Global Assessment Report on Disaster Risk Reduction 2015
Making development sustainable: The future of disaster risk management

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Part I - Chapter 3
geographical regions and hazard types. As such, it is appropriate for ranking and comparing country risk levels. However, given the limitations arising from its global resolution and lack of granularity, it is not appropriate for the development of detailed national or local disaster risk management strategies, including risk financing schemes. However, it can be used by governments to provide an initial risk profile for a country, which should in turn motivate the development of detailed assessments in specific sectors and territories as a basis for public and private investment strategies and for the design of risk financing schemes. The global AAL is extremely conservative for three reasons.
First, it does not include all hazards and relevant sectors. it only represents direct physical risk to residential and commercial buildings, schools, hospitals and other public and industrial buildings. It does not include risks to infrastructure such as roads and bridges, ports and airports, energy and electrical facilities, telecommunication facilities, dams and mines, or to agriculture. At the same time, it only includes a number of potential global hazards. If the risk of extra-tropical windstorms, ice and snow, sandstorms and tornadoes were also taken into account, the figure would again be significantly higher.
Second, extensive risk, associated with smallscale, high frequency localised events is not considered. The analysis of 85 national disaster loss data sets presented in Chapter 4 show that this risk layer may account for up to 40 per cent of economic losses, particularly in low and middle income countries.
Third, AAL does not consider indirect losses and impacts. While it is difficult to calculate a global value, evidence from specific countries shows that these indirect losses can surpass the direct costs, particularly if economic resilience is low. When compared to reference income without a disaster, impacts from large disasters can lead to
income (GDP) reductions of up to 20 per cent over a number of years following a devastating event. A much-cited example of this effect is the impact of Hurricane Mitch in Honduras in 1998.
To give a perspective on how losses to the built environment from a disaster are only a share of total losses, direct losses to the built environment in the Haiti earthquake in 2010 represented 80 per cent of total direct losses and 47 per cent of combined direct and indirect losses (Government of the Republic of Haiti, 2010

Government of the Republic of Haiti. 2010,Haiti Earthquake PDNA: Assessment of damage, losses, general and sectoral needs, Annex to the Action Plan for National Recovery and Development of Haiti.. .
). In the case of the May 2014 floods in Serbia, the losses to the built environment were 54 per cent of total direct losses and only 31 per cent of combined direct and indirect losses, to which the agriculture sector contributed 8 per cent (Government of the Republic of Serbia, 2014

Government of the Republic of Serbia. 2014,Serbia Floods 2014, United Nations Serbia, The World Bank and The European Union. Belgrade.. .
3.2 Capital investment and social
expenditure challenged
In absolute terms, global AAL is concentrated in large, higher-income, hazard-exposed economies. However, in relation to annual capital investment or social expenditure, many low and middle-income countries, and in particular small island developing states (SIDS), have the highest concentrations of risk.
Disaster risk is not evenly distributed around the earth, but reflects the social construction of hazard, exposure and vulnerability in different countries in the context of different risk drivers (UNISDR, 2009a

UNISDR. 2009a,Global Assessment Report on Disaster Risk Reduction: Risk and Poverty in a Changing Climate, Geneva, Switzerland: UNISDR.. .
). Globally, the distribution of AAL reflects the value and vulnerability of the capital stock concentrated on cyclone or tsunami-prone coastlines, along seismic fault lines or in floodprone river basins.
In absolute terms, global AAL is concentrated in large, higher-income, hazard-exposed economies,suchasJapanandtheUnitedStatesofAmerica (Figure 3.4). However, the disproportionately
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