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]

Thank You …