Rising operational risks and funding constraints challenge boards.

    Aid and development agency Save the Children Australia marked its Centenary Year with a national event at the Australian War Memorial in Canberra in October. Soon after, CEO Paul Ronalds learned that one of the international agency’s education facilities in Syria had been bombed.

    Sadly, that was no isolated incident. In January 2018, the Islamic State group claimed responsibility for detonating explosives and storming the offices of Save the Children in the eastern Afghan city of Jalabad. Thirty-six of 40 staff made it to the office’s strong room. Four were killed.

    “Staff of non-government organisations in war zones are being targeted like never before,” Ronalds told the Governance Leadership Centre. “There was a time when schools, hospitals and humanitarians were off limits. Now, terrorists bomb soft targets to make a point.”

    Worker and volunteer safety is a key risk for Save the Children Australia’s board and management. As part of the largest independent aid agency for children – one that reached more than 40 million children in 116 countries in 2018 – Save the Children Australia works at the epicentre of the world’s most dangerous places, supporting children during crises.

    “Directors learn to adapt to high risk and govern through it, rather than focus only on risk-minimisation.”

    From a governance perspective, Save the Children directors deal with risks that are arguably as complex as any faced by boards in this country. “Our board understands we work in an inherently high-risk environment,” says Ronalds. “We assess safety and other risks carefully, but joining the Save the Children board means being prepared to govern an organisation that works in fast-moving, volatile places. Directors learn to adapt to high risk and govern through it, rather than focus only on risk-minimisation.”

    In addition to safety risks, Save the Children Australia’s board grapples with recurring funding pressures. The Federal Government’s aid budget as a proportion of Gross National Income (GNI) has fallen to 0.21 per cent – a fraction of what it once was and well below comparable budgets in the United Kingdom and other developed countries.

    Funding could rise to 0.5 per cent after the Joint Standing Committee on Foreign Affairs, Defence and Trading this year recommended the government increase the aid budget to at least 0.5 per cent of GNI and to 0.7 per cent within 10 years – but for now, aid funding remains tight.

    Donation competition is another factor, says Ronalds. “There’s a lot of fundraising competition in the not-for-profit sector and donors rightly expect funds to be used effectively and transparently. At the same time, the media is far more willing to attack aid agencies if they believe they have stepped out of line, which hurts reputations and fundraising efforts.”

    As funding pressures intensify, demand for Save the Children’s services is rising. Climate change, global poverty and growth in dictatorships is leading to more conflict zones, mass migration and refugee camps. And more children who desperately need help.

    “Over half of globally displaced people are children,” says Ronalds. “More people are on the move than ever across borders and that has increased demand for our services at time when the country’s aid budget is at a record low. We keep stretching our resources to respond to rising demand and that creates long-term problems due to lack of investment.”

    Ronalds is one of the not-for-profit sector’s dynamic leaders. Prior to joining Save the Children as CEO in July 2013, he was First Assistant Secretary responsible for the Office of Work and Family in the Department of Prime Minister & Cabinet, advising the Prime Minster on social policies.

    As a lawyer by profession, Ronalds was formerly deputy CEO for World Vision Australia and chief operating officer for Urban Seed, an innovative non-government organisation that helps marginalised people in Melbourne. He is also a successful e-commerce entrepreneur and author.

    Ronalds currently serves on several NFP boards and believes governance in the sector needs to change. “I am not convinced that boards, generally, across the NFP sector fully understand the strategic challenges their organisation faces or are capable of adapting fast enough. That’s not a criticism: I just think NFP boards are struggling to keep up with the growth in social problems.”

    Ronalds says NFP executive teams and boards are often overwhelmed by the breadth and speed of issues. “With Save the Children, our board grapples with funding pressures, work safety, child-protection issues, regulatory challenges and a long list of other risks. It can be hard to pull your head above day-to-day issues and find time to think about long-term issues for the organisation.”

    Entrenched underinvestment is another factor, says Ronalds. “Too many charities have operated in starvation mode for too long. They have badly underinvested in their technology, processes and people – partly because governments and donors focus on crude performance ratios such as administration expenses. Yes, the sector needs to watch every dollar, but we also need to invest to ensure we have the right technology and skills at a time when we most need it.”

    Ronalds questions the traditional model of NFP governance. “It depends on the organisation: a volunteer board is entirely appropriate for a smaller charity. In Save the Children’s case, we’re part of an organisation with 25,000 staff in 116 countries. Our board, led by Chair Peter Hodgson (who is also on Save the Children’s international board), devotes a lot of time to its role. I’d argue the issues boards of large NGOs face are more complex than those in the corporate sector, yet we expect NGO directors to volunteer their time while those on corporate boards earn high fees.”

    Attracting current leaders from the corporate and government sectors to the NGO sector is vital, says Ronalds. “I’m worried that being a director of an NGO is often viewed as something you do at the end of your career to give back to the community. That’s noble, but we also need NGO directors who currently lead tech start-ups, run divisions of large corporates or are on the executive team.”

    Climate change

    Susan Pascoe AM FAICD, President of the Australian Council for International Development (ACFID), says climate change, authoritarianism and reputation risk are other issues for aid agencies. Pascoe is one of the NFP sector’s most respected voices, having been the inaugural Commissioner for the Australian Charities and Not-for-profits Commission (ACNC).

    Pascoe says climate change will drive higher demand from Pacific islands for aid. Many Australian aid and development agencies focus on impoverished Pacific nations and have workers there.

    “Climate change in the Pacific could lead to more insecurity, conflict and poverty,” says Pascoe. “Demand for Australian aid-agency services in the Pacific will rise significantly if island communities are affected by rising sea levels and extreme weather events. Our Prime Minister should be commended for visiting our Pacific neighbours, but it’s clear that tensions in the region are running high on Australia’s approach to climate change.”

    In the background is China’s growing influence in the Pacific and status as a key lender to indebted island nations – a trend that has implications for Australian aid agencies.

    The growth of authoritarianism in developing and developed nations is another potential driver of conflict and poverty – and a trigger for aid-agency demand, says Pascoe. “Civil society is shrinking and more people than ever are being forced to move across borders. Young climate activists in Australia can organise a peaceful demonstration, but in some developing countries, activism against authoritarian leaders is difficult and dangerous. Larger numbers of people are forced to flee their country and move to places where disease and human-rights abuses are recurring problems.”

    Reputation risk has also become a bigger issue for aid and development agencies, says Pascoe, after the 2018 scandal involving Oxfam, one of the United Kingdom’s largest charities. There were allegations of sexual misconduct by senior Oxfam staff in Haiti that included hiring young prostitutes at a villa the charity rented. The scandal reverberated through the international aid community.

    “The Oxfam scandal reinforced the importance of having rigorous standards, processes and the right organisation culture,” says Pascoe. “Aid workers deal with vulnerable people and any ethics breach can cause immense damage to the people they serve and to their organisation. Training, compliance and high conduct standards are critical for aid agencies.”

    ACFID members sign up to a voluntary, self-regulatory industry Code of Conduct. The ACFID Code is designed to improve outcomes for international aid and development agencies and increase stakeholder trust by enhancing transparency and accountability. The Code is a benchmark for how other parts of the NFP sector can self-regulate conduct.

    “There have not been major conduct problems in Australian aid agencies,” says Pascoe. “But the Code is an important framework to guide aid agencies and their staff on conduct and maintain public trust. We’ve strengthened statutes in the Code and it provides another layer of risk management and governance for boards in the aid and development sector.”

    Pascoe is optimistic that management teams and boards of Australian aid agencies can deal with the sector’s many challenges. “The calibre of CEOs leading our aid agencies is exceptional and boards in the sector include many very experienced, skilled directors. The aid sector continues to attract high-calibre people who want to address global problems and help people.”

    Aid agencies well governed

    Anne Robinson AM FAICD, former Chair of World Vision Australia, says aid and development agencies are at the forefront of NFP governance. Robinson is head of Prolegis Lawyers, a firm that has acted for hundreds of NFPs, and a noted sector advocate.

    “Aid and development agencies, collectively, are far ahead of the curve in terms of regulations being rolled out now, such as whistle-blower legislation,” says Robinson. “Aid agencies have long had child-protection policies and other conduct standards, and are used to operating under intense public scrutiny. Australian aid agencies mostly have rigorous governance processes. I get to see a lot of governance across the NFP sector, and believe aid agencies rate very highly.”

    Robinson served on the World Vision Australia board for 12 years, seven as its Chair. She says international aid complexities are growing because of funding pressures. “I can’t understand our government’s incredibly mean approach to aid. I hope it will change. We’ve cut funding at a time when international aid demand continues to rise.”

    Robinson opposes the notion of NFP directors earning fees – an issue that was raised in the AICD’s 2019 AICD Not-For-Profit (NFP) Governance and Performance Study. Some survey respondents argued that the volunteer NFP board model is losing effectiveness as director workloads and risks grow, and that the absence of fees makes it harder to recruit younger directors to the sector.

    “Aid agencies and NFPs work well when they have a ‘natural community of interest’,” says Robinson. “That is, people who care deeply about the cause and volunteer their time to it. As soon as NFP boards introduce fees, they risk attracting the wrong directors. NFPs that have governance problems invariably have introduced director fees or lost their natural community of interest.”

    Robinson says directors join an aid-agency board for the immense personal rewards that come from serving the world’s poorest people and taking a global view. “I’ve always said that directors of aid agencies, like all directors, need to ‘walk the factory floor’. In aid work, that means directors travelling, usually at their own expense, to unbelievably harsh places. The smell of poverty and turmoil is often the first thing directors notice.”

    Robinson remembers visiting Zambia and seeing World Vision’s program to educate and retrain female sex workers, some as young as 10, who had been forced to work along a new trucking route.

    She visited Santiago in Chile and spent time with women whose husbands had disappeared, presumably taken away and killed in camps. The women lived in shanty towns and showed up to a graduation ceremony for training that World Vision Australia provided. Robinson gave certificates to women who dressed up for the occasion and were immensely proud of their achievement.

    When Robinson, now Chair of Bible Society Australia, read to the women from the Book of Proverbs: Chapter 31, tears filled the room.

    ‘A woman of noble character who can find? She is worth far more than rubies. She gets up while it is still night; she provides food for her family and portions for her female servants… She opens her arms to the poor and extends her hands to the needy…“Many women do noble things, but you surpass them all.”

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