Board/Minutes/2021-02-S2S/Decide to what extent management of financial risk should be formalized - and how to implement that
Decide to what extent management of financial risk should be formalized - and how to implement that
Notes by participants. Might be enriched.
This session took place in parallel with "Discuss local community/chapter support and expansion". A summary was provided to the other group.
- Guillaume Rischard
- Jean-Marc Liotier (facilitator for this session)
- Tobias Knerr
The rest of the board members participated in the parallel session.
Goals: ensure OpenStreetMap's sustainability
- Survival of OpenStreetMap.
- Technical core.
- Buffer role for temporary gaps.
- Avoiding opportunity costs.
- Avoiding contract termination costs.
What level of formality?
- Informal - decided by the Board, ad hoc (about the current situation).
- Bank account, with 90 days delay lock.
- About two years of expenses.
- No prealably(?) defined even triggers using the reserve.
- Formal - Operating Reserve Policy for a Board-Designated Operating Reserve.
Benefits of a formal approach
- Reassuring all stakeholders (OSMF members, donors, contributors) that the OSMF is serious about sustainability, by taking concrete formal steps.
- Serves as an alarm bell.
Not a benefit
- Even a formal policy does not bind a future board.
Is there any advantage in defining in advance the triggering event for use of the reserve ? Since the Board isn't bound by a formal policy, it will take a Board decision anyway.
Nevertheless, in times of crisis, a formal document as a guideline has a stabilizing effect.
Any change to the document will have public visibility. Steps outside of the documented process will trigger scrutiny. This adds to the reassuring effect.
We might conclude that the whole point is to foster confidence in our stability.
Steps to avoid reaching a point where reserve use is considered:
- Establish a framework to match funds to projects.
- Earmark exceptional donations to specific projects.
- Match project end to funding horizon.
- Avoid funding running expenses with exceptional income.
Plans around the reserve
- Fallback to core OpenStreetMap - the doomsday plan
- Define the barest minimal OpenStreetMap that remains OpenStreetMap.
- Calculate core openstreetmap's gross burn rate.
- Operational reserve to fund transition from plenty to thrift.
- Operating Reserve Policy for a Board-Designated Operating Reserve.
Currently, the reserve is about two years of operational budget. The norms non-profit sector standards show a three years reserve is nice to have but two years is still acceptable.
Impact on the funding process
- Any increase in budget must be tied to an increase in reserve.
- Special reserves, subdivisions of the the reserve.
- Would donors be interest in funding an endowment?
Possible next steps
- Draft a simple formal policy, with numbers blank.
- Use the "what is core" debate to draw the perimeter of the budget whose multiple (also to be defined) should constitute the reserve.
- Guillaume to use the "what is core" debate to draw the perimeter of the budget whose multiple (also to be defined) should constitute the reserve.
- Jean-Marc to draft a simple formal policy, with numbers blank.