In today’s philanthropic landscape, uncertainty is a constant. Whether it’s economic volatility, shifting community needs, or unforeseen challenges faced by grantees, grantmakers must be prepared to navigate risk thoughtfully and proactively. Risk management isn’t just a financial safeguard, it’s a strategic tool that can enhance impact, build trust, and strengthen relationships with grantees.
During a recent webinar, Matthew Henkes, Vice President of Grants & Initiatives at the Iowa West Foundation, shared how his team has embraced risk management as a core part of their grantmaking strategy. Their journey offers valuable insights for any foundation looking to build resilience and responsiveness into their work.
Risk can take many forms. The Stanford Social Innovation Review’s, Embracing Philanthropy’s Risky Business, identifies four types:
Impact Risk: Will the grant achieve its intended outcomes?
Financial Risk: Is the investment sound, and are funds being used effectively?
Governance Risk: Are grants compliant with legal and regulatory standards?
Reputational Risk: Could the grant affect the foundation’s standing in the community?
As Matt noted in the webinar, nearly a quarter of all grants encounter risks that prevent them from achieving their goals. Yet, many foundations don’t proactively address risk during the grant lifecycle. In fact, studies show that 87% of grantees are never asked for risk assessments during the application process.
At Iowa West Foundation, risk management starts with organizational culture. Through a strategic visioning process, the foundation identified its comfort level with risk, which was neither overly cautious nor aggressively bold. They liken their approach to managing a financial portfolio: diversify, balance, and embrace higher-risk opportunities when the potential for outsized impact is clear.
This mindset is reflected in how they engage with grantees. One simple but powerful question they ask during application reviews is: “What keeps you up at night about this project?” This opens the door for honest conversations and helps surface potential challenges early.
They also emphasize “radiating resiliency”—encouraging grantees to share obstacles during implementation and committing to being responsive partners when things don’t go as planned.
To operationalize their approach, Iowa West Foundation developed two key tools: a risk analysis scorecard and a contingency fund.
For grants over $750,000, Iowa West Foundation conducts a formal risk analysis using a scorecard that evaluates:
Reputation Management: Are there political sensitivities or community concerns?
Partner Ownership: Is the grantee driving the work, and do they have the capacity?
Financing: How far along is fundraising, and what’s the foundation’s share?
Impact: Is the project mission-aligned and serving underserved communities?
Effective Approach: Is the strategy evidence-based and measurable?
Eligibility & Budget Fit: Does the grant align with policies and financial capacity?
Each category is scored from low to high risk and color-coded (green, yellow, orange, red), helping staff and board members quickly assess areas of concern. Importantly, the scorecard is shared with the board before a decision is made, allowing time for discussion and potential mitigation strategies.
Recognizing that even well-planned grants can hit roadblocks, Iowa West Foundation established a contingency fund to provide rapid support when needed. Funded through write-offs from unspent grant dollars, the fund includes three components:
Capacity Building: Proactive support to strengthen grantee capacity.
Grant Contingency Support: Additional funds for existing grants facing unexpected challenges.
Emergency Funding: Operational support during moments of vulnerability.
There’s no formal application process for this fund. Staff have authority to deploy up to $75,000 quickly, using a streamlined agreement to document shared goals. This flexibility allows the foundation to respond swiftly and strategically.
With support from GivingData, Iowa West Foundation embedded these processes into GivingData, their grants management system. Dashboards track both the main grantmaking budget and contingency fund, monitor spending, and ensure transparency. This integration has replaced a patchwork of spreadsheets and improved internal coordination.
As Jeremiah Tan, Client Success Manager at GivingData, explained, “Our goal was to help Iowa West Foundation track allocations and spending in a way that reflects their risk strategy. It’s not about perfection—it’s about starting somewhere and evolving over time.”
Iowa West Foundation’s experience offers several takeaways for grantmakers:
Start small: Don’t wait for a perfect system—begin with what you have.
Engage your board: Risk tools should foster dialogue, not just inform decisions.
Trust your intuition: Sometimes, risks don’t fit neatly into categories—listen to your gut.
Be a partner: Risk management is not just about protecting the foundation; it’s about supporting grantees through uncertainty.
Risk is inherent in philanthropy, but it doesn’t have to be a barrier. With thoughtful tools, open communication, and a culture of trust, grantmakers can turn risk into opportunity.
To dive deeper into Iowa West Foundation’s approach and see how these tools work in practice, watch the full webinar: Grantmaking During Uncertainty: Working Alongside Grantees to Navigate Risk