“Skin in the game”: Risk Appetite and Transformational Leadership

When I transitioned from the for profit sector to the nonprofit sector, it was a life-changing experience. It was a plunge I had to take to honor my inner churning that was focused on providing quality education to underprivileged children. But this plunge ran deeper and it became about concentrating all our efforts towards securing a healthy, safe and secure future for the child. Keeping the child at the center, we took a leap of faith and started the Pratishthan Learning Centre in 2013, which was a fast track education model for high school dropouts and adolescents with fractured learning. It was a parallel intervention that remained unexplored as an alternative pathway to help these children complete their educational journey. We started with only 6 students, whom we taught from a small room in a shopping arcade. Today, we are a family of 2000+ students, all of them being provided quality education, nutrition and access to livelihood through our campus in Dhunela. By being true to the core purpose of serving the child, we were able to establish a campus that not only catered to our students' needs but also created an ecosystem that strengthened parent-student-teacher relationship, valued people and connected them with the right opportunities.?

As we plan on turning our Dhunela campus into the largest philanthropic school in the world, which will serve 10,000 underserved students at once, we hope to illuminate how “risk-appetite” has played an important part in our growth and journey.

While recalling a Ted Talk from years ago, I am reminded of Dan Pallota’s words emphasizing the connection between risk, growth and impact. He highlighted that risk-appetite is a prerequisite for the non profit sector to thrive and deliver meaningful impact. However, the terrain is itself very risky because of the depth and penetration of large scale social problems and the acute paucity of funds to solve these issues. Challenging the status-quo comes off as a rosy idea, but it takes years of courageous and strenuous effort to effect real change. The inherent contradiction lies in the fact that as individuals we are a part of the system that has helped us leverage our privilege to get where we are today.? At the same time we are not only challenging this system but also working with it to eliminate the existing inequalities for a more just society. How do you then walk the thin line between dedication to cause and raising funds for the cause, without compromising on your belief system? What is the key to unlocking risk appetite for growing a non profit organization?

At Lotus Petal Foundation, risk is embedded in the DNA of our foundation and remains an integral part of our processes. We believe that one’s commitment to core purpose, alignment with their value system and pushing one’s limit to explore the roads less traveled by, governs one’s risk-appetite. Because at the end of the day our intent matters. Even when you are taking risks, it is not about taking a blind jump into the unknown, but is centered around evaluating the pros and cons of the risk and thinking through how it will adversely impact the beneficiaries. If the negatives outweigh the positives, then the risk must be assessed and rethought to align with the core purpose.?

At Lotus Petal Foundation, having a risk appetite is a quality that we nurture and encourage in all our changemakers. For us, taking risks is guided by the principle of always keeping the child and their ecosystem at the center of everything. This means our work not only touches upon the lives of the children, but also their parents and community. Indulging in risk-appetite is about balancing risk and responsibility. As we are working with children, it is of paramount importance that we take responsibility for our decisions and base them on their well being and safety. Our risk appetite is influenced by the following guiding principles:?

1. Child at the Centre of everything we do
2. Alignment with the organizational vision?
3. Ownership and Accountability

In the last 13 years of running a nonprofit organization, I have delved deeper into the processes which have honed my risk appetite over the years. When I started the organization, it started small, and at that point of time I was transitioning from the corporate to nonprofit sector. Being aware of the risk, I had carefully evaluated the cost of the risk involved and saw to it that the personal loan I incurred to start the organization was paid off. The risk was small, but also deeply personal. However, as the organization grew, the people associated with it and the beneficiaries we served also increased. The higher the number, the greater is the risk quotient and hence, the rationale which governed my risk appetite before also underwent a complete change.

“Skin in the game”, is exactly how I view my risk appetite today. As a founder, my decision to take risks is not isolated from the people, beneficiaries, and stakeholders, but they are all connected. If I take a risk today, I will bear the weight of its consequences and outcomes along with my people, because I am no longer working on a personal pursuit but a collective effort creating and contributing to change.?

Secondly, risk-appetite is dependent on how far you are willing to push your boundaries and experience change. Change doesn’t happen overnight, it's a continuum. The risk journey in a non profit sector puts a certain type of strain on a person, because the sector doesn’t reap monetary rewards. Therefore, fighting for a cause in a sector where funds are so scarce compels individuals to stretch out of their comfort zone and embrace discomfort. So in a way, risk appetite also transforms you as a leader, and provides you with a capacity to not only weather any kind of change but also adapt and mold yourself accordingly to specific contexts and situations.

?If there’s one thing that leadership at Lotus Petal Foundation continues to exhibit and strive for, it would be taking an organic approach to taking risks. One can see this approach as being akin to nurturing a child, holding space for them and taking decisions that will inevitably contribute towards their growth. To achieve this, we evaluate the value-fitment of both funders and new recruitments. Aligning values is of utmost importance to us. There have been times when a certain arrangement can benefit the organization, but it doesn’t align within our scope of work or long-term goals, then it is a risk we are willing to take by letting it go. Exercising restraint, compliance and inaction is also a risk that the leadership invests in when there’s a misalignment in values and specific “asks”. We try to remind ourselves that compromises are a part and parcel of this journey, and it is okay if one stakeholder is less happy than the other, but our work and beneficiaries should not be affected by it.?

These practices which inform the risk appetite at Lotus Petal Foundation forms the basis of transformational leadership. Therefore, a risk-filled path is indeed a transformative journey which comes with its own set of challenges, but also brings forth immense learnings. Here are some of the lessons I learnt as a founder while running a non profit organization :?

• Individual Risk Capacity vs Organizational Risk Capacity: When you scale an organization, you are no longer evaluating the risk from an individual perspective, but you have to think about multiple factors that bind the organization together - from people, to processes to operations to beneficiaries, all of them must be given equal weightage. The weight of the risk increases as the number of people also increases. As an individual I may have a high risk-appetite, but as a founder the system that I am responsible for may have the capability but not the same appetite as me. Hence, the yardstick for taking risks changes as the organization grows.
• Calculating the Downside: When taking any risk, the first and foremost element to decide if the risk should even be attempted in the first place is evaluating its downside. If the downside is higher, then would your organization survive it? If not, then one should not opt for it.?

• Spiritual Quotient: A person's spiritual quotient helps them do inner work, guiding us to align with our core purpose and decide what risks to invest in.?
• Self-belief: Self doubt will follow when we are contemplating taking risks, but we must remember that self-belief should be greater than self-doubt. By believing in one self, vision and mission we can achieve intended results.?

Even though the journey has been an enriching experience, a lingering question remains unanswered on as founders, do we optimize the risk appetite of the organization as a whole and that of each of the members??

If you are someone who is just starting out in the nonprofit sector or have been running it for years and have taken certain risks for the organization, we would like to know your thoughts on this in the comment section below.?

?Resources:?

1. https://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong?language=en