Financial Health for Humanitarian Impact

Megan - 00:00:40: Today, my guest is Sam Wehbe. Sam is a financial management executive and board member with over 20 years of experience in the international development and nonprofit sectors. He has overseen the financial stewardship of more than $2 billion in donor funds, both in the United States and internationally. As a chief financial officer, Sam champions strategies focused on financial resilience by designing scalable financial and funding structures that drive meaningful impact and support sustainable social, health, and economic outcomes in vulnerable communities worldwide. His extensive experience includes collaborations with key donors such as various United Nations agencies, U.S. government entities, foundations, corporations, and foreign governments. Committed to strategic organizational development, Sam has consistently led initiatives centered on financial and operational sustainability, funding models, risk mitigation, and business intelligence. He has played leading roles in the strategic design and execution of modern financial and cost structures that enhance an organization's capacity for growth and strengthen its industry positioning, while ensuring that financial resources are optimized for mission-driven impact. While achieving the mission is the ultimate purpose for nonprofits, Sam believes that financial leadership has the even greater responsibility of ensuring that the same mission is achieved sustainably. Sam, thank you very much for being my guest on today's episode of CFO Weekly.

Sam - 00:02:42: My pleasure, thank you for having me.

Megan - 00:02:43: Yeah, today we're going to be talking about the business of doing good, balancing impact and financial health of global nonprofit organizations. And Sam, your background is really remarkable and I'm excited about the opportunity to learn about you and your thoughts and experiences with this topic. So let's jump right in.

Sam - 00:03:01: Great.

Megan - 00:03:02: First of all, you have two decades of experience in financial management within the nonprofit and international development sectors. What was it that initially inspired you to pursue a career in this field?

Sam - 00:03:15: Oh, very good question. Well, I grew up in Lebanon during the civil war back in the 80s. And as a kid living through civil unrest, it had an impact on my personality as a young kid growing up and as a professional later on in life. And these experiences let you see the world and the people who are going through similar experiences through a totally different lens. So this reality, however, only hit me after I graduated from business school. And then I started applying for jobs. That's when I learned that, hold on, there's a whole totally different financial sector outside banks, outside of insurance companies, outside of the financial market. And this sector, I could actually give back to the community and most importantly, support those who are vulnerable and those who lived through civil unrest and wars and poverty and economic and political corruption. So I found this as an opportunity. And that reality of a child, ,the memories of a child growing up in a civil war made me, in a way, focus all of my job applications to this specific industry, which is the nonprofit, humanitarian, international development industry. And until now, this is my driver. I see that issues of political corruption, wars, poverty, civil unrest, unfortunately, were normalized back then for me growing up. And they still normalized in many countries these days. So this is what drives me. This is what brought me into this industry. I have a degree in finance. I never worked for a bank. This is what I started. And this is where I am right now.

Megan - 00:04:51: That's amazing. So can you just kind of walk us through your career, what you've done and where you are today?

Sam - 00:04:58: Of course. Back in Lebanon, I started my first job was with a nonprofit in Beirut. It's a DC-based nonprofit, but they had a regional office in Beirut. And this is where I learned the ropes of nonprofit world, worked with different donors, different government and non-government clients. Afterwards, I had a very short stint in Iraq operating my own business. Supported the multinational forces in the country back then. Afterwards, I moved to the States where I went back to the humanitarian nonprofit industry with several health development organizations. Primarily, they were all health development and health systems. And my career, I grew from one position to another until I am now with Medical Teams International. I am their chief financial officer and have been with them for almost three years now. And it'll be three years in March. Time flies.

Megan - 00:05:49: We have dust.

Sam - 00:05:51: I mean, exciting industry, very challenging industry. Many nights I don't sleep because you always think about the challenges that you face in a humanitarian sector, but it is exciting and I would never trade it for anything else.

Megan - 00:06:04: And in your opinion, how can financial management create positive change? And have you experienced that in your career?

Sam - 00:06:12: Of course. Creating positive change is not easy to start with, particularly in a humanitarian sector and even more particularly if you are in a financial capacity. Creating positive change requires, needs to be sustainable because all of the investment going towards the change, if it's unsustainable, then it's money lost. And unfortunately, we live in a world where global needs are only growing while resources are shrinking. This makes sound financial management the difference maker because it would be the only strategy and the only way to transform resource limitation into opportunities for impact. And this is what we need right now. And this should be the trend moving forward in the financial management sector. I can give you an example. In an organization that I worked for, we were facing significant funding shortfall. It was projected. It wasn't a reality yet, but we did project significant funding shortfall while program support needs were growing at a steady pace. So obviously this threatened the similar programs that we were operating. So we had to move fast. So the first thing we did is we built several revenue shortfall models and we adapted our operating model, our financial model, our structures for those different models. So we are ready for any challenge. And it worked. By doing so, we basically responded to the model, to the different, to the funding shortfall before it became reality in our books. And I'm biased here, but financial, but when it comes to the importance of financial management, I always say that the objective for everyone in the organization is to achieve the organization's mission. And this is something all of us at Rayon have. However, the objective of financial leadership of the organization is to achieve the mission, but not only achieve it, they have to achieve it sustainably. And this is always a challenge at times when you're sitting at the helm of the financial management of an organization that you have this extra responsibility of achieving that mission and keep it sustainable and financially viable to move on to the future.

Megan - 00:08:21: Just talk to us for a moment about Medical Teams International. What is their mission?

Sam - 00:08:26: Well, Medical Teams International, we break barriers to health. We operate in a very challenging context that other organizations, even health humanitarian organizations, do not operate in. Our model is very expensive. Medical health and providing and breaking barriers to health is a very expensive proposition. It is challenging. It's risky. We operate in countries where there is crisis, there is war, there is civil unrest. And we do that. That's our mission. That's our calling. We are a faith-based organization, and we take that faith direction as a calling. And we are called to do this work. So this is who we are. This is our identity. And this is why it is challenging, because doing, it's like going the path that is less traveled. This is the path that we take. And we continue doing that.

Megan - 00:09:13: Yeah, your role must be 24-7.

Sam - 00:09:15: 24-7.

Megan - 00:09:16: And at Medical Teams International, how do you define and measure the balance between financial health and social impact?

Sam - 00:09:23: A very good question. It's tricky at times. However, we have defined dependence. And dependence is always by ensuring that every dollar spent is aligned with the objectives of your mission. Additionally, you have this responsibility that while you want to direct every dollar to the mission, but you also have the responsibility to build financial resilience to the organization and support the long-term or the longevity of your programs. So achieving this balance requires a solid financial model that allows you to remain agile in response to challenging needs, to changes in the funding landscape, while also prioritizing measurable outcomes that reflect your impact on the communities that you serve. So to maintain this balance as a CFO of Medical Teams, I prioritize several key performance in the KPIs. I definitely monitor our program efficiency ratio just to see how much money is going towards program, how much admin costs is supporting the programs. How efficient our programs are. And this is something we have to be accountable towards donors, even towards the people that we serve. I usually, from a financial perspective, monitor the leverage ratio to make sure that programs are not over leveraged, that we are actually building a financial cushion to enable our financial resilience moving forward. And one difficult metric to measure is the impact per dollar. And this is hard to measure, and it would require innovation and something that we always try to achieve. But it's, it's difficult in our industry with the changing needs to measure the impact per U.S. dollar you spend. Finally, the two big things that I work on, and this at a very high level, is to make sure that we have enough reserves to respond to immediate needs and immediate investments that we need to make and the net assets to make sure that we are building financial resilience moving forward as an organization.

Megan - 00:11:10: And given your extensive experience in managing donor funds, what strategies have you found most effective in ensuring transparency and accountability to those stakeholders, letting them know that their dollars are being spent as they donated them to be spent and keeping the wheels on the business?

Sam - 00:11:28: Gosh, that's a multifold question. Well, I will start with the basics. The basics, there are two pillars that would drive any type of management of donor funds in a good way. First of all, there shouldn't be any, no one, you can't compromise on transparency and accountability. That's number one. These two should be the only way through which an organization can achieve its objectives in a manner that aligns with its value and the value of the industry, of the nonprofit industry. Second of all, there have to be measurable metrics because you can't gauge your improvement without metrics. So setting these metrics do not only inform internally how you're performing. But they also, demonstrate transparency and accountability and financial responsibility towards donors, governments, oversight bodies, and most importantly, the individuals that are benefiting from the service that the nonprofit is providing. So with two in place, then you look at the ecosystem that you have. Every organization, and as a CFO, I strive to build a rigorous ecosystem of financial control and compliance framework to ensure that donor funds are spent, as intended. Now, having said that, when these basics are in place, then you can start planning for innovation because you can't innovate if you do not have the basics. Then you would start building, for example, month-to-year flexible budgets for innovation. And it's something that I found very beneficial where building flexibly, building flexibility within multi-year budgeting frameworks allows the organization to pivot towards innovation projects that align with its mission and while still being accountable for how funds are spent, and this is many CFOs in the industry right now do not do this approach because in the humanitarian world, most of the time we're restricted by funding availability. So we are budgeting year after year, instead of building this multi-year flexible model to include innovation in it. And when you build this model moving forward, it's very difficult to have it work without maintaining transparent and regular communication with stakeholders, because there are a lot of dependencies when you build long-term model of what this model has and what other departments are required to implement and do based on that model. So clear communication. Transparent communication is, is the key with the stakeholder group and ensuring that there is strong governance and oversight structure to ensure that everything is going well would enable this strategy moving forward. So in a nutshell, really, it's a balance. It is a balance of maintaining strong focus on transparency and solid governance. Yet, a lot of flexibility and financial planning in order to create lasting social value to the work that we are doing.

Megan - 00:14:14: And every organization struggles to find balance between immediate operational needs and long-term strategic goals. But how is this unique in a nonprofit context? What are your unique challenges?

Sam - 00:14:26: Well, the unique challenge at a nonprofit context is that most of the time a nonprofit goes underwater, they go down and they shut doors, not because they are not doing well financially. It's not because they're not growing enough, but because they do not have the liquidity to answer for immediate commitments. And this is an area of financial planning and analysis in a nonprofit context, because you will have to balance your immediate commitments, your long-term commitments, and the availability of cash that you get. And it's not a little bit technical here, but in the U.S., we follow GAAP, and all of our budgeting, spending, revenue recognition, all of that is accrual. It's not cash. What it means is that you see the revenue on your books now, but the cash may come next year, especially if it's a pledge or a long-term commitment or a grant. And this comes with challenges of this balance. So making sure that you have a proper and adequate FP&A function is very important at this point to address this risk. And at the heart of the FP&A should be prioritizing your mission delivery, because there is no FP&A structure that fits every organization. Every organization has its own context, its own nuances, its own industry. But the one thing that standard had common, is that it has to address the mission delivery and make sure that there are metrics for resource allocation, financial modeling, forecasting, and scenario planning to make sure that the nonprofit is ready to face unpredictable top-end funding streams or donor restrictions, and make sure that it is flexible enough that flexibility models are built into the financial model of the organization and make informed utilization of its unrestricted the resources.

Megan - 00:16:10: And what strategies are you utilizing to ensure that things are flexible enough to sustain programs, even when funding is low?

Sam - 00:16:21: Absolutely. I mean, the first strategy that comes to mind, and I think this is a given that every organization should build, would be building a reserve fund. And that reserve fund, it can be, I mean, different organizations call it differently. We call it operating reserves. And this is a strategy basically is providing the financial cushion during the periods of revenue volatility. This allows the organization to continue delivering critical programs, even if funding is delayed or reduced. At Medical Teams, I regularly, I prioritize replenishing these reserves so we can absorb any short-term fluctuation without disrupting operations. The last thing you want to do is to stop programs to build your reserves, as important as reserves is. As an organization, your mission is to deliver program and not to build reserves. The second strategy would be to diversify your funding streams, because through proper diversification of donor base, you are not dependent on one donor. Whether it's a government donor, where any political, whoever is in office may basically determine your funding or level of funding, or whether it's a private donor, which means you are at more risk of that person's or that foundation's financial health. And there's no one-size-fits-all. It's all for this diversification. However, it remains the single most important mitigator to financial risk at times of funding uncertainty. I also focus on, and this is more of a collaboration between myself and other stakeholders at the organization, is how we can build long-term funding partnership. And this can be through partnerships with institutional donors. We can talk about DHA, USAID, other government agencies, the United Nations, or building consortia with several implementers. Who are like us, like-minded, where we can share resources and approach funding opportunities together. And this way you are focusing more on those partnerships that will generate income later on to move forward.

Megan - 00:18:18: And talk to me about cultural differences in regulatory environments and how those impact financial management practices in global nonprofit operations.

Sam - 00:18:28: They do. And it is a challenge for international nonprofits, particularly like us. If we were only operating in the United States, then you are falling. You're reading from one book with some variances, obviously. But when you go global, when you go international, you are navigating regulatory compliance differences between your donor, who may be the U.S. government or the United Nations, and the local laws and the tax laws and the labor laws and the country of operation. So different countries have unique reporting standards and funding regulations that you have to adapt your financial systems to meet these regulations or else you cannot operate in that country. And there's always a challenge. So this from a regulatory aspect, but from cultural aspect, and this is when it's even more challenging. I mean, we've always, myself and maybe other CFOs and other industry leaders, we faced instances when the cultural attitude toward decision making in a certain country may pose risk to the organization. Even the cultural attitude may affect risk tolerance in that country, which may have impact on financial decisions, accountability, transparency. And I think from my perspective, this necessitates investments in capacity building in that location or in that country to make sure that cultural differences do not pose risks to the best, to the organization and continue applying the best practices, no matter what the culture in that country dictates. Also, and it's a very difficult topic to talk about at times, also culture at times makes fraud easy. What we may see as fraud here, because fraud is fraud, it's either black or white. In other countries, it may be a little bit socially acceptable under certain contexts. Everyone recognizes fraud that it's a bad thing to do, but in certain contexts at times, fraud may be acceptable. And this is very challenging for us. And a lot of education should have to go in that area at a local, at a country level, at a country leadership level, even at a program leadership level.

Megan - 00:20:32: And in the context of crisis situations, such as natural disasters or health emergencies, how is it that you ensure that financial resources are allocated efficiently to maximize impact? I mean, you just started your role, right, basically in the thick of COVID.

Sam - 00:20:49: Correct. Yes. And that was not fun. It was challenging, though. Well, I talked in previous question about building flexibilities in your budget. And we do build some flexibility and anticipation of crisis that may happen. Like last year, we had the fires in Hawaii, right?

Megan - 00:21:07: Yeah.

Sam - 00:21:07: We didn't know these were coming, but in our budget, we built a response budget in case a natural disaster happened in the U.S.. We had Florida a couple of months ago. This was also built in our budget. We didn't see it coming, but we built flexibilities there. However, when the crisis happens, what we do is we do a quick rapid needs assessment in order to prioritize. So it starts with initial assessment. Assess the crisis impact, the need, potential costs, who are the players, is there anyone on the ground, an organization that we know, an organization that's part of a collaboration that we've worked with before. So we start building network in the area if we do not have presence there. After that, we assess how we're going to respond. Are we going to send teams? Are we going to build clinics, mobile clinics there to respond to the crisis? Or are we going to partner with someone on the ground and send some of our resources, some of our staff to go and help or only fundraise. So if we plan not to go there in person for many reasons, and it happens all the time, we can fundraise for a partner organization and provide them with the resources for them to go ahead and respond. So there are many, many outcomes of that assessment. And based on that, we start depending on the path we want to take. And at Medical Teams, we apply a variation of this model in different countries and different locations. I talk about Florida. I talked about Hawaii. We also adopted it internationally. I can talk about Ukraine, the civil war in Sudan, the earthquake that hit Turkey two years ago, in addition to the war in Gaza. So unfortunately, we live in a world where crisis, there's abundance of crisis and abundance of need. But unfortunately, resources are only going down, and we have to respond to that. It doesn't mean we just sit back and look at the crisis happen. We have to respond.

Megan - 00:23:00: As a financial leader in the nonprofit sector, how are you promoting a culture of innovation while maintaining fiscal responsibility? And what role is technology playing in that?

Sam - 00:23:11: I mean, we live in a world where if you do not embrace innovation right now, you will be left behind. This is given. This is granted. And I think that the industry has to move to a point where innovation is not a strategy anymore. Like you shouldn't be sitting and strategizing and one of your strategies would become innovative. Innovation has to be a culture at this point that's embedded in every part of the organization. And in our space, in the nonprofit financial management space, this means investing in continuous improvement. And investing in technology that enables data-driven decision-making, all while upholding the fiscal responsibility and mitigating risks. However, I think that organizations have to be smart about innovation by establishing proper guardrails defined by the organization's mission and financial health and their financial strategies moving forward.

Megan - 00:24:01: And you spoke about fostering collaboration across the organization, but how is it that you foster partnerships with other organizations and governments and within the private sector to enhance your financial health and increase social impact?

Sam - 00:24:18: Fostering these partnerships is usually a given in a strategy, particularly if you want to grow. And you look for like-minded organizations to start with. You look for alignment on mission and impact goals. So when partnering with a government agency or not even a government agency, it's mainly media, another donor, another foundation, the United Nations, you have to make sure that you are delivering a service that aligns with their objective for development. So that's one. Also making sure that there's a shared vision. If you are partnering with other like-minded organization at your level, maybe competitors in some context, but also you do the same work. Look for shared vision, look for outcome-focused planning, co-develop impact projects with clear metrics that can help both. One of the strategies that would go under this would be leveraging complementary strength. Make sure that there is mutual resource sharing, because at the end of the day, no one's going to partner with you if you are only benefiting from this partnership and they're not. So there has to be mutual resource sharing, and there's something at Medical Teams we are open about and we share, just like we expect others to share resources with us. And through that, you can start building partnership and consortia in order to develop, to co-develop, develop projects. Finally, establishing transparent communication and accountability. Just like every partnership, although the goal would be the mission, but a partnership at the end of the day is a business partnership. These are two businesses partnering together with clear objectives. So having shared transparent communication, accountability, metrics would be beneficial for that partnership and can only help it grow.

Megan - 00:26:02: And last question, but as you look ahead, what trends do you anticipate in the nonprofit sector regarding financial management? What can we see in the next three to five years.

Sam - 00:26:13: I don't want to sound very generic in this response, but definitely technology and automation is the trend right now, has been the trend for years, and it will continue. Nonprofits should invest in proper financial software for real-time tracking and efficient reporting. And by when I say a proper financial software, it doesn't have to be the best in class. It doesn't have to be the big names in the industry. It has to be a system that talks to your need. I've seen in a lot of organizations invest millions of dollars rolling out best-in-class financial systems and softwares and ERP systems and CRMs just because they have the brand, they have the name, they have the market. But they're not fit for purpose. They're not fit for what they do, and it's a loss of money, loss of resources. So looking for the system that talks to your needs is the way to go. The second thing I can think about funding diversification. The funding landscape is changing year after year. It's even difficult to draw a funding landscape, like to imagine how the funding landscape will be five years from now. It is changing continuously. With the recent crisis around the world, there is what you call right now a donor fatigue from crisis. The donor sentiment is shifting towards impact, whether social, economic impact, rather than a crisis. So right now, a fundraiser can go to a major donor and they try to show how their organization is responding to a crisis in a country or in the U.S.. There is less, the probability of getting the ask fulfilled is less than going to that same donor and expressing how their dollar will impact a community from a social perspective or from an economic perspective or building economic opportunities to vulnerable communities. These stories now are more impactful. And this is where the fundraising direction, I think, is heading in the next years. So these are the two things that I think are trending in the next couple of years, whether it's from a technology automation and understanding the sentiments of your donors, particularly your major donors that provide you with most of your unrestricted funding.

Megan - 00:28:25: Sam, thank you so much for being my guest today.

Sam - 00:28:27: Thank you, my pleasure.

Megan - 00:28:28: Yeah, I really enjoyed speaking with you. And thank you so much for finding the time to be here with us today. I wish you and Medical Teams International all the best. Your work is so, so important.

Sam - 00:28:39: Thank you, Megan. I appreciate it.

Megan - 00:28:40: And to all of our listeners, please tune in next week. And until then, take care.