The dull but necessary craft

It may not be the most glamorous or ”artsy” part of the job, but a significant part of any arts manager’s responsibility is to understand, assess, and manage risk. Our idealized vision of artistic endeavor is that it demands ignorance or arrogance to risk (creative, personal, physical, financial), and that any additional calculus in our action is tantamount to selling out.

In reality, the great artists and arts organizations are masters of managing risk — reaching out as much as possible, while feeling and finessing the ground beneath their feet.

But, of course, that ground is always shifting, and only rarely under your control. Case in point is the current bond market, which had offered a creative financial footing for many larger nonprofit arts ventures, but is now crumbling away.

During a healthy economy, bond financing was becoming a handy alternative to building directly with contributed cash. Instead of spending the millions raised in a campaign on bricks and mortar, organizations would secure bonds against that money while investing it. Interest on the debt was exceptionally low, interest on the invested money was consistently higher. So, arts organizations could earn a little something on the float while they moved forward with their ambitious projects.

It all worked wonderfully on paper (and in real life for a while), before a shakier money market flipped the numbers (thanks to a soft economy, overly enthusiastic lenders suddenly realizing losses, and a general sense of impending recession). Investments are now on a roller coaster, while lenders are increasingly skittish about their outstanding bonds (and demanding higher interest to assuage their concerns).

I’m sure there are several arts managers (particularly in LA) who hadn’t banked on banking as their primary job responsibility. But other managers across the country should be pulling out their green visors and re-assessing the risks in their current financial strategies.

It may not feel like art, but it’s certainly part of the artifice that makes art work.