GAR 2015 Main Report

xviii Preface

in sectors and territories to ensure a low discounting of future risk as well as transparency and accountability as risks are generated, transferred and retained.

This requires a combination of prospective risk management to ensure that risks are appropriately managed in new investment, corrective risk management to reduce the risk present in existing capital stock, and compensatory risk management to strengthen resilience at all levels.

From risk information to risk knowledge

Managing risks in this way requires greater risk awareness and knowledge. The social production of risk information itself needs to be transformed, with a shift in focus from the production of risk information per se towards information that is understandable and actionable by different kinds of users: in other words, risk knowledge.

A change in perspective in the production of risk information is also required: from measuring risk as an objective externality that can be reduced towards understanding risk as both an opportunity and a threat, and towards improved identification and estimation of the causes and consequences of risk generation and accumulation.

An increasing sensitivity to extensive risk is particularly important. Because of its pervasiveness, this form of risk relates directly to the day-to-day concerns of households, communities, small businesses and local governments, and therefore it can stimulate and leverage social demand for disaster risk reduction. At the same time, precisely because it is a risk layer that internalizes social, economic and environmental vulnerability, it can be managed effectively through an appropriate combination of prospective, corrective and compensatory disaster risk management practices.

Assessing the costs and benefits

Disaster risk management always weighs risk against opportunity and future threats against

current needs. As such, the costs and benefits of disaster risk management need to become fully encoded into public and private investment at all levels, into the financial system and into the design of risk-sharing and social protection mechanisms.

At present, cost-benefit analyses are usually limited to the avoided replacement costs of damaged buildings or infrastructure versus the additional costs of reducing the relevant risks. This analysis needs to be expanded to highlight the trade-offs implicit in each decision, including the downstream benefits and avoided costs in terms of reduced poverty and inequality, environmental sustainability, economic development and social progress as well as a clear identification of who retains the risks, who bears the costs and who reaps the benefits.

Such a broader approach to cost-benefit analysis can increase the visibility and attractiveness of investments in disaster risk management by stressing their positive development benefits rather than the avoided costs and losses alone. If encoded into the financial system, it can help to identify the potential risks inherent in asset and loan portfolios, in credit and debt ratings and in forecasts and analyses, thus defusing the dangerous link between global financial flows and investments that increase disaster risk.

This approach may also provide a rationale to encourage the expansion of risk financing and social protection measures to low-income households, small businesses and local governments.

Becoming accountable

It will only be possible to encode the full costs and benefits of disaster risk management into investment decisions, the financial sector and risk-sharing mechanisms if those responsible can be held to account for their decisions. If societies become more sensitive to both the causes and consequences of disaster risk, responsibility for

	xviii Preface in sectors and territories to ensure a low discounting of future risk as well as transparency and accountability as risks are generated, transferred and retained. This requires a combination of prospective risk management to ensure that risks are appropriately managed in new investment, corrective risk management to reduce the risk present in existing capital stock, and compensatory risk management to strengthen resilience at all levels. From risk information to risk knowledge Managing risks in this way requires greater risk awareness and knowledge. The social production of risk information itself needs to be transformed, with a shift in focus from the production of risk information per se towards information that is understandable and actionable by different kinds of users: in other words, risk knowledge. A change in perspective in the production of risk information is also required: from measuring risk as an objective externality that can be reduced towards understanding risk as both an opportunity and a threat, and towards improved identification and estimation of the causes and consequences of risk generation and accumulation. An increasing sensitivity to extensive risk is particularly important. Because of its pervasiveness, this form of risk relates directly to the day-to-day concerns of households, communities, small businesses and local governments, and therefore it can stimulate and leverage social demand for disaster risk reduction. At the same time, precisely because it is a risk layer that internalizes social, economic and environmental vulnerability, it can be managed effectively through an appropriate combination of prospective, corrective and compensatory disaster risk management practices. Assessing the costs and benefits Disaster risk management always weighs risk against opportunity and future threats against current needs. As such, the costs and benefits of disaster risk management need to become fully encoded into public and private investment at all levels, into the financial system and into the design of risk-sharing and social protection mechanisms. At present, cost-benefit analyses are usually limited to the avoided replacement costs of damaged buildings or infrastructure versus the additional costs of reducing the relevant risks. This analysis needs to be expanded to highlight the trade-offs implicit in each decision, including the downstream benefits and avoided costs in terms of reduced poverty and inequality, environmental sustainability, economic development and social progress as well as a clear identification of who retains the risks, who bears the costs and who reaps the benefits. Such a broader approach to cost-benefit analysis can increase the visibility and attractiveness of investments in disaster risk management by stressing their positive development benefits rather than the avoided costs and losses alone. If encoded into the financial system, it can help to identify the potential risks inherent in asset and loan portfolios, in credit and debt ratings and in forecasts and analyses, thus defusing the dangerous link between global financial flows and investments that increase disaster risk. This approach may also provide a rationale to encourage the expansion of risk financing and social protection measures to low-income households, small businesses and local governments. Becoming accountable It will only be possible to encode the full costs and benefits of disaster risk management into investment decisions, the financial sector and risk-sharing mechanisms if those responsible can be held to account for their decisions. If societies become more sensitive to both the causes and consequences of disaster risk, responsibility for	Page 1 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 ->Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 40 Page 50 Page 60 Page 70 Page 80 Page 90 Page 100 Page 110 Page 120 Page 130 Page 140 Page 150 Page 160 Page 170 Page 180 Page 190 Page 200 Page 210 Page 220 Page 230 Page 240 Page 250 Page 260 Page 270 Page 280 Page 290 Page 300 Page 310