The volatile economy has caused many nonprofit organizations to invest in forecasting software to take a look at how the organization is expected to carry on for the next six months to a year, and that is just one of the ways executives are attempting to protect the entities they work for. According to a new poll by SEI, a provider of investment processing, fund processing and investment management business outsourcing solutions, 65 percent of more than 130 executives and committee members overseeing U.S. nonprofit endowments said they are using, or are considering to enlist, an outsourced chief investment officer (OCIO). They are seeking help due to their need to improve managing finances within the organization, as well as protecting against potential risks that can doom certain investments.

"Having experienced the volatility of the past few years, nonprofit executives are focusing on protecting the financial well-being of their portfolios in order to support their core missions and the increasingly important role that endowments play in the overall financial health of organizations," said Mary Jane Bobyock, director of nonprofit advice for the institutional group at SEI.

New investments during tough times merit outside help
For years the economy has made it difficult for executives at nonprofits to manage money in their organizations. However, sustained low interest rates have, and signs of a recovery have many firms poised to make moves throughout 2013. The survey revealed 39 percent of respondents will pour their funds in a variety of inflation-hedging products, while nearly half of respondents will purchase private real estate. By bringing on an OCIO, the decision-makers in these organizations can feel safer with their finances, as well as make sure their business forecasting tools are helping them make the right moves.

"A complex market, coupled with increased fiduciary awareness and limited resources, have prompted nonprofit leadership and investment committees to show increased interest in partnering with an OCIO," said Bobyock.

Nonprofits at higher risk than other organizations
In many ways, nonprofits and big businesses operate similarly, but there are also a lot of differences in what goes on in the day-today management of the funds at each body. Because of this, nonprofits are often thought to have a greater risk of running into trouble. An article for the Huffington Post written by Fred Leeb, turnaround consultant and former emergency financial manager for the city of Pontiac, Michigan, shared why executives at nonprofit organizations often fail to self-police the firm.

  • Lack of organizational support: While there are top decision-makers at nonprofits, very few have board members that oversee everything at the firm, and ensure that it is operating as efficiently as possible. This failure to have a support staff can often lead to unneeded spending and high costs throughout the entity.
  • Fragmented relationships with banks: Banks are thought to be less likely to support nonprofits with loans and advice on how the organization could best manage its money. Firms that do receive lending often have to operate in a restrictive manner under guidance from the bank. This makes it tough for the nonprofit to make the best use of its available capital.
  • Less available information: Many decision-makers at nonprofits are looking to merge with other organizations to strengthen both bodies, but the information that is needed to make that happen is often unavailable or hard to obtain. Investment bankers or business brokers will very rarely facilitate relationships between two entities.

These are just a few of the ways managers at nonprofit organizations could struggle with finances if they are not careful, demonstrating why the use of business forecasting software could help these bodies operate at the most efficient levels and better serve their causes.