Global Assessment Report on Disaster Risk Reduction 2013
From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction

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The risk assessment for GAR13 uses a probabilistic approach. Probability is defined as the likelihood of an event occurring compared to all the possible events that might occur. The exceedance probability is the likelihood of one event of a given magnitude occurring or being exceeded within a defined time span. Frequency is the expected number of times that a particular event occurs in a defined time span. Return period is the average frequency with which a particular event is expected to occur. It is usually expressed in years, such as 1 in X number of years. This does not mean that an event will occur once every X numbers of years, but is another way of expressing the exceedance probability: a 1 in 200 years event has a chance of 0.5 percent to occur or be exceeded every year.

Annual average loss (AAL) is the estimated average loss per year over a long time period considering the range of loss scenarios relating to different return periods. The probable maximum loss (PML) is the maximum loss that could be expected for a given return period, for example of 250 years.

Capital stock is made up of produced capital, natural capital and intangible capital.ii 

Produced capital is the total value of machinery, equipment, structures (including infrastructure) and urban land. GAR 13 analyses urban produced capital, defined as the produced capital in urban areas with more than 2,000 inhabitants. Exposed produced capital refers to the urban produced capital stock that is exposed to natural hazards. Natural capital is the total value of existing nonrenewable resources (including oil, natural gas, coal and mineral resources) as well as cropland, pastureland, forests and protected areas. Intangible capital includes values such as human capital, institutional infrastructure and social capital.

Gross fixed capital formation is the total value of capital investment by the private and public sectors in a given year. In GAR13, relative disaster risk is estimated by comparing the AAL for earthquakes and tropical cyclones

with urban produced capital and gross fixed capital formation. In the case of tsunamis, relative disaster risk is estimated using the proportion of urban produced capital exposed to tsunamis.

Disaster risk reduction (DRR) describes the policy objective of reducing risk. Disaster risk management (DRM) describes the actions that aim to achieve this objective. Actions include prospective risk management, such as better planning, designed to avoid the construction of new risks; corrective risk management, designed to address pre-existing risks; compensatory risk management, such as insurance that shares and spreads risks; and disaster management measures such as business continuity planning, preparedness and response. Risk governance is used to describe how national or local governments work with business, civil society and other actors to organize DRM, including, for example, through institutional arrangements, legislation, policies and strategy.

i See UNISDR, 2009

UNISDR. 2009.,Global Assessment Report on Disaster Risk Reduction: Risk and poverty in a changing climate., United Nations International Strategy for Disaster Reduction., Geneva,Switzerland: UNISDR.. .
. Terminology on Disaster Risk Reduction. Geneva, Switzerland: UNISDR.
ii Based on a definition developed by the World Bank to estimate the wealth accumulated historically in a country (World Bank, 2010

World Bank. 2010.,Economics of Adaptation to Climate Change., Synthesis Report., Washington: IBRD and World Bank.,. .
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