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But some businesses are now starting to include disaster risks when considering the costs and benefits and trade-offs implicit in these investment decisions.

Integrating disaster risk estimates into a broader analysis, which takes into account other considerations such as labour costs, access to markets, stability and infrastructure, would enable businesses to identify which risk layers can be reduced (for example, through investments in strengthened building or protective measures); which risks cannot be reduced; and which would have to be managed through other mechanisms, such as insurance, or those that can neither be reduced nor shared. By analysing the cost-effectiveness of these different disaster risk management strategies, businesses can decide how much disaster risk to accept and how much to invest in reducing or sharing that risk; in other words, businesses can now identify how much risk appetite is appropriate for their goals and objectives.

Integrating disaster risk metrics into investment planning

To factor disaster risks into their investment decisions, businesses need access to risk information and up-to-date estimates that can be easily integrated into planning and decision-making. As a first step, this may consist of horizon scanning of the countries and cities they are considering for their investment. Developing such disaster risk profiles requires risk information and metrics at an appropriate scale and format.

At present, the growing volume of risk information being produced at different scales—by universities, scientific and technical institutions and others—is rarely standardised, compiled or aggregated in a way that can be used by corporate risk managers, finance or planning ministries or by city planners and administrators.

But this scenario is changing rapidly. As highlighted in Chapter 15, new efforts are stimulating interac-

tion and convergence between private and public risk modelling, as evidenced by the Understanding Risk conferences organised by the World Bank in 2010 and 2012 ⁱⁱⁱ and new platforms such as the Willis Re. Atlas platform (see Chapter 15). The GAR global risk model and national disaster loss databases, now being published by an increasing number of countries, are helping to provide open access risk metrics that can be used for business investment decisions.

The integration of disaster risk metrics into analytical business forecasts will be another critical path for improving the availability of risk information, particularly for businesses that are not able to manage their own risk identification and estimation platforms.

Opening the black box: open source and open access disaster risk information

Proprietary risk models produced by the risk modelling industry are designed to provide detailed information to value the prime of specific portfolios of assets for the insurance industry and to identify potential risks of insolvency. These models are not necessarily designed to support investment decisions by businesses or governments. As highlighted in Chapter 13, this contributes to an information asymmetry in which purchasers of insurance, including businesses and governments, do not have access to the information that the insurance industry is using to determine pricing levels.

As open source and open access risk information becomes more readily available and improved, the situation may begin to change. Increased risk information availability will facilitate a healthy debate between businesses, governments and insurers regarding risk levels, patterns, trends and pricing. It may also encourage governments to develop more appropriate regulatory frameworks for the insurance industry.

Most important, it will enable a greater social awareness of disaster risks, which in turn may lead to