Disaster Recovery Funds: Which Fund Should You Choose? December 16 th , 2013

Disaster Recovery Funds: Which Fund Should You

Choose?

December 16th, 2013

Alan ChaneyYan Lu

Serap Suvari-GuvenVaibhav Thadakamalla

Kagan Yaran

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Agenda

Objectives

Fund Classification

Project Process

Methodology

Disasters

Fund Commonalities and Takeaways

Donor Company Interviews and Takeaways

Which Fund Should You Choose?

-2-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Objectives

• Understand the disaster recovery funding environment – Classification into Traditional or Non-Traditional funds– Identify the market opportunity and attractiveness of Non-

Traditional funds

• Examine drivers of corporate motivation to support Non-Traditional funds vis-à-vis Traditional funds

-3-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Fund Classification

-4-

• These are well known disaster recovery organizations that are perpetual in nature with funds raised on an annual or event specific basis.

• Examples: American Red Cross, United Way, Doctors Without Borders

Traditional Funds

• These are funds that are either working outside their primary mission or established in a one-off situation following a disaster. In some cases the funds could close after a period of time.

• Examples: Boston One Fund, Joplin Recovery Fund, Robin Hood Sandy Relief Fund

Non-Traditional Funds

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Project Process

-5-

STEP 1 •Examine the disaster relief efforts for select disasters

STEP 2 •Categorize funds into Traditional or Non-Traditional

STEP 3 •Discover commonalities among fund types

STEP 4 •Identify and interview the universe of corporate donors

STEP 5 •Discover commonalities in donor motivations

STEP 6 •“Which Fund Should You Choose?”

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Fund Research

- Establish a database of information collected from web research and interviews

- Research Focus: - Money raised and

disbursed - Use of proceeds - Operational vs. program

expenditures - Informational disclosure - Major corporate donors,

etc.

Donor Research

- Conduct interviews with select BCLC member companies

- Interview Focus: - Role of disaster relief within

CSR - Corporate relationships with

disaster organizations - Type of donations - Selection criteria for

supporting Traditional vs. Non-Traditional funds

Analysis

- Data Analysis- “Which Funds Should

You Choose?”

Methodology

-6-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Disasters

-7-

• 3 million people affected with up to 316,000 estimated deaths• Examined 10 Funds: Traditional: 5, Non-Traditional: 5• Clinton-Bush Fund: Raised $54 Million, Disbursed: $54M Million• Use of Funds: Shelter, food, sanitation, education, job corps, construction

Haiti Earthquake (January 2010)

• Damages $2.8 billion• Examined 8 Funds: Traditional: 2, Non-Traditional: 6• Joplin Recovery Fund: Raised $9.4 Million, Disbursed $3.8 Million• Use of Funds: Rebuilding homes and schools, counseling, therapy, legal aid

Joplin, MO Tornadoes (May 2011)

• Damages $2-3.5 billion• Examined 2 Funds: Traditional: 1, Non-Traditional: 1 • United Way Tornadoes Relief Fund: Raised: $15.6 Million, Disbursed: $8.4 Million • Use of Funds: Mental health and trauma counseling, debriefing for first responders,

immediate needs

Oklahoma Tornadoes (May 2013)

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Disasters

-8-

• Damages over $68 Billion, 286 people killed in 7 countries• Examined 11 Funds: Traditional: 4, Non-Traditional: 7• Robin Hood: Raised $73 Million, Disbursed $73 Million• Use of Funds: Housing and shelter, medical support, community restoration

Hurricane Sandy (October 2012)

• 3 people lost their lives, 264 people got injured • Examined 14 Funds: Traditional: 3, Non-Traditional: 11• The One Fund: Raised $70.5 Million, Disbursed: $70 Million• Use of Funds: Covers amputation surgery and hospitalization costs of the victims

Boston Bombing (April 2013)

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Fund Commonalities Traditional Funds Non-Traditional Funds

Amount raised 15.6 - 304 Million 4.3 - 73 Million

% Disbursed 76% 88%

Major Program Categories

Immediate Relief,e.g. food, water, shelter, emo. support,

transitional housing, blood etc.

Long-Term Recovery Needs, e.g. Healthcare, microfinance, workforce dev. infrastructure

Program Expenses 85.6 - 97% 95 - 100%

Other Expenses 3 - 14.6% 0 - 5%

Pro-Bono Services Used Rarely In Most Cases

Information Disclosure (out of 10) 10 9.3

-9-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Information Disclosure

Disclosure assessed by:• 990s (2 points out of 10)– mandatory filings (hence lowest weight)

• Event Reports (3 points out of 10)– often used for marketing purposes

• Breakdown of fund disbursements (5 points out of 10)– indicates the highest level of program transparency

-10-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Fund Research-Takeaways

-11-

•Focus on Immediate Relief•Extremely Transparent•Reputational Power •High Capacity

Traditional

•Focus on Long-Term Recovery•Efficient with Donations•Celebrity Power / Political influence•Local Knowledge

Non-Traditional

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Companies Interviewed

-12-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Donor Interviews-Takeaways• Disaster Relief: a subset of CSR programs

– Size of subset based on fit with values/competencies

• Annual Giving more popular than event specific donations

• Reporting requirements vary from company to company

• Donors view Traditional and Non-Traditional Funds as mutually exclusive – Traditional: Capacity to deliver immediate response– Non-Traditional: Ability to support long-term recovery with donations

made on a project-to-project basis

-13-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Donor Interviews-Takeaways• Traditional funds favored over Non-Traditional

– Desire and ability to build long-term partnerships – Trust built through execution history and reputation

• Non-Traditional funds favored over Traditional– Program aligns with the company’s mission focus to support recovery– If there is a perception that the non-traditional fund is uniquely placed

to fill a community need

-14-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Anecdotal Information: Perception of Funds

-15-

"We want to work with organizations who have strong reputation and the capacity to execute a program"

“We donated [to the Boston One Fund] because they were respectable, had the backing of the mayor and there was a perception that it would be well managed."

"Partnerships with funds are built on trust"

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Anecdotal Information: Disaster Relief

-16-

“Our disaster relief efforts look to contribute locally to national organizations."

“We have a dedicated team that focuses on disasters and disaster relief. If an event occurs we want to be appropriately placed to inform and assist both our employees and our customers."

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

Barriers for Non-Traditional Funds• Reputation and Trust

– Difficulty in establishing relationships due to short term existence– Difficulty in assuring donors of the capacity to execute

• Funds Overcome these Barriers by;– Associating themselves with a political or celebrity figure– Associating themselves with a reputable partner such as the BCLC,

NetHope or a traditional fund like the American Red Cross– Committing to rigorous reporting practices as part of program

execution

-17-

University of Maryland - Smith School of Business - BUSI 718 Social Venture Consulting Practicum

“Which Fund Should You Choose?”• Non-Traditional match Traditional in terms of transparency &

accountability• Non-Traditional are complementary to Traditional • Assessing Non-Traditional analogous to assessing a start-up

– Mission statement– Program proposal– Charter detailing– Local knowledge level (expertise)– Partnerships

• Choice ultimately comes down to:– Is community central to donor? Contribute to relief and recovery?– If focus is disaster support/assistance? Contribute to relief?

-18-

QUESTIONS?