What We Should Talk About When We Talk About Risk

February 3, 2020

Whether you’re in the for-profit or the nonprofit world, we all seem to be talking about risk. No one wants to “play it safe” or “hedge their bets.” Instead, we’re launching moonshots and embracing failure. The problems we face are so big and complex, the thinking goes, that the only way to tackle them is to put everything on the line and fully commit. But this “risk is good” mantra glosses over the fact that some risky decisions are just bad decisions.

So how should philanthropic organizations leverage risk in a more sophisticated way to achieve the kind of change we seek? The first step may be to acknowledge that much of our most consequential decision making happens in information-poor and ambiguous contexts, and risk taking is simply a strategy for managing this uncertainty. After all, when we describe a decision as “risky,” what we are actually saying is, “I am not sure what will happen if we decide to do X.”

The idea for this paper began with a conversation at Democracy Fund about how we, as a foundation, could take more and better risks. As we got further into this work, however, we realized that the conversation about risk was really rooted in the nature of decision making itself — in particular, what it means to make a good decision in a low-information/high-uncertainty context.

This document lays out the philosophical foundations of the approach we intend to take and what we think it means broadly for Democracy Fund’s work. We hope that by looking at risk taking through a broader lens of decision making, we can open up the conversation both internally and externally about what it means to be an organization that takes smart risks. This approach also provides an opportunity to look more critically at all of our internal processes to see whether they support good decision-making habits and how we might refine these processes to better leverage and mitigate risk to maximize our impact. In the coming months, we’ll be taking a deeper look at these processes — from the decisions we make about the systems we work in and what strategies will lead to the impact we hope to see, to what investments we make, to how we use evaluation and learning to assess and revisit those decisions, and everything in between.