From: American Red Cross

Sent: Thursdayr September 04, 2014 10:23 AM

To: Chapter Executives; NHQ - Chapter Division ?v?Ps; BHD - Division ?v'Ps; BHQ - Blood Services NHD - Directors and Above; BHQ - Directors and Above
Subject: Gail McGovern: Financial Update and the Path Forward

Distributed to: Chapter Executives; Chapter D'v?Ps; Diced Services Region Biomedicai Division lit'F's; Directors and Above, 

The following message is from Gail McGovern, President and CEO:

I hope all of you were able to spend time this summer with family and friends and take a break from the hard work you do every clay on behalf of others.

As we are closing the books on FY14, I want to give you an update on Red Cross finances, where things stand on the transformation efforts, and what lies ahead.

While the FY14 year?end figures are not final, the latest indications are that the Red Cross finished FY14 with adeiicitoi about?'i? million. The causes ofourfinancial challenges continue to be?

lndustry-wide declines in the blood banking industry,
Fundraising that fell short of our target in a year without any huge national disasters,
Costs of honoring the funding obligations of the pensions of our employees and retirees, and

Continuing to pay down our long-term debt.

While factors like blood demand and the severity and number of disasters are factors beyond our control, we still must respond decisively to deal with them. We must be financially stable at
the new lower level of demand for blood products. And, we must fundraise to ensure that we can provide help to those we serve who are impacted by the disasters each year,
regardless of the number of large disasters.

In January, senior leadership at the Red Cross began work on a plan to address these financial challenges and lay out a vision for how we expand our services to more people while lowenng
the cost of our operations, and making the best use of donor dollars. We set a planning window of three years to achieve this vision in 201?, and the FY14 financial results show the
importance of getting ahead of these issues.

Across the Red Cross organization, these efforts are moving forward. ?lipmleld is continuing its reengineering work that is on track to achieve more than $250 million in savings, and PHSS
already has implemented staff reductions in its National Sales and Service Delivery operations.

Driven by recommendations from the field and volunteer leadership, we are restructuring our chapter network to 53 regions with fewer community chapters and an expanded volunteer
presence. In addition, we have identified cuts of SD percent or more in most of our national headquarters operations.

Throughout this effort, we have sought to rein in expenses, reduce or eliminate lower priority programs, find ways to do our work more efficiently and limit the impact on our people, such as
making some staff reductions through attrition. But sadly, there is no escaping the fact that some of our colleagues will be losing their jobs.

The current estimate is that across the organization, this will affect about 1,200 positions in FY15, less than 5 percent of our approximately 25,500 employees throughout the country. I
understand how hard this is for everyone. Red Crossers see theirwork as not just ajob, but a mission, and it is always difficult when people with such passion and commitment leave the
organization. Our employees and volunteers are kind?hearted and compassionate, which makes it especially challenging to see our fellow Red Crossers affected this way.

I also understand how stressful uncertainty is, so our intent is to let individuals know as soon as possible if their employment will be impacted. Some of these notifications have already taken
place, and more will occur in the next few weeks. ?lipmeld reengineering initiatives will continue throughout this fiscal year, but for most personnel reductions that will take place in FY15,
everyone affected should know by October 31, even if their departure date is later in the fiscal year.

When the bulk of these reductions are made and behind us, I believe we can begin to better focus on achieving the vision I described earlier this year:

- ?lipmeld adjusts to the drop in demand by emerging as the highest quality, best value provider of blood?while ensuring that our donors have the most gratifying experience, and that the
needs of patients and hospitals are always met.

- New revenues from fundraising and PHSS can be reinvested in mission?related activities to provide help and hope in the face of emergencies.

- We are able to spend even more on the disaster clients we serve because we have reduced our non?mission related costs.

- We engage volunteers throughout the organization and we are the best place in the country to volunteer.

- We are even better stewards of our donors' dollars because we are a cost-conscious organization.

- We are a place where our employees are proud and energized to come to work each day.