In early 2020, Rising Academies, one of the fastest growing education companies in Africa, faced a dual crisis. The company was poised to expand into Ghana when an unexpected short-term delay from their primary equity sponsor threatened the deal. Soon after, Covid-19 lockdowns threw the entire education sector into chaos. To keep their impact — and business — on track, Rising Academies needed emergency funding — fast.

Rising Academies is far from alone. During the first six months of the pandemic, the demand for emergency grants and loans from my organization, Open Road Alliance, grew by more than 1000%, yet still only represented a fraction of the global need. In nearly a decade of working in emergency financing, I have never seen so many organizations navigating such a range of threats: devastated revenue streams, delayed promised investments, and stressed capacity, even as demand for many services skyrocketed. An incredible number of companies have needed money. Fast.

As investors struggled to respond in early 2020, countless impact-first companies had to wait six months or more for funds because investors were using that precious time to set up emergency procedures, protocols, and criteria as the pandemic was happening. One multimillion dollar relief fund that was launched in spring 2020 didn’t make its first “relief” investment until more than a year later.

Because they were unprepared, many of the impact investors who recognized the need for emergency funding have stumbled in actually responding. They’ve learned, perhaps, what we at Open Road learned over the past 10 years, working with more than 300 companies: that emergency financing requires different criteria, investment theses, and due diligence. Moreover, setting up these systems takes time. If these emergency financing structures had already been in place, the response would have been faster, decision-making more efficient, and the financial harm caused by Covid lessened. Here’s what impact investors need to do to respond differently to future crises.

Identify structural constraints and areas of flexibility.

Impact investing includes a wide variety of legal structures with related abilities and constraints. Self-sorting into one of these three categories upfront can save time in a crisis by pointing you away from emergency strategies that are ultimately non-starters.

Very Flexible

These investors are only constrained by their own choices. They have access to multiple vehicles or legal entities, allowing them to change their criteria, terms, or even investment products. For example, an individual impact investor making equity investments to date can choose to pursue debt, grants, or a guarantee, with minimal restrictions.

Limited Flexibility

These are institutional investors and other organizations whose operating documents may limit the type of investments, sector, or other investment terms. These investors will want to look for options within their existing structure. For example, an equity fund cannot suddenly start making loans. However, its structure may offer it the flexibility to accelerate due diligence timelines, delay pricing by offering convertible notes, or provide non-financial technical support.

Significantly Constrained

Impact investors in this group cannot change their investment strategies and face significant constraints due to their legal and fiscal structures. This includes organizations such as pension funds with strict fiduciary responsibilities. In these cases, preparing for emergencies may not involve launching a direct in-house response, but rather identifying third-party actors that specialize in emergency finance and can serve as an outsource for flexibility.

Develop a system to triage requests quickly, efficiently, and on a rolling basis.

Emergencies don’t wait for deadlines, and organizations in crisis can’t wait for your board meeting in three months. This means that to be effective, you need to know how to make expedited decisions. This may mean creating a smaller investment committee with authority to approve emergency investments or giving similar authority to senior staff. It is critical to do this ahead of crisis so you don’t spend precious time trying to corral your board or your investment committee for the necessary approvals to change or create protocols in the moment.

Focus on future cash flows and accept ambiguity.

When dealing with an externally created crisis (like Covid), it’s more important to analyze projected cash flows than past audited financial statements; you want to focus on whether the company can survive rather than dwell on what went wrong.

At the Open Road, one of the frameworks we use to assess this risk quickly is the concept of “a bridge to somewhere.” When looking at a company’s situation, ask if the emergency financing would build a bridge to future identified cash flows or if it’s simply extending the runway to give the company time to figure something out. While you might be willing to invest in the latter, building a bridge to maybe nowhere is a much riskier proposition.

Finally, while the default investor mindset is focused on externally validated documentation, in a time of crisis phone calls, shared spreadsheets, and real-time conversation can give you sufficient insight to make a decision about a company’s cash position and help prioritize who is most in need.

Choose what you’re willing to lose.

In large-scale crises, like Covid, the need usually outweighs the supply. This means that those in the privileged position of providing emergency finance have to own the responsibility of clearly identifying — and transparently communicating — who or what they won’t save.

Preparing this emergency financing criteria before a crisis hits is not only the best way to ensure that you will truly be doing what you intend to do, but it is critical in making sure that decisions that you are making under pressure meet your DE&I standards and your values.

As impact investors, it’s critical to weigh the opportunity cost of losing impact. For example, during Covid, supporting a marginally profitable health clinic was arguably more important than ensuring that an e-recycling business didn’t furlough its staff. Likewise, supporting a less profitable business in your portfolio may be more impactful because the stronger companies in your portfolio are likely to pull through on their own. Ideally, an investor can support both, but that outcome is not always realistic. Ultimately, resilience isn’t only about overcoming a crisis today, it is about preserving impact for the future.

Moving Forward

In a post-Covid world, resilience is the new ROI. Those who do not adapt their practices before the next emergency will be left behind. Those who take the above steps so they are prepared to respond will reap the rewards.

In the case of Rising Academies, a loan from Open Road enabled them to close the deal with Omega Schools and then rapidly iterate a low-resource distance learning solution which they scaled to 25 countries and 12 million children through 35 partners, all in the span of 150 days. As a business, they are stronger than ever.