The Nitty Gritty of Disaster Relief

Doctors Without Borders keeps reserves liquid

Remi Obert of Doctors Without Borders Remi Obert of Doctors Without Borders

Mobilizing cash quickly, safely and cost-effectively during a disaster is unfamiliar territory for most corporate treasurers. But Remi Obert, director of finance for the French branch of Doctors Without Borders/Médecins Sans Frontières (MSF), the humanitarian aid organization, does it all the time. It’s his job to turn cash into urgently needed medical equipment and supplies for devastated areas like Haiti after the 2010 earthquake and Japan in the wake of this year’s disasters.

The secret, Obert says, is to start with international reserves (typically six to nine months' expenditures, or $400 million to $600 million) that can be monetized and moved quickly, centralize as much of the spending as possible at headquarters, and organize a flexible, responsive network of global accounts for receiving and concentrating donations.

“We try to anticipate what we’ll need, so we can respond to emergencies quickly before receiving dedicated funds,” Obert says. “We have a centralized ‘emergency desk’ at headquarters staffed with people who specialize in designing and implementing emergency response plans. The primary cash flows for purchasing medical equipment, drugs, tents, transportation and salaries of people on the ground at the emergency site are all ordered and funded by that desk. Import constraints generally are waived for emergency response. We saw that in Haiti.”

Of course, some things have to occur on the ground in conditions that may be chaotic. One of the first duties of on-the-ground coordinators is to meet with legal and financial authorities and open accounts at the most functional banks, so headquarters can wire cash in the local currency to those accounts.

After the initial funding, the accounts usually are refreshed with monthly wires in amounts estimated to meet needs, Obert explains. “To maintain controls and minimize the need for local cash, we try to persuade as many local suppliers as possible to take payment from headquarters,” he says.

Only two or three people—including a project coordinator and a finance coordinator—are authorized to use those local accounts, he adds. In Japan and Haiti, it helped that MSF already had a presence and local bank accounts before the disasters hit. In the first three months following the earthquake in Haiti, 85% of expenditures were paid by headquarters, and only 15% locally, Obert reports.

Managing inflows is the other half of the equation. Here 19 MSF national sections around the world come into play. Five of them, designated as operational centers, run programs in the nearly 70 countries where MSF is active. All 19 sections serve as collection centers for the contributions that pour in after a well-publicized disaster.

After the Haiti earthquake, the Paris operational center, which partners the with the U.S., Japan and Australia sections, received $140 million in donations designated for Haiti. In the first month after the Japan disasters, the total was $5 million.

All channels are open. Mail flows into post office boxes, usually as checks or debit authorizations, and the donations are deposited in appropriate accounts. Donations are made online at the Websites operated by all 19 MSF sections (such as www.doctorswithoutborders.org for the U.S.), either by authorizing direct debits or paying by credit card. Some donors wire contributions to an account number listed on the Websites and in MSF mailings and TV ads.

More than two-thirds of the funds raised come in as euros or U.S. dollars, and donations in other currencies are generally converted into either euros or U.S. dollars, depending on the currencies needed and the rates. Currency conversions are handled at the spot rate or sometimes with forward contracts. Accounts are not segregated by disaster, but data processing keeps track of how much was donated for specific disasters or countries.

The national sections coordinate fund-raising to avoid collecting more earmarked funds than are needed. MSF’s policies strongly encourage unrestricted donations that can be used in any emergency, Obert explains. For example, after the Japanese earthquake and tsunami, MSF stopped accepting restricted donations, since its operations in Japan were relatively small, and instead asked donors to contribute to the general emergency fund instead.

MSF’s procurement has been polished by experience. Two supply centers are responsible for sourcing the best products that meet MSF medical and logistical standards at the best prices. Some emergency supplies, such as vaccines, surgical kits and tents are stored in the warehouses MSF has in each country in which it operates. The organization cuts the best deals with air and sea freight companies to move supplies to where they are needed, Obert says.

 “Experience has taught us what we’re likely to need on the ground during the first days of a disaster without being physically present, and that helps us contain costs,” Obert says. “Key people who arrive first on the ground are authorized to move quickly without waiting for approval from headquarters, but we’ve learned to minimize the amount of cash that changes hands locally.”  MSF funds its relief work strictly with reserves and donations, he adds, and never taps a line of credit for emergency expenditures.

 

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