Trustees proactively preparing to meet challenges over 2025
The last few years have ushered in an era of unprecedented change for all organisations. The charity sector has certainly not been immune to these, navigating the aftermath of the Covid-19 pandemic with reduced reserves, dealing with ever increasing costs, and managing an exponential increase in their beneficiaries’ need for funding, services or advice.
At the same time, organisations, including charities, however indirectly, have been dealing with the shifting sands of the geopolitical environment, including new governments, worldwide cultural and ideological shifts, the climate crisis and rapid technological advancement. This has meant that even the most experienced charity trustee is expected to invest more time and attention in their voluntary role than ever before.
With so much change on the horizon, it can be difficult to plan and prepare for what is coming next. However, there are several key themes, changes and challenges which charities can prepare for during 2025.
Impact of worldwide events
War, environmental and political change all continue to shift the geopolitical landscape while the charity sector is on balance perhaps used to being reactive to a slower pace of change. But the speed and impact of interconnecting issues requiring a strategic response means all charity trustees and senior leaders need to become more alert to change and disruption than their predecessors.
Thus they should be prepared to have more generative rather than reactive discussions at their board meetings. In particular, trustees may need to talk to their investment advisers about what the new regime in the US and Trump’s economic measures could mean for their portfolios. It may be a year when trustees need to check in more regularly on their investments.
The skills required to stay ahead of the curve may mean that the composition of trustee boards needs to evolve to make sure that those trustees operating at the coalface of these changes in their everyday working lives are able to share knowledge and experience of these other sectors with their charity, applying it when relevant to the way forward.
This may require a new approach to the composition of our trustee boards or a wider discussion about support for volunteers, perhaps revisiting of the age-old arguments regarding whether or not it should be commonplace for at least some trustees to be paid.
Governance is key
This may sound like old news, but good governance remains vitally important and continues to be a hot topic. It is common for funders (institutional, individual and corporate) to insist on good governance practices being demonstrated prior to the award of funding. Whenever charities hit hard times, those with good governance fundamentals in place are more likely to survive, while others are likely to struggle and implode.
Governance shouldn’t be just a once every five-year focus. It should be an ever-present and a continual assessment of what good governance should look like for your charity. Professional advisers see it all (good and bad) and can contribute to the discussion about how your charity can be structured in such a way that ensures that good governance is part of the day to day activity.
Keep your ear to the ground for any updates and changes to Charity Commission guidance and look out for its published alerts, decisions and statements. These can be an invaluable source of information and an opportunity to learn from others.
After public consultation on the new format Charity Governance Code last year, the new version is expected to be launched this year. Many trustee boards will no doubt be scheduling time over the next year or so to assess their governance against its recommended practice.
The new Fundraising Regulator’s Code of Fundraising Practice to reflect changes in the law and best practice is expected to be published in the first half of the year.
Rachel Reeves’ budget
One of the most significant changes outlined in the Labour budget was the introduction of VAT on private school fees. Whilst this will undoubtedly have a direct impact on fee charging schools and is likely to have wider ranging repercussions for the education sector as a whole, other parts of the budget not directly affecting charities are likely to affect the sector as well.
The change of government and policy changes have meant that seasoned and “would be” philanthropists may be unsure of how the planned changes to the tax regime will affect them.
My prediction is that in the longer term, donations from high net worth and ultra-high net worth individuals are likely to increase, but in the short term, there may be delays with donations whilst their advisers are assessing the impact of these changes and helping them to navigate what the changes mean for them. This could result in project based funding difficulties and the postponement of planned projects until the analysis is clear.
Digital transformation
One of the most significant themes for charities in 2025 will be digital transformation. The Covid-19 pandemic accelerated the adoption of digital technologies by charities. This trend is set to continue as charities seek to engage with a digital-native generation and embrace changes to cut core costs. The challenge lies in successfully implementing digital strategies that enhance fundraising, service delivery and engagement while ensuring accessibility for all stakeholders.
Whilst non charities in the corporate world have many options to fund the necessary investment required, this is more challenging for charities who by their very nature don’t have shareholders or a structure which can facilitate external investment in the technologies required to boost efficiencies and keep up with change.
Data breaches and cybercrime
The risk of cybercrime and data breaches has increased exponentially over the last few years. Charities need to be aware of this threat and invest in more cybersecurity to protect the sensitive information of donors, beneficiaries and employees.
Our UK General Data Protection Regulation (UK GDPR) and other privacy laws require strict compliance, and charities must navigate these regulations carefully to protect data, avoid penalties and maintain public trust. If you are a trustee who wants to find out more, or you find yourself in the middle of a crisis, the National Cyber Security Centre has a wealth of information, advice and guidance.
Increased regulation
I am expecting that regulators within the sector or those who regulate services provided by charities will be able to do more with less, after adopting new technologies to analyse data sets, notice trends and quickly react to issues.
The Economic Crime and Corporate Transparency Act gives Companies House the ability to be a more active regulator, with new powers having been granted to act to prevent the abuse of companies and to reduce economic crime. The Act is now being rolled out in tranches and these provisions will impact charitable companies, charity trading subsidiaries and other charity subsidiary or joint venture company structures.
New ID checks for new and existing directors, persons with significant control and those filing on their behalf will need to be adhered to from the second half of the year. Companies House already appears to be analysing the information sent to it more thoroughly and one is seeing occasions where the accuracy of the information held on the register is being questioned.
The new corporate offence of the Failure to Prevent Fraud, applying to large organisations will apply to some Charitable Incorporated Organisations and Royal Charter and Registered Companies, impacting charities as it impacts other organisations.
Increasing red tape
With a new government in position, it remains to be seen what opportunities there could be for the sector. Charities are now being subject to the increase in National Insurance, and government funding is increasingly being subject to red tape and non-negotiable terms which don’t enable charities to take action in a sustainable way. This includes the ability to secure permanent staff, accrue necessary reserves and make long term plans.
On the flipside, the new draft Civil Society Covenant sets out the way the government wants to interact with the sector and acknowledges the importance of the sector in propping up public services, including healthcare, social care, education, healthy recreation and transport.
As with previous governments, only time will tell as to whether this will be translated into any actionable solutions or opportunities for the sector, but the hope is that there will be constructive engagement between charities and Labour. In the meantime, careful preparation, focusing on implementing effective digital strategies, and awareness of the legislation set to come into force this year will help the sector to feel prepared for the year ahead.
