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BDO Report: Nonprofits Prioritizing Long-Term Resiliency

A new BDO benchmarking survey found that amid economic uncertainty, nonprofits are taking steps to strengthen their organizations for the future. Among the ways they’re ensuring resiliency: by updating their mission, diversifying revenue sources, and investing in technology.

In the face of geopolitical, social, and economic concerns, the nonprofit sector is working to adapt to these circumstances and stay ahead.

That’s according to BDO’s new “2023 Nonprofit Standards: A Benchmarking Survey,” which asked 250 U.S. nonprofit executives about their organization’s financial outlook and how they’re making changes at this critical juncture.

“We have to take this year in the context of current events,” said Andrea Espinola Wilson, co-leader of BDO’s national nonprofit and education practice. “Nonprofit organizations are looking to ensure their organizations stay strong in the face of these disturbances.”

Some of the ways that nonprofits are addressing these challenges are by shifting the scope of their missions, investing in technology and cybersecurity, and seeking new avenues of revenue.

Expanding Mission

According to the survey, 98 percent of public charities, which include associations, have expanded or shifted the scope of their mission in the past 12 months.

Sixty percent reported that evolving geopolitical, environmental, and social climates were the major reasons for the shift, and 54 percent said the changes were to meet new needs of the populations they serve.

Organizations are also adjusting their program offerings. In the next 12 months, 60 percent of nonprofits plan to introduce new programs without eliminating existing programs, and 62 percent intend to introduce new programs and eliminate current ones.

The study found that organizations are considering mergers or strategic partnerships with similar nonprofits (56 percent) or for-profit organizations (60 percent) in the next 12 months.

“These organizations may feel like they can’t go it alone anymore as they balance multiple priorities to serve their populations,” Espinola Wilson said. “They shouldn’t lose sight of areas like talent and technology during program growth and mission expansion.”

She recommends that organizations should clearly define their missions, even if they’ve changed, so they can stay true to their goals. In addition, organizations considering strategic partnerships or mergers should boost their financial strength to help them through the merger process and make them a more attractive target.

Finding New Revenue Sources

According to the survey, finding new sources of revenue remains a top priority for public charities. Twenty percent reported that it is their highest overall priority, and 34 percent included it in their top-three priorities.

Organizations are also looking at new revenue sources: BDO found that 56 percent of public charities are tapping new donors, 44 percent are planning to expand program areas, and 34 percent are pursuing government funding.

“It’s critical for these organizations to identify new sources of revenue so they can take on increased roles and responsibilities for the communities they serve,” Espinola Wilson said. “Review your strategies in the wake of economic uncertainty. Whether or not a recession comes, nonprofit CFOs should consider two or three scenario plans, instead of just one.”

Investing in Tech and Cybersecurity

BDO found that technology was a major investment area for public charities. Thirty-two percent reported that digital transformation was one of the top three priorities over the next 12 months, second to seeking new sources of funding.

Half of surveyed public charities plan to increase their technology investment in the next 12 months. This investment is largely tied to strengthening their finances, since the most-cited goal for tech investment was to reduce overhead costs (24 percent).

“Effective digital transformation requires upfront investment,” Espinola Wilson said. “Before adopting new technology, associations should go through proper planning and create a thorough change management plan.”

Cybersecurity is also a priority for these organizations, with 96 percent of respondents reporting that they were somewhat or very concerned about cyberattacks. Twenty percent noted that preventing cyber risk is a goal for their technology investments, and 46 percent indicated enhanced cybersecurity capabilities as a deciding factor in selecting a new enterprise resource planning system.

Some of the steps these organizations have taken to prevent cybercrime are setting up multifactor identification (56 percent), regularly updating their software (52 percent), and requiring regular password changes (50 percent).

“From investing in technology and cybersecurity, to an increased focus on finding new revenue sources, we’re seeing that nonprofit leaders are thinking through their challenges and responding strategically,” Espinola Wilson said. “They have the presence of mind to put the needs of their organizations and beneficiaries front and center and match them together to the best outcome.”

[Parradee Kietsirikul/ISTOCK]

Hannah Carvalho

By Hannah Carvalho

Hannah Carvalho is Senior Editor at Associations Now. MORE

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