5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
5th
International Disaster and Risk Conference IDRC 2014
‘Integrative Risk Management - The role of science, technology & ...
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IDRC Davos 2014

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5th International Disaster and Risk Conference IDRC 2014 Integrative Risk Management - The role of science, technology & practice 24-28 August 2014 in Davos, Switzerland

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  • several major flood disasters having occurred during the past decade

    core idea: investigate interaction of efforts and how prevention measures of one region can affect – in a positive or negative way – the neighbouring regions and their own prevention decisions
  • self-protection as reduction of the probability, in contrast to self-insurance as reduction of the damage level (Ehrlich and Becker 1972)
  • consideration of symmetric and asymmetric cases  latter more interesting and relevant, especially for negative externalities
  • example of (te Linde et al. 2011): a river borders on two countries, whereby in the case of a flood both regions are affected. However if one country undertake prevention efforts – for example with higher dikes – on basis of its own cost-benefit-analysis, the losses in the neighboured country can be increased (through higher current velocity, missing drain areas etc.).
  • Transcript of "IDRC Davos 2014"

    1. 1. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Prevention as adaptation measure against natural disasters in a non-cooperative game Oliver Fiala TU Dresden, Faculty of Business and Economics oliver.fiala@tu-dresden.de Daniel Lukas TU Dresden, Faculty of Business and Economics daniel.lukas@tu-dresden.de
    2. 2. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Introduction • flooding is one of the most significant natural hazards in Europe (EEA 2010) • climate change may likely lead to a higher frequency and magnitude • increasing economic losses are a consequence of growing populations and increasing economic activities in flood risk areas (Barredo 2009; te Linde et al. 2011; IPCC 2012; Surminski and Oramas-Dorta 2013) • this presentation will show interactions between different regions, where various prevention policies can affect each other in unintended ways • theoretical examination of the interdependency of preventive measures against exogenous loss events
    3. 3. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Fundamentals of the model and basic equilibriums • paper considers theoretically two homogenous, symmetrical regions • prevention can reduce the probability of the actual damage for the individual region (self-protection) • region can take a discrete decision regarding its prevention efforts; model with prevention costs No disaster Occurrence of a disaster No investment in Prevention Case 1 𝑈𝑖 = 𝑌𝑖 Case 2 𝑈𝑖 = 𝑌𝑖 − 𝐿𝑖 Investment in Prevention Case 3 𝑈𝑖 = 𝑌𝑖 − 𝑐 ∗ 𝑃𝑖 Case 4 𝑈𝑖 = 𝑌𝑖 − 𝑐 ∗ 𝑃𝑖 − 𝐿𝑖
    4. 4. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Fundamentals of the model and basic equilibriums • theoretical model shows interactions of the single prevention decisions and their effects • spill-over-effects of the other region’s prevention on the own region and vice versa through the shift of loss probability • direction of the spill-over-effect is not clear: both a positive impact of the prevention effort of one region on the other (positive externality) and a negative impact (negative externality) are possible • four different equilibriums: – both regions undertake prevention (prevention as dominant decision) – one region expends prevention efforts and the other region does not (and vice versa) – no region undertakes any prevention measures
    5. 5. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Fundamentals of the model and basic equilibriums Individual prevention decision prevention decision of region 1, given region 2 conducts prevention prevention decision of region 1, given region 2 conducts no prevention
    6. 6. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Role of different externalities • externalities through prevention efforts of one region can be directed in both directions: – positive effects: partial protection for inactive region, for example through a alert system – negative effects: higher risk probability or losses for inactive region as consequence of a unilateral flood protection
    7. 7. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Role of different externalities Postitive externalities • positive effects through better protection and therefore a reduction of the probability for damage are not limited to the region, which undertakes the prevention measures • a region profits through a reduction of the damage probability due to the efforts of the other region without incurring any costs for prevention • could yield to ‘free-rider’ behaviour in the decision process for or against prevention • underlying technology – how the single prevention efforts of every region are working together – has a vital importance – in extreme cases, prevention measures can collaborate as perfect substitutes or perfect complements
    8. 8. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Role of different externalities Negative externalities • own prevention measures have a positive effect on the own damage probability, indeed the effect on the other region is negative (increasing probabilities for damage) • (te Linde et al. 2011): due to an advanced dyke system in the Netherlands that aims to prevent significant areas from being inundated, floods may occur in upstream sections of the river in Germany, due to lower flood safety levels there
    9. 9. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Role of different externalities Negative externalities (cont’d) • every region would conduct a cost-benefit-analysis and will undertake prevention measures if individual effort is smaller than related costs  the effects on the other region are not be considered in this analysis • this mean not that such a prevention effort shouldn’t be conducted  but show the problem that the related total economic costs and benefits have to be analysed
    10. 10. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Conclusion • research investigates interdependencies between two regions regarding the prevention decision against natural catastrophes in a non-cooperation game • four different equilibriums: both regions undertake prevention (prevention as dominant decision), one region expends prevention efforts and the other region does not (and vice versa), no region undertakes any prevention measures • positive and negative effects of own prevention decisions can be discussed • next steps for research: – model should analyse asymmetry between the regions, especially for negative effects – main idea this research is based on was to examine the influence of such interdependencies of prevention decisions on insurance companies
    11. 11. 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland www.grforum.org Added value for the Post 2015 Framework for Disaster Risk Reduction • How did your work support the implementation of the Hyogo Framework for Action: – prevention decisions should be analysed with consideration of impacts on other regions (otherwise well-meant policies could have negative, not intended consequences) – planning in coordination with neighbour regions and superior level • From your perspective what are the main gaps, needs and further steps to be addressed in the Post 2015 Framework for Disaster Risk Reduction in Research – deeper understanding about determinants of demand for disaster microinsurances – influence of index-based insurances on prevention effort

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