Purpose
Turn a raw list of funding sources into a scored concentration-risk report — quantifying how dependent the organization is on its largest funders, flagging where a single loss would create a budget crisis, and benchmarking the portfolio against healthy diversification standards. Solves the problem of concentration risk being felt intuitively but rarely measured until a major funder walks.
When to Use
Invoke this skill when the user asks to:
- Assess how dependent the organization is on its top funders
- Prepare a funding risk analysis for a board or finance committee
- Evaluate exposure ahead of a major grant renewal or expiration
- Diagnose whether the revenue base is dangerously concentrated
- Benchmark funding diversification against sector standards
- Build a case or plan for diversifying revenue sources
Inputs Required
Before starting, collect:
- Funding sources and amounts: A line-item list of each funder/source and its dollar amount for the period (grants, individual donors, government contracts, earned revenue, events, etc.)
- Total annual revenue/budget: The full operating revenue figure for the period
- Funder type per source: Foundation, government, individual/major donor, corporate, earned revenue, or event (used to assess volatility, not just size)
- Renewal status or term: For the largest sources — multi-year committed, annual/renewable, one-time, or uncertain
- Restricted vs. unrestricted: Whether each source is restricted or unrestricted, if known
- Organization size/stage: Approximate budget size and whether early-stage, growth, or mature
If funder type or renewal status is missing, score on amounts alone and note that volatility-adjusted risk could not be applied.
Instructions
Step 1: Normalize and Rank the Portfolio
Convert the source list into a clean, sortable ledger:
- Confirm the sum of all sources reconciles to total revenue; if there's a gap, treat the difference as an "unlisted/other" bucket and flag it.
- Calculate each source as a percentage of total revenue.
- Rank sources largest to smallest.
- Note funder type and renewal status alongside each ranked source.
Step 2: Calculate Concentration Ratios
Compute the core metrics:
- Top 1 concentration: Largest single source as % of total revenue
- Top 3 concentration: Sum of the three largest sources as % of total
- Top 5 concentration: Sum of the five largest sources as % of total
- Herfindahl-Hirschman Index (HHI): Sum of the squared percentage shares of every source (a 0–10,000 scale where higher = more concentrated). Report the raw HHI and its interpretation band.
- Funder type mix: % of revenue by funder type (foundation / government / individual / corporate / earned / event)
Step 3: Apply Benchmark Thresholds
Score each ratio against diversification standards:
Top 1 single-funder dependency
- Healthy: under 25%
- Caution: 25–35%
- High risk: 35–50%
- Critical: over 50%
Top 3 concentration
- Healthy: under 50%
- Caution: 50–65%
- High risk: 65–80%
- Critical: over 80%
Top 5 concentration
- Healthy: under 65%
- Caution: 65–80%
- High risk: over 80%
HHI interpretation
- Diversified: under 1,500
- Moderately concentrated: 1,500–2,500
- Highly concentrated: over 2,500
Funder type mix: Flag if any single funder type exceeds 60% of revenue — type concentration is a hidden risk even when individual funders look balanced (e.g., five foundations behaving as one correlated risk).
Step 4: Flag High-Risk Dependencies
Identify specific vulnerabilities beyond the raw ratios:
- Single points of failure: Any source above 20% whose loss would force program cuts. State the dollar gap and rough % of budget it represents.
- Renewal cliffs: Large sources that are one-time, expiring, or uncertain — weight these as higher risk than committed multi-year funding of the same size.
- Correlated risk: Multiple sources that could fail together (same funder type, same economic driver, same government appropriation cycle).
- Restriction trap: High concentration in restricted funds while unrestricted revenue is thin — flag if unrestricted revenue can't cover core operating costs.
Step 5: Assign an Overall Risk Score
Synthesize into a single grade:
- Low / Diversified — all ratios in healthy bands, no single point of failure over 20%
- Moderate — one or two ratios in caution, manageable dependencies
- Elevated — one high-risk ratio or a single-funder dependency above 35%
- Severe — critical band on top-1 or top-3, or a renewal cliff on a source above 30%
State the primary driver of the score in one sentence.
Step 6: Diversification Action Plan
Deliver 4–6 prioritized, specific actions tied to the actual portfolio, such as:
- Which dependency to reduce first and a target % to bring it under
- Which underweight funder type to grow and a realistic 12–24 month target
- Whether to prioritize unrestricted revenue growth given the restriction mix
- What to do about any identified renewal cliff before it hits
- A recommended cash reserve target given the concentration level (higher concentration warrants deeper reserves)
Output Format
- Structure: Ranked portfolio table → concentration ratios with benchmark scoring → high-risk flags → overall risk grade → action plan
- Length: 700–1,000 words
- Format: Ranked table for the portfolio and ratios; bulleted flags; numbered action plan
- Sections: Portfolio Snapshot → Concentration Ratios & Benchmarks → High-Risk Dependencies → Overall Risk Score → Diversification Action Plan
- Tone: Nonprofit CFO addressing a finance committee — precise, numbers-first, candid about risk without alarmism
Quality Checklist
Before delivering output, verify:
- [ ] Top 1, Top 3, and Top 5 concentration percentages are all calculated and stated
- [ ] HHI is computed and placed in an interpretation band
- [ ] Every listed source sums to total revenue (or the gap is flagged)
- [ ] Each ratio is scored against its specific benchmark band, not just reported
- [ ] At least one named high-risk dependency includes its dollar gap and % of budget
- [ ] An overall risk grade is assigned with a one-sentence driver
- [ ] The action plan is specific to this portfolio — not generic diversification advice
Notes
- Two organizations with identical top-1 percentages can have very different real risk: a 30% multi-year committed government contract is safer than a 30% annual foundation grant up for renewal. Always weight by renewal status when the data allows.
- Funder-type concentration is the most commonly missed risk — a portfolio of ten foundations can behave like a single correlated bet in a downturn.
- Recommend re-running this analysis annually and before any budget above 25% concentration goes into a renewal year.
How to use this skill
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Installing in Claude Code:
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Using in Claude.ai, ChatGPT, Gemini, or other AI tools:
- Drag this file into a new chat, or copy and paste its contents
- Send your task or request as your next message — the AI will apply the skill where it fits
For Claude Code skill details: https://docs.anthropic.com/en/docs/claude-code/skills