-For-Profit Group.

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