Buffering Against Uncertainty: Working Capital and the Resiliency of BIPOC-Serving Organizations

Buffering Against Uncertainty: Working Capital and the Resiliency of BIPOC-Serving Organizations

Most arts organizations operated with precariously low levels of liquidity as 2019 came to a close and were poorly prepared to manage risk even before the COVID-19 pandemic hit, a report from SMU DataArts finds. The report, Buffering Against Uncertainty: Working Capital and the Resiliency of BIPOC-Serving Organizations (10 pages, PDF), found that despite a period of economic growth in the years before 2019, organizations included in the analysis had, on average, only five months of working capital on hand at the end of the year, with a median of just 1.5 months, while 47 percent had fewer months of working capital on hand than in 2016. The report notes that despite having limited access to capital, organizations serving primarily Black, Indigenous, and people of color audiences have a track record of living within their means, in part because they tend to stay smaller, and report having more months of working capital than non-BIPOC organizations. The report also found that small, midsize, and large BIPOC-serving groups had more working capital on hand than non-BIPOC groups (1.7, 2.4, and three months v. .9, 1.7, and three months). The report's recommendations for grantmakers include making multiyear investments in grantee-defined strategies for recovery and adaptation to new and/or changing community/audience dynamics; investing in capacity building; providing unrestricted long-term support for new business models; and making grants to bolster cash reserves after a grantee has  reliably achieved a surplus in its budget.