Quantifying Disaster Risk and optimizing investment
Sujit Mohanty
UNISDR – Asia Pacific
Protecting development gains: A path towards resilience
Escalating losses
Total economic losses (1981 – 2011) in million US$ for selected countries
Source: GAR 2013
Our collective aim…
“Substantial reduction of disaster losses, in lives and in the social, economic and environmental assets of communities and countries”
“Expected outcome” of the Hyogo Framework for Action 2005-2015: Building the Resilience of Nations and Communities to Disasters (Hyogo Framework)
One starting point of understanding ‘Disaster Risk Reduction’ and the path
towards ‘Resilience’ could be by :-
Measuring ‘Losses’ over time
Risk can not be ‘Managed’ or ‘Reduced’ if it can not be ‘Measured’
Understand risk
Quantify economic losses (in past and in future)
Understand investment (how much, when, where)
Track investment in DRR
Analyze cost and benefit of doing DRR
Optimize investment (no one has unlimited resource)
Optimizing investment in DRRto safe guard development gains
Only works if backed by a strong National Coordination Mechanism/ National Platform
National Coordination Mechanism/ National Platform
Optimizing public investment in DRM
Q1 How much money should be allocated to DRM? (size of total pie)
Q2 How to decide the most efficient and effective allocation of money
between option A (risk reduction) and B (risk transfer and risk retention)? (how to divide the pie)
Q3 How to comprehensively plan and finance risk reduction policies?
For example, how to design risk sensitive investment mechanism?
Q4 How to design risk transfer and risk retention schemes?
Component 3
Process of evidence-based decision making
STEP1 : Produce risk profile (annual average loss & probable maximum loss).
STEP2: Choose the return period to cover : political decision
STEP3: Define the expected level of DRR: political decision
STEP4: Measure the impact of policy tools on DRR (avoided economic loss)
STEP5: Check the gap between the expected level of DRR
and current level of DRR
STEP6: Decide how to do with the gap: implement more DRR or transfer risk?
:political decision
Country perspective: Investment decisions
Can you avoid the risk?
Can you avoid the risk?
Prospective DRM(Risk Avoidance)Prospective DRM(Risk Avoidance)
Can you mitigate the risk?
Can you mitigate the risk?
Risk RetainingRisk Retaining
Risk TransferRisk Transfer
Prospective DRM (Risk Mitigation)
Prospective DRM (Risk Mitigation)
Can you transfer the risk?
Can you transfer the risk?
Yes
No
Yes
Yes
No
No
Risk Reduction
Risk Finance
Hazard, Exposure,
Vulnerability
Hazard, Exposure,
Vulnerability
Disaster losses (past)
Disaster losses (past)
Future Risk (Probability of
losses or Annual Average Loss)
Future Risk (Probability of
losses or Annual Average Loss)
Cost and benefit
Investment Planning(Cost and Benefit)
optimize public investment in DRM
Risk management tools for Govts.
• To affect private corporations and households
• To assure government business continuity & public asset protection
Evidence based decision making
Optimization of investments/ resources
Investment Planning(Cost and Benefit)
optimize public investment in DRM
Risk management tools for Govts.
• To affect private corporations and households
• To assure government business continuity & public asset protection
Evidence based decision making
Optimization of investments/ resources
HazardHazard VulnerabilityVulnerability ExposureExposure
Socio economic data/ Social statistics
Socio economic data/ Social statistics
Spatial/ GIS data/ Climate dataSpatial/ GIS data/ Climate data … …… …Current status of investmentCurrent status of investment
Risk transfer and risk financing
Disaster losses (Past and future)
Disaster losses (Past and future)
CapacityCapacity
Information and data
Also needs better governance (National Coordination Mechanism/ National Platform)
In addition to traditional DM agency, MOF and Planning Authority should be key stakeholders.In addition to traditional DM agency, MOF and Planning Authority should be key stakeholders.
Sectoral ministries, especially Ministry which has responsibility for infrastructure building, are also
important stakeholders
Sectoral ministries, especially Ministry which has responsibility for infrastructure building, are also
important stakeholders
Private sector, especially insurance sector and construction sector, had better be mobilized for
cooperation
Private sector, especially insurance sector and construction sector, had better be mobilized for
cooperation
The enabling factor: National Platform
• Nationally owned and led forum of multi stakeholders
• a coordination mechanism for DRR mainstreaming in development
• Serves as advocate for DRR at all levels• Coordination, analysis, and advice on priority
setting• Engaging higher level policy makers• Facilitating dialogue and partnership among
national and international organisations
Country context: Asia Pacific region(Lao PDR, Cambodia, Myanmar, Maldives, Srilanka, Mongolia)
Proposed actions:
1.DRR landscape mapping ( institutional mechanism, national coordination mechanism, who is doing what …)
2.National disaster loss accounting (existing)
3.Probabilistic risk assessments to estimate future losses.
4.Study of public investment practice (In collaboration with ADB)
5.Study of current risk information use and availability (in collaboration with ADB)
6.Cost benefit analysis
7.Optimal investment plan
8.A strong national coordination mechanism to implement overall DRR in the country through sectoral investment planning( national platform) [KEY]