Nonprofit Revenue Strategy and Downside Risk: Applying Portfolio Theory and Extreme Value Theory
This 2023 article by Saerim Kim for the Nonprofit and Voluntary Sector Quarterly argues that it is best to incorporate portfolio diversification that seeks a negative correlation between sources to avoid simultaneous losses:
The risk of revenue instability is a concern for any nonprofit. Existing research leads to the well-known strategy of equalizing revenues across sources to reduce revenue volatility. This study offers several expansions to this strategy.… The results can help nonprofits consider incorporating downside risk in revenue portfolio management to enhance financial security.
