Assets, liabilities and resilience

The balance sheet of assets and liabilities provides important indicators of a nonprofit organization's financial health and prospective resilience in a crisis. As a gross measure, net assets reflect the reserve capacity of an organization to pay off its obligations and still remain in business in the worst of circumstances. However, many nuances apply. Restrictions on assets limit the ability of nonprofit leaders to allocate resources in a crisis situation. Thus, the liquidity of a nonprofit's assets is key, and the establishment of adequate reserve funds an important strategy for ensuring immediate application of liquid resources in response to crisis. The restrictions on use of endowment funds limit the utility of endowments as a staple of crisis strategy. However, endowments provide a restraining element to dissipation of a nonprofit's assets over time. In addition, although maintaining substantial debt can undermine an organization's resilience, the access to credit can be an important option for managing a crisis once it occurs. Further, financial balance sheets offer only a limited view of the total assets that a nonprofit organization may command. A broad conception of an organization's balance sheet, including both hard and soft assets and liabilities, can help underwrite the formulation of a strong resilience strategy.