[Osmf-talk] Operating reserves

Allan Mustard allan at mustard.net
Tue Dec 15 18:45:01 UTC 2020


Is anybody still in doubt as to why the Board asked for an amendment to
the AoA so that we could create, inter alia, a budget committee that
includes Foundation members not on the Board?  :-)

The Board is taking note of all of these comments, and the chairperson
of the Board reserves the right to enlist for said committee individuals
sharing good ideas on this talk list. ;-p

cheers,
apm


On 12/15/2020 12:12 PM, Christopher Beddow wrote:
> I am a novice on these topics but following so I can learn more.
>
> If I may add a suggestion for critique: could we consider several
> tiers or compartmentalized reserves? This seems it may reduce risk.
> For example:
>
> 1. Core reserves: absolute last to be touched and covers operations
> for 3 years at an all volunteer level
> 2. Auxiliary reserves: covers 2 years of "nice to have expenses" which
> aren't required in #1, could include paid position such as site
> reliability 
> 3. Temporary reserves: covers 1 year of expenses for things that are
> more experimental, reactive, or otherwise outside the core and close
> to core needs. A position like iD maintainer could fall here or in #2
> depending on perspective, but in a sense this reserve gives all
> programs a 1 year earning that funding is due to be cut, while
> auxiliary gives a 2 year earning, and core would expect that
> everything is about to collapse at 3 year mark. 
>
> If this is too complicated and a simple 2 or 3 year operating reserve
> which has a single category of "critical needs" is better, then I
> don't defend my position too strongly and defer. 
>
> Chris Beddow 
>
>
> On Tue, Dec 15, 2020, 08:50 Craig Allan <allan at iafrica.com
> <mailto:allan at iafrica.com>> wrote:
>
>     First, congratulations to Jean-Marc Liotier on your election!
>
>     Regarding reserves, people are making good, thoughtful comments. I
>     needed a framework to help me think about it, so I wrote this.
>
>     THE FRAMEWORK
>     Policy can be seen as a set of rules to implement our
>     organisational strategy. Strategy is informed by our mission
>     (Section 3 of the AoA) and the long term vision of the
>     organisation (missing). So in any organisation there will be
>     likely be a hierarchy of plans, each more detailed than its
>     parent, ending eventually in a large list of short-term tasks.
>
>     There is currently a draft strategy prepared by Allan Mustard
>     circulating privately among board members. I expect that the
>     document will be made available for the rest of us at some stage,
>     and will be adopted by the Board after members comment. In the
>     strategy document there will surely be a statement about our
>     financial strategy.
>
>     To reliably implement our financial strategy we could put in place
>     many rules (policies), to keep the Board on-track and accountable.
>     If we choose that path I would like to see that all the policies
>     related to financial prudence (not just operating reserve) are
>     linked to and guided by the strategy document. So the ordinary
>     member can say to the Board - "We have this financial strategy and
>     these rules. Why are you not complying with them?"  Which
>     addresses Jean-Marc Liotier's concerns and "all contractual and
>     moral financial obligations of the OSMF" as suggested by Christoph
>     Hormann.   Noted however that Joost Schouppe trusts the Board, as
>     do I, and he is less enthusiastic about rule making to keep them
>     in line.
>
>     By posting this context I'm not proposing we stop discussing the
>     reserve policy and wait for the strategy process to complete. It
>     is useful to air the issue and I would support an interim short
>     rule proposing maintaining an operating reserve to be put to the
>     Board in January.
>
>     HOW MUCH BUFFER
>     For determining the quantum, the best reserve amount, that is a
>     different topic. Should we be "increasing the reserves by quite a
>     bit" as Simon Poole suggests.
>
>     For that we can refer to the document "Grantmakers in the Arts'
>     Operating Reserve ...
>     <https://www.giarts.org/sites/default/files/Operating-Reserve-Policy-Toolkit_1stEd_2010-09-16.pdf>"
>     that was suggested by Jean-Marc Liotier. The authors very sensibly
>     propose a risk based analysis to determining the proper operating
>     reserve to hold.   
>
>     Risk determination normally is done by considering how likely is a
>     feared event and how serious will the impact of the event be. You
>     then set up ways to reduce the likelihood of the event, to reduce
>     the impact of the event and actions to recover from the event. For
>     example; if we have a super-reliable income stream our risk is low
>     so we can keep a lower reserve, but if we depend on the
>     unpredictable mood swings of a few large donors our risk is high
>     and we need a big operating reserve.
>
>     If we follow a risk based approach then holding an operating
>     reserve can be seen to be an action taken before a feared event to
>     mitigate (lessen) the impact of our income stream crashing. It is
>     here that you take into account the risk of terminating
>     contractors and the risk of Brexit issues that CH raises.   The
>     risk evaluation will point to an appropriate quantum of reserve to
>     hold.   Allan Mustard's suggestions for ending consultancies and
>     cutting costs to "circa $120K" are post-event mitigations that we
>     can take to adapt our organisation to continue after an income
>     stream crisis.  
>
>     Note that any policy, on any topic, not just finances, can be
>     linked to a risk analysis, which is a useful management tool.
>
>     I hope that helps.
>
>     Craig Allan
>     OSM:cRaIgalLAn 
>
>     ==============================
>     On 2020/12/14 23:47, Jean-Marc Liotier wrote:
>>
>>     As a new member of the Board, I wish to start term my with a
>>     fundamental topic - the Openstreetmap Foundation's operating
>>     reserves.
>>
>
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