What it's about:
Natural disasters have filled the news in recent months, occurring so frequently that they seem to intimate apocalypse: wildfires, earthquakes, hurricanes. But as national and international media coverage of these events recedes, the local effects persist - often for years.
Small businesses, which account for the vast majority of enterprises in the U.S. and employ half of the private sector workforce, are particularly vulnerable when disaster strikes. Unlike large businesses, they often do not have the resources to complete effective contingency plans; nor are they eligible for relief that targets individual households. As a result, almost 40 percent of small enterprises in the U.S. shutter in the wake of shock.
A new report out of the Yale Center for Business and the Environment, co-authored by Katy Mixter and Laura M. Hammett, explores how the private sector, with its nimbleness and operations expertise, can support small businesses after disaster, supplementing the traditional model built on government, nonprofit, and international agencies.
As global damages from disaster continue apace - currently pegged between $250 to 300 billion per year - this report offers a new approach to relief that draws on latent potential in the private sector.
While standard relief efforts should not be abandoned, the report describes how existing companies can leverage their extensive resources - their products, services, human capital, client base, supply chains, and footprints - to help bolster local infrastructure and economies post-disaster.
For a full draft of the report, visit: http://cbey.yale.edu/adaptive-finance
Why it's noteworthy:
In today’s rapidly changing world, there are many challenges facing organizations that help reconstruct communities after disasters. One major challenge is providing adequate financing options to survivors that are timely and appropriate. Such financing empowers survivors to rebuild their own homes, businesses and lives.
Unfortunately, gaps remain between the financing needs of individuals and businesses after disasters and the availability of funding during recovery. And financing is often too slow or insufficiently scaled to support the most critical needs of individuals and businesses in the wake of disasters.
The private and public sector both have an opportunity to contribute to short and long-term reconstruction efforts by providing financial products and services that are adapted to the needs of those affected by disasters.
However, offering such products requires a paradigm shift in the way that companies design and offer financial products that can adapt to customer needs - as well as an understanding of the specific challenges presented by disaster recovery.
Changing conditions demand flexibility. Most product-development processes for individuals and small businesses create fixed products. For example, a mortgage is a product which a client can buy with generally set terms. However, if a client wants to change the fixed terms of their contract, they generally have to refinance.
In contrast, adaptive financing offers flexible products that can adapt to changes in customer situations. This adaptability depends on flexible underlying processes that allow finance providers to make ongoing adjustments to products in response to changing client needs.
This requires a redesigned product-development process. It also necessitates the management of a financial product as a service instead of a commodity.
This report documents the major challenges associated with designing adaptive products - and creating solutions that can reduce such barriers. It serves as a launch point for any organization beginning to think about creative financing solutions to disaster reconstruction. We hope it will inform and inspire such organizations to craft solutions that close the funding gap.
Read it on
Yale Center for Business and the Environment