{"id":9786,"date":"2016-11-03T22:48:10","date_gmt":"2016-11-04T02:48:10","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/disasters-or-opportunities\/"},"modified":"2016-11-03T22:48:10","modified_gmt":"2016-11-04T02:48:10","slug":"disasters-or-opportunities","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/disasters-or-opportunities\/","title":{"rendered":"Disasters or Opportunities?"},"content":{"rendered":"

No More Budget Deficits<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>In a 2014 email to the leadership of the American Red Cross, Gail McGovern, a former HBS marketing professor and the CEO of the American Red Cross sought to explain the non-profit\u2019s $70 million FY14 deficit.\u00a0 McGovern described the root cause of the budget deficit as \u201cfundraising that fell short of our target in a year without any huge national disasters.\u201d[1]<\/a>\u00a0 In a post climate change world, the Red Cross would no longer have to lament the dearth of death, instead being able to focus on increasing their revenues from their 4% administrative fee[2]<\/a> and 17-26% of donations spent on fundraising.[3]<\/a><\/p>\n

Climate Change and Natural Disasters<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>While the potential effects of climate change may be quite varied, one of the clearest results would be a rise in the number of and devastation caused by natural disasters. Sea levels would rise, flooding homes along the world\u2019s coastlines, extreme weather patterns would increase the number of floods and droughts on land, warmer temperatures would lead to heatwaves and more hurricanes and typhoons, all necessitating disaster relief efforts.\u00a0 Global conflicts would likely increase as a result of the scarcity of resources creating refugees who would seek the safer shores of the United States.\u00a0 Though such disaster would spread throughout the globe, the United States would be affected by flooding, hurricanes, heatwaves and said refugees seeking a new home.\u00a0 In this situation, the American Red Cross would be called upon to provide disaster relief and the American people would increase donations.<\/p>\n

Revenues Rise with Sea Levels<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>The American Red Cross is a tax-exempt, non-profit formed in 1881[4]<\/a> with revenues of over $2 billion a year.[5]<\/a>\u00a0 The Red Cross\u2019s financial figures are notoriously opaque due to combining revenues and expenses from the organization\u2019s separate fundraising and blood supply efforts.\u00a0 In 2014, NPR worked with ProPublica to research the true administrative and spending figures for the American Red Cross and found that 17-26% of all money donated is spent on fundraising, on top of the 3-4% spent on administrative fees. [6]<\/a> Using these figures with the current $2 billion a year in tax-free revenues the Red Cross is earning roughly $80 million in admin fees per year and spending around $400 million on fundraising. \u00a0In the aftermath of Hurricane Katrina in 2005, the American Red Cross raised over $3 billion, displaying the huge impact each natural disaster has on the Red Cross\u2019s bottom line.[7]<\/a>\u00a0 As the rate and severity of natural disasters increases we can only expect to see more donations to the American Red Cross, raising revenues and their associated administrative fees.<\/p>\n

Disaster Fatigue<\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>Perhaps the most important issue with which the American Red Cross would have to deal is so-called disaster fatigue.\u00a0 As the frequency of natural disasters increases, donors will feel less and less obligated to donate to the Red Cross during each subsequent event.\u00a0 One cause of disaster fatigue could be donors who set yearly donation budgets which may be met early in a year.\u00a0 Another effect of climate change would be decreased media coverage of each natural disaster as the public tires of watching the same videos of death and destruction on the news every night.\u00a0 As awareness for natural disasters decreases and so many more events occur, the Red Cross will receive far less donations for each disaster as they did before.\u00a0 In order to cope, the American Red Cross will either need to decrease services provided, be forced to look for internal cost cutting measures, or seek to raise awareness of disasters to keep the money flowing.\u00a0 This would be a very serious problem and the Red Cross would be unable to cut costs enough and would have to start providing fewer services with each natural disaster or seek federal funding to continue their disaster relief efforts. Although, the American Red Cross will be a short-term beneficiary of climate change, the American public will grow desensitized to others\u2019 suffering and less likely to donate in the long run.<\/p>\n

(698 words)<\/p>\n

 <\/p>\n

[1]<\/a> “CEO Gail McGovern Email on Red Cross Deficit – September 2014.” – ProPublica. Accessed November 03, 2016. https:\/\/www.propublica.org\/documents\/item\/1348173-ceo-gail-mcgovern-email-on-red-cross-deficit.html.<\/p>\n

[2]<\/a> \u201cRating for American Red Cross,\u201d January 10, 2016, accessed November 4, 2016, https:\/\/www.charitynavigator.org\/index.cfm?bay=search.summary&orgid=3277.<\/p>\n

[3]<\/a> \u201cThe Red Cross CEO Has Been Serially Misleading About Where Donors\u2019 Dollars Are Going,\u201d Red Cross, December 4, 2014, accessed November 4, 2016, https:\/\/www.propublica.org\/article\/red-cross-ceo-has-been-misleading-about-donations.<\/p>\n

[4]<\/a> \u201cOur Federal Charter | American Red Cross,\u201d 2016, accessed November 4, 2016, http:\/\/www.redcross.org\/about-us\/history\/federal-charter.<\/p>\n

[5]<\/a> \u201cRed Cross Misstates How Donors\u2019 Dollars Are Spent,\u201d December 4, 2014, accessed November 4, 2016, http:\/\/www.npr.org\/2014\/12\/04\/368453320\/red-cross-misstates-how-donors-dollars-are-spent.<\/p>\n

[6]<\/a> \u201cThe Red Cross CEO Has Been Serially Misleading About Where Donors\u2019 Dollars Are Going,\u201d Red Cross, December 4, 2014, accessed November 4, 2016, https:\/\/www.propublica.org\/article\/red-cross-ceo-has-been-misleading-about-donations.<\/p>\n

[7]<\/a> \u201cHurricane Katrina 5 Year Summary,\u201d accessed November 4, 2016, http:\/\/www.redcross.org\/images\/MEDIA_CustomProductCatalog\/m3640083_Katrina5Year_Sum.pdf.<\/p>\n","protected":false},"excerpt":{"rendered":"

Imagine an organization that thrived when others suffered, earned revenue during times of crisis and disaster, such an organization would be well-suited to benefit from the effects of climate change. 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