Managing Risk and Growth of Nonprofit Revenue

Abstract

Managers of nonprofit organizations are challenged to manage revenue growth and risk (i.e., volatility) in order to sustain current and future financial operations. Although the negative repercussions of revenue risk are generally perceived as undesirable, not all risk is bad. If higher levels of revenue risk are compensated with a greater amount of revenue growth, then organizations may rationally pursue volatile revenues that produce growth. This article examines the extent to which a reliance on major revenue sources by nonprofit organizations affects the magnitude of total revenue volatility as well as the pace of total revenue growth. A monitoring application is introduced that can be used to compare the effectiveness of revenue management among similar nonprofit organizations. It can also be used to guide nonprofit managers striving to achieve sustainable financial growth for their organizations.