Development agencies, philanthropists, charities and to a lesser extent even corporates are all active social change agents – whether they explicitly focus on health, education, agriculture, enterprise, the arts or any of a myriad of sectors that speak to the human condition either directly or indirectly.  Most are acutely aware of their contributors/donors/shareholders and are continuously looking for good news stories to justify their engagement if not maintain the flow of funds.  So, what happens if we see these stakeholders and actors less as donors and contributors but more as investors?  The question or challenge is how certain are the outcomes sought and how much risk should these development funds be exposed to?

What is Risk – other than a 60-year-old board game that invites participants to strive for global domination!?

Well it depends on the lens through which you view what is ultimately a calculation on the probability of success or failure.  If you are a 110-kg novice tightrope walker straddling Niagara at 400 feet – then your lens may be acutely focused and perhaps your assessment and short-term horizon quite blurred……… however, most of us are more likely to be confronted with the rather vanilla and ill-defined question of “what is your attitude to risk?” when first engaging the services of a financial advisor.

“…most of us are more likely to be confronted with the rather vanilla and ill-defined question of “what is your attitude to risk?…””

In both cases success and failure are possible – death and glory the extremes in one and financial loss and gain in the other – the challenge is for the participant to determine the probability of either and decide on a response accordingly.  Risk can sometimes be greater in perception than in reality – e.g. the likelihood of disaster on a rollercoaster is remote – but for some it can appear all too real.

So, how does this casual glance at the nature of risk help us when we consider its implications for a commercial and development context?  It does not tell us how risk is made up other than some form of equation around probability, however, it does hint at the fact we cannot avoid it and we probably recognize it as something else – the antithesis of certainty.  We all have a greater or lesser degree of comfort when dealing with issues of certainty, so at a most basic level we have maybe identified an unavoidable tension that exists between risk and certainty and depending on personality, cultural norms, physical attributes, organizational demands etc, etc, etc, and any given context we can place ourselves on that continuum.

We mentioned “an equation” of risk; an assessment of probability.  What are the variables to that calculation?  Risk is a relationship between what we know and what we can measure.  It is an anticipation of certain unknowns against a degree of quantifiable impacts.  The greater the knowledge – the less the apparent risk.  Risk is intrinsically born out of a lack of knowledge and risk is mitigated by the degree to which we can anticipate the impact of those unknowns – by measuring them.  If we possess heightened knowledge we already understand impact – even if we cannot measure it for that specific instance – hence we speculate.  Equally we might be considered speculative if we have moderate knowledge but a high anticipation of being able to better understand impact through measurement. In circumstances where we have high knowledge and understanding with ongoing competence to measure – we are a long way up our certainty continuum and the existence of risk is all but eliminated and we make a measured, informed and calculated investment.  So, let’s make this real – if we buy a house and spend a certain amount upgrading it – so long as our total spend does not exceed a realistic recoverable position in the market – then we at worst are speculating, more likely making a sound investment.  Less tangible but equally valid we might choose a school for a child based on its reputation and your understanding of the child’s needs rather than throw darts at a local street map.  Our selective process does not guarantee the outcome but it sure reduces the risk!

“…what was once understood can morph dramatically and rapidly and outmanoeuvre the adaptive programming solutions … that characterise … the established professional…”

In the development context, many donors (vs investors) are looking for certainty.  They strive for defined outcomes to well-known problems.  They put their money into challenges that they believe are “well-known” and deeply understood and matched to their unrivalled toolkit of models, log frames and research paradigms.  They are perhaps right to conclude that they are making a solid investment on behalf of their stakeholders.  Here’s the problem – problems are typically dynamic in nature and sensitive to external influences – so what was once understood can morph dramatically and rapidly and outmanoeuvre the adaptive programming solutions and milestone reviews that characterise the involvement of the established professional.  The problem, while observed and measured, begins to move off script and what was once known is again becoming unclear – but the burden of expectation – especially where donor funds are concerned – is rarely diminished.

In this space of uncertainty and opaque social challenges is created the operational territory of the social innovator, where the old problem is finding new expression and demanding new or alternative responses; where experimentation rather than certainty is the guiding principle; where new problems are emerging and belligerently refusing to conform to tested methodologies of intervention and where the actors and communities themselves – unimpeded by what they “know” – are driven by a social imperative to get involved.  The problem may not be adequately understood, yet, but its impact is all too apparent.  The social innovator – through enterprise or welfare – has sought to scrape away the layers, measure and tell stories to better illuminate the truth, but they cannot guarantee certainty.

So, our professional (the donor representative, consultant, civil servant) and innovator converge at the same point – new and old problems requiring different solutions.  Some have the means but constrained by their need for clarity and certainty – the other driven by ideas and measured speculation but constrained by the means to push the boundaries.  One dare not take the risk, the other is compelled to take it.  The innovator has found angel; social; corporately responsible; inclusive “investors” who are prepared to back a variety of largely small scale projects with ambitious aims but which constantly need re-assessing as the problem continues to morph and mutate – the “investor” has come to terms with their likely minimal or negatively proportionate return, but understands it will only ever be measured in social capital.  The established professional has dabbled and is trying new approaches, but cannot break free of the need to be able to deliver fixed and tangible results – something the innovation space may deliver in time.  The professional has partnered with the innovator but in very few instances is the engagement framed by the demands of the innovator’s approach – still more often “constrained” by the professional’s need for results and certainty.

Our experience has regularly reflected that which is described above.  Programme design is set and traditional technical rigor is brought to bear to a well-defined challenge.  New knowledge and insight uncovered and shared and the opportunity for innovation explored – policy, infrastructure resourcing, finances, devolved responsibility – there is a shift in thinking, a refreshed outlook – BUT the design remains sacred and its enshrined goals and expectations unmoved.  So even should innovation deliver and flourish, by the watermark against which it assessed it is deemed to have “failed”

Earlier on we allude to the concept of risk in a commercial context and we have reflected on donors being “investors” in finding solutions to development questions.  So briefly drawing the commercial and development strands together for a point of reflection, it is interesting to note that in the world of dot.com bubbles and hi-tech innovation the big bucks follow the risk – or at the very least a significant proportion of an investment portfolio looking for big results is in high risk sectors.  Is there something to be learned here for the development donors and social investors?  Big results require a stake in higher risk sectors – and while we might legitimately support the development of understanding by measurement and impact assessment – the people who genuinely understand and operate in this part of our market require backing without the same pre-conditions of a safe steady return on investment.  Perhaps most fundamentally donors/investors into the development innovation space – the risk space – need to better understand the nature of their role.  No longer is it enough to be defined as the financial backer and “paradigm setter” – it takes a depth of relationship, over “unreasonable” timeframes and narrative and understanding that goes way beyond reporting and DAC criteria.

About Andy

andy-simpson-BW-123Andrew Simpson, Managing Director of Imani Development International, has a record of over 20 years in Senior Management positions with international companies across multi-site and multi-discipline teams. Among a wide array of competencies, he has extensive experience in operational performance management, organisational change, programme design/evaluation and training development across both the public/private sectors as well as on donor-funded programmes.

He has a keen interest in the overlap between social development and economic development through his work to establish the Social Enterprise Academy Africa in Southern Africa, of which he is a Director, and by supporting the inclusion of representative civil society organisations in national and regional economic development, evidenced by his role as Technical Advisor on the Advisory Committee of the Southern Africa Trust.