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ROLE & IMPORTANCE OF
FINANCE IN DISASTER
MANAGEMENT
A PRESENTATION BY ATUL PANDEY
1
PREVIEW
PART 1
WHAT IS A DISASTER, DISASTER MANAGEMENT(DM)& DM CYCLE
PART 2
IMPORTANCE OF DISASTER RISK FINANCE
PART 3
CHA...
PART 1:
DISASTER, DISASTER MANAGEMENT
& DM CYCLE
3
WHAT IS A DISASTER
A SERIOUS DISRUPTION OF THE FUNCTIONING OF A COMMUNITY
OR A SOCIETY INVOLVING WIDESPREAD HUMAN, MATERIA...
WHAT IS DISASTER MANAGEMENT
 IT IS MORE THAN JUST RESPONSE AND RELIEF (I.E., IT ASSUMES A MORE
PROACTIVE APPROACH)
 IT I...
WHAT IS THE DIFFERENCE
BETWEEN DM AND DRM
6
 A COLLECTIVE TERM
ENCOMPASSING ALL ASPECTS
OF PLANNING FOR
PREPARING AND
RESPONDING TO DISASTERS.
 REFERS TO THE MANAGE...
DISASTER RISK
MANAGEMENT
A BROAD RANGE OF ACTIVITIES
DESIGNED TO:
 PREVENT THE LOSS OF LIVES
 MINIMIZE HUMAN SUFFERING
...
WHAT IS A DM CYCLE
9
PRE DISASTER PHASE
 STRUCTURAL/ NON STRUCTURAL MITIGATION
 CONSTRUCTION OF DAMS, RETAINING WALLS, EMBANKMENTS,
PLANTATIO...
POST DISASTER PHASE
 RELIEF CAMPS FOR DISASTER VICTIMS IN SCHOOLS, COMMUNITY HALLS
ETC.
 TO PROVIDE FOOD TO VICTIMS OF A...
PART 2:
IMPORTANCE OF DISASTER RISK
FINANCE
12
DISASTER RISK FINANCE :
PROBLEM AREAS
 NATURAL DISASTERS DEVASTATE LIVES AND LIVELIHOODS ACROSS THE
WORLD AND SLOW DOWN T...
 ALTHOUGH BEST WAY TO COUNTER THE THREAT TO POVERTY
REDUCTION AND SUSTAINABLE DEVELOPMENT IS RISK MITIGATION
BEFORE A DIS...
 GOVERNMENTS DO NOT LACK THE FINANCIAL RESOURCES TO
INVEST IN DRM BUT THEY HAVE NOT IDENTIFIED IT AS A (POLITICAL)
PRIORI...
 HOWEVER, AFTER A DISASTER, THE WINDOW OF OPPORTUNITY
FOR DRM OPENS WIDER IN SOME COUNTRIES THAN IN OTHERS:
 IN SOME COU...
 SOCIAL AND ECONOMIC COSTS OF A DISASTER BE MADE MORE
VISIBLE (FOR EXAMPLE, IN COLOMBIA, ESTIMATED LOSS FROM
DISASTER IS ...
PART 3:
CHALLENGES TO
FINANCING DISASTER RISK
18
DATA AND REPORTING
19
 DATA ON CONSTITUENTS OF DRR SPENDING DIFFICULT TO COLLECT.
 EXISTING DATA OFTEN NOT REPORTED.
 N...
RESPONSIBILITY
20
 THE DISASTER RISK MANAGEMENT FUNCTION IS OFTEN NOT OWNED BY
ANY ONE DEPARTMENT.
 IMPLEMENTATION OF DI...
CAPACITY CONSTRAINTS, POST-DISASTER
ASSESSMENTS, MONITORING AND EVALUATION AND
TIMELY RELEASE OF FUNDS
21
 REGIONAL AND N...
LACK OF POLITICAL WILL
22
 LOCAL, PROVINCIAL AND NATIONAL POLITICAL LEADERS DO NOT
UNDERSTAND THE CRUCIAL ROLE OF DISASTE...
PART 4:
MECHANISMS OF FINANCING
DISASTER RISK
23
WorldConferenceon DisasterReduction
18-22January2005, Kobe,Hyogo, Japan
24
HYOGO FRAMEWORK FOR ACTION
 GOVERNMENTS AROUND THE WORLD HAVE COMMITTED TO TAKE
ACTION TO REDUCE DISASTER RISK.
 ADOPTED...
HYOGO FRAMEWORK FOR ACTION
THE FRAMEWORK HAS THREE STRATEGIC GOALS (UNISDR, 2005:4):
1. THE INTEGRATION OF DISASTER RISK R...
HYOGO FRAMEWORK FOR ACTION
FURTHERMORE, THE HFA OFFERS FIVE AREAS OF PRIORITIES FOR
ACTION (UNISDR, 2005:2-4):
1. ENSURE T...
HYOGO FRAMEWORK FOR ACTION
FOUR CORE INDICATORS FOR THE PRIORITY AREA 1:
1. NATIONAL POLICY AND LEGAL FRAMEWORKS FOR DISAS...
29
30
STAKEHOLDERS IN DISASTER RISK
REDUCTION (DRR)
31
DISASTER FINANCING AS A PROPORTION
OF TOTAL INTERNATIONAL AID, 1991-2010)
32
THE INTERNATIONAL
COMMUNITY COMMITTED
OVER $3...
THE IMPACT OF DISASTERS : BY COUNTRY
INCOME CLASS
33
HIGH AND
UPPER
MIDDLE
INCOME
COUNTRIES
TOGETHER
ACCOUNT
FOR THE
MOST
...
DRR FINANCING ORGANISATIONS
34
THE WORLD BANK
ALONE MANAGES
MORE THAN 63%
OF ALL DRR MONEY
FROM
DEVELOPMENT
BANKS, FUNDING...
DRR FINANCING COUNTRIES
35
JAPAN IS THE LARGEST
SINGLE DIRECT DONOR TO
DRR.
OVER THE LAST 20 YEARS IT
HAS ACCOUNTED FOR
$3...
PART 5:
SOURCES & TOOLS OF FINANCE
IN DISASTER MANAGEMENT
36
SOURCES OF DISASTER FINANCE
37
TOOLS OF DISASTER RISK FINANCE
 A VARIETY OF RISK FINANCING AND OTHER FINANCIAL TOOLS
DEVELOPED TO FACILITATE MANAGEMENT ...
 COMBINED WITH GREATER EXPOSURE TO RISKS, LACK OF ACCESS TO
EFFECTIVE RISK MANAGEMENT TOOLS MAKES MANY POOR
COMMUNITIES A...
DEVELOPMENTAL LOOP
SAVINGS
ACCESS
TOCREDIT
INVESTMENT
DEVELOPMENT/
LIVELIHOOD GAINS
RISK
PREVENTION
INSURANCE
/
40
MAPPING OF KEY RISK
FINANCING TOOLS
FINANCING MODE
SAVINGS CREDIT INVESTMENT INSURANCE
POOR
HOUSEHOLDS
SMALL
BUSINESSES
MI...
TARGETS OF RISK FINANCE TOOLS
POOR HOUSEHOLDS
 VULNERABLE TO DISASTERS AND OTHER SHOCKS NOT JUST BECAUSE
OF A LACK OF FIN...
SMALL BUSINESSES
 SMALL BUSINESSES PARTICULARLY VULNERABLE TO DISASTER RISKS.
 OFTEN OVERLOOKED AS PROGRAMS ORIENTED MAI...
COMMUNITIES
 COMMUNITIES REPRESENT AN IMPORTANT PART OF RISK DECISION-
MAKING.
 OPERATES BETWEEN THE LEVEL OF INDIVIDUAL...
NATIONAL GOVERNMENTS
 POOR COMMUNITIES ALSO DEPEND ON EFFECTIVE REGULATORY
GUIDANCE AND FINANCIAL ASSISTANCE FROM THEIR N...
 RISKS FROM INJURY, SICKNESS, OR DISASTER ARE A CRITICAL DIMENSION
OF POVERTY AND CAN EASILY THREATEN THE SMALL SAVINGS A...
 SOCIAL FUNDS ARE PROGRAMS THAT PROVIDE BLOCK GRANTS FOR PROJECTS
TO BUILD UP COMMUNITY ASSETS SUCH AS COMMUNITY FACILITI...
 A POTENTIAL SOLUTION FOR EXTENDING INSURANCE COVERAGE IN POOR
COMMUNITIES
 PROVIDES ACCESS TO POST-DISASTER FINANCIAL R...
 PROVIDE A MECHANISM FOR CATALYZING THE PROVISION OF INSURANCE IN
MARKETS WHERE THERE HAVE BEEN IMPEDIMENTS TO PRIVATE IN...
TOOLS OF DISASTER RISK FINANCE:
OTHER TOOLS
CONDITIONAL CASH TRANSFERS
 CASH TRANSFERS AND PUBLIC WORKS BOLSTER SAFETY NE...
TOOLS OF DISASTER RISK FINANCE:
OTHER TOOLS
CASH FOR WORK PROGRAMS.
 BASIC EMPLOYMENT PROGRAMS WITH THE WORK TARGETED
TOW...
TOOLS OF DISASTER RISK FINANCE:
OTHER TOOLS
ALTERNATIVE CURRENCIES
 COMPLEMENTARY OR LOCAL CURRENCIES USED IN A NUMBER OF...
TOOLS OF DISASTER RISK FINANCE:
OTHER TOOLS
INSURANCE FOR DISASTER RESERVES FOR PRIVATE COMPANIES
UNITED NATIONS ENVIRONME...
CONCLUSION
54
RECAPITULATION
 THE COST OF DISASTERS IS INCREASING, AND VULNERABLE PEOPLE
(ELDERLY, WOMEN, CHILDREN), AND NATIONS (DEVEL...
 DATA ON NATIONAL EXPENDITURE FOR DRR ARE SCARCE BUT
EVIDENCE THAT DOES EXIST DEMONSTRATES ITS IMPORTANCE.
 NEW FUNDS AR...
THANK YOU
57
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Role & Importance of Finance in Disaster Management

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Role & Importance of Finance in Disaster Management

  1. 1. ROLE & IMPORTANCE OF FINANCE IN DISASTER MANAGEMENT A PRESENTATION BY ATUL PANDEY 1
  2. 2. PREVIEW PART 1 WHAT IS A DISASTER, DISASTER MANAGEMENT(DM)& DM CYCLE PART 2 IMPORTANCE OF DISASTER RISK FINANCE PART 3 CHALLENGES TO FINANCING DISASTER RISK PART 4 MECHANISMS OF FINANCING DISASTER RISK PART 5 SOURCES AND TOOLS OF FINANCE IN DISASTER MANAGEMENT CONCLUSION 2
  3. 3. PART 1: DISASTER, DISASTER MANAGEMENT & DM CYCLE 3
  4. 4. WHAT IS A DISASTER A SERIOUS DISRUPTION OF THE FUNCTIONING OF A COMMUNITY OR A SOCIETY INVOLVING WIDESPREAD HUMAN, MATERIAL, ECONOMIC OR ENVIRONMENTAL LOSSES AND IMPACTS, WHICH EXCEEDS THE ABILITY OF THE AFFECTED COMMUNITY OR SOCIETY TO COPE USING ITS OWN RESOURCES. A DISASTER CAN BE EITHER NATURAL [RAIN, FLOOD, CYCLONE, STORM, LAND SLIDES, EARTHQUAKE, VOLCANOES] OR MAN MADE [WAR INCLUDING BIOLOGICAL, ARSON, SABOTAGE, RIOTS, ACCIDENT (TRAIN, AIR, SHIP), INDUSTRIAL ACCIDENTS, FIRES (FOREST FIRES), BOMB EXPLOSIONS, NUCLEAR EXPLOSIONS AND ECOLOGICAL DISASTERS]. 4
  5. 5. WHAT IS DISASTER MANAGEMENT  IT IS MORE THAN JUST RESPONSE AND RELIEF (I.E., IT ASSUMES A MORE PROACTIVE APPROACH)  IT IS A CONTINUOUS SYSTEMATIC PROCESS (I.E., IS BASED ON THE KEY MANAGEMENT PRINCIPLES OF PLANNING, ORGANISING, AND LEADING WHICH INCLUDES COORDINATING AND CONTROLLING)  AIMS TO REDUCE THE NEGATIVE IMPACT OR CONSEQUENCES OF ADVERSE EVENTS (I.E., DISASTERS CANNOT ALWAYS BE PREVENTED, BUT THE ADVERSE EFFECTS CAN BE MINIMISED)  IT IS A SYSTEM WITH MANY COMPONENTS. 5
  6. 6. WHAT IS THE DIFFERENCE BETWEEN DM AND DRM 6
  7. 7.  A COLLECTIVE TERM ENCOMPASSING ALL ASPECTS OF PLANNING FOR PREPARING AND RESPONDING TO DISASTERS.  REFERS TO THE MANAGEMENT OF THE CONSEQUENCES OF DISASTERS. DISASTER MANAGEMENT 7
  8. 8. DISASTER RISK MANAGEMENT A BROAD RANGE OF ACTIVITIES DESIGNED TO:  PREVENT THE LOSS OF LIVES  MINIMIZE HUMAN SUFFERING  INFORM THE PUBLIC AND AUTHORITIES OF RISK  MINIMIZE PROPERTY DAMAGE AND ECONOMIC LOSS  SPEED UP THE RECOVERY PROCESS 8
  9. 9. WHAT IS A DM CYCLE 9
  10. 10. PRE DISASTER PHASE  STRUCTURAL/ NON STRUCTURAL MITIGATION  CONSTRUCTION OF DAMS, RETAINING WALLS, EMBANKMENTS, PLANTATION OF MANGROVES.  IMPLEMENTATION OF GOVT SCHEMES E.G.- WATER SHED DEVELOPMENT PROGRAM IN WATER DEFICIT REGIONS.  MEETING THE REQUIREMENT OF MACHINARY & EQUIPMENTS.  HAZARD, RISK, VULNERABILITY ZONE MAPPING ETC. NEED FOR FINANCE IN DISASTER MANAGEMENT
  11. 11. POST DISASTER PHASE  RELIEF CAMPS FOR DISASTER VICTIMS IN SCHOOLS, COMMUNITY HALLS ETC.  TO PROVIDE FOOD TO VICTIMS OF AN EVENT.  TO PROVIDE HEALTH OR MEDICINES FACILITY TO THE INJURED, SICK ETC.  COMPENSATION TO OVER COME THE LOSS OF LIFE OR PROPERTY.  RECONSTRUCTION OF SOCIO ECONOMIC STRUCTURE. NEED FOR FINANCE IN DISASTER MANAGEMENT
  12. 12. PART 2: IMPORTANCE OF DISASTER RISK FINANCE 12
  13. 13. DISASTER RISK FINANCE : PROBLEM AREAS  NATURAL DISASTERS DEVASTATE LIVES AND LIVELIHOODS ACROSS THE WORLD AND SLOW DOWN THE DEVELOPMENT PROGRESS ACHIEVED THROUGH MANY DECADES OF HARD WORK.  ACCORDING TO THE IFRC WORLD DISASTERS REPORT (2012), THE FREQUENCY AND INTENSITY OF NATURAL DISASTERS IS INCREASING.  THE RISKS ARE GREATER AS INCREASING NUMBER OF PEOPLE LIVE IN VULNERABLE URBAN AREAS; CONSTRUCTION PRACTICES ARE OFTEN SUBSTANDARD AND INSURANCE COVERAGE IS LOW.  CONSEQUENTLY THE FISCAL AND ECONOMIC PRESSURE OF DEVELOPING COUNTRIES HAVING TO DEAL WITH THE ADVERSE EFFECTS OF NATURAL DISASTERS IS INCREASING, TOO. 13
  14. 14.  ALTHOUGH BEST WAY TO COUNTER THE THREAT TO POVERTY REDUCTION AND SUSTAINABLE DEVELOPMENT IS RISK MITIGATION BEFORE A DISASTER, FOCUS STILL IS ON DISASTER RELIEF AND RECONSTRUCTION AFTER A DISASTER.  ‘LACK OF FINANCIAL RESOURCES’ OFTEN QUOTED AS THE EXCUSE.  THE GLOBAL ASSESSMENT REPORT 2011 (UNISDR, 2011:100), SAYS THAT GOVERNMENT INVESTMENT IN DRM IN COLOMBIA AND MEXICO, FOR EXAMPLE, IS SIGNIFICANTLY LESS THAN THE AMOUNT OF MONEY GIVEN OUT IN THE FORM OF TAX EXEMPTIONS. DISASTER RISK FINANCE : PROBLEM AREAS 14
  15. 15.  GOVERNMENTS DO NOT LACK THE FINANCIAL RESOURCES TO INVEST IN DRM BUT THEY HAVE NOT IDENTIFIED IT AS A (POLITICAL) PRIORITY.  DISASTERS BECOME POLITICAL PRIORITIES ONCE THEY HAVE OCCURRED AND CAUSED LOSS OF LIVES AND DEVASTATION, AS SAVING LIVES AND ASSISTING DISASTER VICTIMS IS A HUMANITARIAN PARADIGM.  ON THE UP SIDE – MAJOR DISASTERS SOMETIMES ALSO TRIGGER A REAL OR PERCEIVED SOCIAL DEMAND FOR IMPROVEMENTS IN DRM. DISASTER RISK FINANCE : PROBLEM AREAS 15
  16. 16.  HOWEVER, AFTER A DISASTER, THE WINDOW OF OPPORTUNITY FOR DRM OPENS WIDER IN SOME COUNTRIES THAN IN OTHERS:  IN SOME COUNTRIES THE SOCIAL DEMAND FOR DRM EITHER TOO WEAK OR IGNORED, THE STRENGTHENING OF DRM COSMETIC OR THE INITIAL IMPETUS DIFFICULT TO SUSTAIN (UNISDR, 2011:101).  COUNTRIES WITH WEAK GOVERNANCE AND LOW INSTITUTIONAL, FINANCIAL AND HUMAN CAPACITIES WHICH LACK THE INFORMATION ON THE COSTS AND BENEFITS OF DISASTER RISK REDUCTION UNABLE TO MEASURE THE OPPORTUNITY COSTS OF INVESTING IN DRM AND, NEGLECT DISASTER RISK REDUCTION (DRR). DISASTER RISK FINANCE : PROBLEM AREAS 16
  17. 17.  SOCIAL AND ECONOMIC COSTS OF A DISASTER BE MADE MORE VISIBLE (FOR EXAMPLE, IN COLOMBIA, ESTIMATED LOSS FROM DISASTER IS ABOUT 1% OF GDP WHICH IS COMPARABLE TO THE COST OF ARMED CONFLICT WHICH WAS ESTIMATED AT 1.1% OF GDP FOR THE PERIOD 1991-1996, UNISDR 2011:105), AND IF  GOVERNMENTS TO ACCOUNT FOR RECURRENT DISASTER LOSSES AND FUTURE LIABILITIES INSTEAD OF TRANSFERRING IMPACTS TO AFFECTED LOW-INCOME HOUSEHOLDS AND COMMUNITY  DRM BE MADE A PUBLIC POLICY PRIORITY SIMILAR TO CONTROLLING INFLATION OR RESOLVING ARMED CONFLICT. DISASTER RISK FINANCE : SOLUTIONS 17
  18. 18. PART 3: CHALLENGES TO FINANCING DISASTER RISK 18
  19. 19. DATA AND REPORTING 19  DATA ON CONSTITUENTS OF DRR SPENDING DIFFICULT TO COLLECT.  EXISTING DATA OFTEN NOT REPORTED.  NO SYSTEMATIC EFFORT TO COMPARE SUCH DATA WORLDWIDE.  ALTHOUGH MOST COUNTRIES REPORT THE INTEGRATION OF DISASTER RISK REDUCTION IN PUBLIC INVESTMENT AND PLANNING DECISIONS, ONLY FEW COUNTRIES ABLE TO PROVIDE DISAGGREGATED INFORMATION AS TO SPECIFIC INVESTMENTS IN DRR ALLOCATED FROM NATIONAL BUDGETS.  DEVELOPING COMPLETE ESTIMATIONS FOR DRR ALLOCATIONS DIFFICULT AS SPECIFIC ACCOUNTING PROTOCOLS OR CODING FOR DRR INVESTMENTS DO NOT EXIST.
  20. 20. RESPONSIBILITY 20  THE DISASTER RISK MANAGEMENT FUNCTION IS OFTEN NOT OWNED BY ANY ONE DEPARTMENT.  IMPLEMENTATION OF DISASTER RISK REDUCTION ACTIVITIES NOT BUDGETED AT DEPT LEVEL OR INTEGRATED INTO NORMAL DAY-TO-DAY OPERATIONS DUE TO LACK OF UNDERSTANDING OF RESPONSIBILITIES.
  21. 21. CAPACITY CONSTRAINTS, POST-DISASTER ASSESSMENTS, MONITORING AND EVALUATION AND TIMELY RELEASE OF FUNDS 21  REGIONAL AND NATIONAL REPRESENTATIVES LACK CRITICAL SKILLS VITAL FOR DISASTER ASSESSMENT VERIFICATION MISSIONS.  RECONSTRUCTION PROJECTS BADLY IMPLEMENTED, PROCUREMENT OF FUNDING FOR PROJECTS DELAYED, FUNDS TO THE AFFECTED POPULATION RELEASED MONTHS, IF NOT YEARS, AFTER A DISASTER HAS HAPPENED AND MISUNDERSTANDINGS ABOUT PROCEDURES FOR THE RELEASE OF FUNDS.  MONITORING AND EVALUATION OF REHABILITATION WORK AT TIMES NOT EVEN PLANNED FOR, LEADING TO MISAPPROPRIATION OF FUNDS AND BADLY RECONSTRUCTED FACILITIES THAT AGAIN DO NOT WITHSTAND FURTHER DISASTERS.
  22. 22. LACK OF POLITICAL WILL 22  LOCAL, PROVINCIAL AND NATIONAL POLITICAL LEADERS DO NOT UNDERSTAND THE CRUCIAL ROLE OF DISASTER RISK MANAGEMENT.  LACK OF WILL TO FUND SOMETHING THAT ‘MIGHT NOT HAPPEN’ WHICH MAKES IT DIFFICULT TO GET FUNDS FOR PRO-ACTIVE DISASTER RISK-REDUCTION PROJECTS.  POLITICAL LEADERS STILL VERY OFTEN CONSIDER DISASTER PREVENTION A COST AND NOT AN INVESTMENT.
  23. 23. PART 4: MECHANISMS OF FINANCING DISASTER RISK 23
  24. 24. WorldConferenceon DisasterReduction 18-22January2005, Kobe,Hyogo, Japan 24
  25. 25. HYOGO FRAMEWORK FOR ACTION  GOVERNMENTS AROUND THE WORLD HAVE COMMITTED TO TAKE ACTION TO REDUCE DISASTER RISK.  ADOPTED A GUIDELINE TO REDUCE VULNERABILITIES TO NATURAL HAZARDS, CALLED THE HYOGO FRAMEWORK FOR ACTION (HYOGO FRAMEWORK, HFA).  THE HYOGO FRAMEWORK ASSISTS THE EFFORTS OF NATIONS AND COMMUNITIES TO BECOME MORE RESILIENT TO AND ABLE TO COPE BETTER WITH THE HAZARDS THAT THREATEN THEIR DEVELOPMENT GAINS (UNISDR, 2005:1).  ITS GOAL IS TO BUILD RESILIENCE OF NATIONS AND COMMUNITIES TO DISASTERS, BY ACHIEVING SUBSTANTIVE REDUCTION OF DISASTER LOSSES BY 2015 – IN LIVES, AND IN THE SOCIAL, ECONOMIC AND ENVIRONMENTAL ASSETS OF COMMUNITIES AND COUNTRIES. 25
  26. 26. HYOGO FRAMEWORK FOR ACTION THE FRAMEWORK HAS THREE STRATEGIC GOALS (UNISDR, 2005:4): 1. THE INTEGRATION OF DISASTER RISK REDUCTION INTO SUSTAINABLE DEVELOPMENT POLICIES AND PLANNING; 2. DEVELOPMENT AND STRENGTHENING OF INSTITUTIONS, MECHANISMS AND CAPACITIES TO BUILD RESILIENCE TO HAZARDS; AND 3. THE SYSTEMATIC INCORPORATION OF RISK REDUCTION APPROACHES INTO THE IMPLEMENTATION OF EMERGENCY PREPAREDNESS, RESPONSE AND RECOVERY PROGRAMMES. 26
  27. 27. HYOGO FRAMEWORK FOR ACTION FURTHERMORE, THE HFA OFFERS FIVE AREAS OF PRIORITIES FOR ACTION (UNISDR, 2005:2-4): 1. ENSURE THAT DISASTER RISK REDUCTION IS A NATIONAL AND A LOCAL PRIORITY WITH A STRONG INSTITUTIONAL BASIS FOR IMPLEMENTATION; 2. IDENTIFY, ASSESS AND MONITOR DISASTER RISKS – AND ENHANCE EARLY WARNING; 3. USE KNOWLEDGE, INNOVATION AND EDUCATION TO BUILD A CULTURE OF SAFETY AND RESILIENCE AT ALL LEVELS; 4. REDUCE THE UNDERLYING RISK FACTORS; AND 5. STRENGTHEN DISASTER PREPAREDNESS FOR EFFECTIVE RESPONSE AT ALL LEVELS. 27
  28. 28. HYOGO FRAMEWORK FOR ACTION FOUR CORE INDICATORS FOR THE PRIORITY AREA 1: 1. NATIONAL POLICY AND LEGAL FRAMEWORKS FOR DISASTER RISK REDUCTION EXIST AND INCLUDE DECENTRALIZED RESPONSIBILITIES AND CAPACITIES AT ALL LEVELS; 2. DEDICATED AND ADEQUATE RESOURCES ARE AVAILABLE TO IMPLEMENT DISASTER RISK REDUCTION PLANS ACTIVITIES AT ALL ADMINISTRATIVE LEVELS; 3. COMMUNITY PARTICIPATION AND DECENTRALIZATION ARE ENSURED BY DELEGATING AUTHORITY AND RESOURCES TO LOCAL LEVELS; AND 4. A NATIONAL MULTI-SECTORAL PLATFORM FOR DISASTER RISK REDUCTION IS FUNCTIONING. 28
  29. 29. 29
  30. 30. 30
  31. 31. STAKEHOLDERS IN DISASTER RISK REDUCTION (DRR) 31
  32. 32. DISASTER FINANCING AS A PROPORTION OF TOTAL INTERNATIONAL AID, 1991-2010) 32 THE INTERNATIONAL COMMUNITY COMMITTED OVER $3 TRILLION IN TOTAL DEVELOPMENT AID IN THE PERIOD 1991-2010. OF THIS, $106.7 BILLION WAS ALLOCATED TO DISASTERS, AND OF THAT JUST A FRACTION (12.7%), $13.5 BILLION, WAS ON RISK REDUCTION MEASURES BEFORE DISASTERS STRIKE, COMPARED WITH $23.3 BILLION (21.8%) SPENT ON RECONSTRUCTION AND REHABILITATION AND $69.9 BILLION (65.5%) SPENT ON RESPONSE. OF THE OVERALL AID FINANCING OVER 20 YEARS, THE $13.5 BILLION SPENT ON DRR ACCOUNTS FOR JUST 0.4% OF THE TOTAL AMOUNT SPENT ON INTERNATIONAL AID.
  33. 33. THE IMPACT OF DISASTERS : BY COUNTRY INCOME CLASS 33 HIGH AND UPPER MIDDLE INCOME COUNTRIES TOGETHER ACCOUNT FOR THE MOST NUMBER OF DISASTERS (67%) AND THE BIGGEST FINANCIAL LOSSES (72%) BUT FOR THE LOWEST NUMBER OF DEATHS (19%). LOWER- MIDDLE AND LOW INCOME COUNTRIES ACCOUNT FOR ONLY 33% OF DISASTERS BUT FOR 81% OF ALL DEATHS.
  34. 34. DRR FINANCING ORGANISATIONS 34 THE WORLD BANK ALONE MANAGES MORE THAN 63% OF ALL DRR MONEY FROM DEVELOPMENT BANKS, FUNDING MECHANISMS AND AGENCIES: $4.8 BILLION OF THE $13.5 BILLION OF ALL DRR FINANCING OVER TWO DECADES. $36 OF EVERY $100 ALLOCATED TO DRR OVER THE PERIOD WAS MANAGED IN ONE WAY OR ANOTHER BY THE WORLD BANK
  35. 35. DRR FINANCING COUNTRIES 35 JAPAN IS THE LARGEST SINGLE DIRECT DONOR TO DRR. OVER THE LAST 20 YEARS IT HAS ACCOUNTED FOR $3.7 BILLION OF TOTAL FINANCING. IN TERMS OF FUNDING COMING DIRECT FROM DONORS, IT ACCOUNTS FOR 64% OF THE TOTAL. THIS IS OVER EIGHT TIMES MORE THAN THE SECOND LARGEST DONOR, THE EUROPEAN COMMUNITY ($479.5 MILLION) AND DOUBLE THE AMOUNT CONTRIBUTED BY ALL OTHER DONORS COMBINES.
  36. 36. PART 5: SOURCES & TOOLS OF FINANCE IN DISASTER MANAGEMENT 36
  37. 37. SOURCES OF DISASTER FINANCE 37
  38. 38. TOOLS OF DISASTER RISK FINANCE  A VARIETY OF RISK FINANCING AND OTHER FINANCIAL TOOLS DEVELOPED TO FACILITATE MANAGEMENT OF RISKS.  HOWEVER THEY PRIMARILY BENEFIT UPPER AND MIDDLE INCOME FAMILIES, LARGE BUSINESSES, AND WEALTHY GOVERNMENTS FOR WHOM THE MARKETS ARE READY TO PROVIDE SUCH TOOLS.  THOSE LIVING IN POOR COMMUNITIES AND IN AT-RISK, DEVELOPING COUNTRIES TYPICALLY HAVE LITTLE ACCESS TO FORMAL FINANCING OPTIONS FOR DISASTER RISK MANAGEMENT.  THIS IS DUE TO A RANGE OF MARKET GAPS AND FAILURES OF FORMAL MARKET PRODUCTS TO MEET THE NEEDS OF THE POOR, PARTICULARLY THOSE WORKING IN THE INFORMAL ECONOMY AND WITH IRREGULAR CASH FLOWS. 38
  39. 39.  COMBINED WITH GREATER EXPOSURE TO RISKS, LACK OF ACCESS TO EFFECTIVE RISK MANAGEMENT TOOLS MAKES MANY POOR COMMUNITIES AND PARTICULAR GROUPS VULNERABLE.  POST-DISASTER ASSISTANCE FROM GOVERNMENTS OR HUMANITARIAN AGENCIES MAY STEM THE IMPACTS OF THE MOST DRASTIC EMERGENCIES, BUT THIS ASSISTANCE IS TOO OFTEN ADHOC, POORLY TARGETED AND FAILS TO REACH OR ASSIST THE MOST VULNERABLE.  ROBUST FINANCING TOOLS CAN HELP THE POOR TO BREAK THE POVERTY CYCLE BY PROTECTING THEIR DEVELOPMENT GAINS, REDUCING IMPACTS AND LOSSES OF DISASTER SHOCKS, AND PROVIDING RESOURCES FOR DISASTER PREVENTION AND RISK MANAGEMENT. TOOLS OF DISASTER RISK FINANCE 39
  40. 40. DEVELOPMENTAL LOOP SAVINGS ACCESS TOCREDIT INVESTMENT DEVELOPMENT/ LIVELIHOOD GAINS RISK PREVENTION INSURANCE / 40
  41. 41. MAPPING OF KEY RISK FINANCING TOOLS FINANCING MODE SAVINGS CREDIT INVESTMENT INSURANCE POOR HOUSEHOLDS SMALL BUSINESSES MIDDLE INCOME HOUSEHOLDS MICRO FINANCE MICRO INSURANCE CATASTROPHE POOLS COMMUNITY SOCIAL FUNDS NATIONAL CATASTROPHE POOLS/BONDS REGIONAL/ INTERNATIONAL L E V E L S 41
  42. 42. TARGETS OF RISK FINANCE TOOLS POOR HOUSEHOLDS  VULNERABLE TO DISASTERS AND OTHER SHOCKS NOT JUST BECAUSE OF A LACK OF FINANCIAL ASSETS BUT ALSO AS A RESULT OF SOCIAL AND POLITICAL EXCLUSION (BASED ON CASTE, ETHNIC IDENTIFICATION, OR GENDER).  OFTEN MARGINALIZED FROM THE FORMAL ECONOMY, THEY ARE THE ONES WITH THE LEAST ACCESS TO EFFECTIVE AND EFFICIENT FINANCING TOOLS.  WHEN DEVELOPING INNOVATIVE SOLUTIONS IN POOR COMMUNITIES, IT IS IMPORTANT TO LOOK AT WHICH SEGMENTS OF THE COMMUNITY ARE REALLY BENEFITING AND WHICH ARE NOT.  FREQUENTLY THE POOREST OF THE POOR ARE LEFT OUT AND THE INNOVATIVE PROGRAMS SERVE ONLY TO BROADEN MARKET ACCESS WITHOUT REALLY ADDRESSING THE MARKET GAPS THEMSELVES. 42
  43. 43. SMALL BUSINESSES  SMALL BUSINESSES PARTICULARLY VULNERABLE TO DISASTER RISKS.  OFTEN OVERLOOKED AS PROGRAMS ORIENTED MAINLY TOWARD HOUSEHOLDS AND FAMILIES.  EFFECTIVE FINANCING FOR RISK MANAGEMENT IS INTIMATELY TIED TO THE PROMOTION OF STRONG, RESILIENT LIVELIHOODS AND HEALTHY LOCAL ECONOMIES, AND THE RESILIENCY OF SMALL BUSINESSES IS CRITICAL FOR EACH OF THESE. TARGETS OF RISK FINANCE TOOLS 43
  44. 44. COMMUNITIES  COMMUNITIES REPRESENT AN IMPORTANT PART OF RISK DECISION- MAKING.  OPERATES BETWEEN THE LEVEL OF INDIVIDUAL FAMILIES AND THAT OF GOVERNMENT.  MANY ASPECTS OF RISK MANAGEMENT (E.G. ENSURING THAT COLLECTIVE WATER AND SANITATION SYSTEMS ARE PROTECTED AND ABLE TO PROVIDE SERVICES EVEN AFTER DISASTER) NEED TO BE PLANNED AND MAINTAINED AT THE COMMUNITY LEVEL IN ORDER TO BE SUSTAINABLE. TARGETS OF RISK FINANCE TOOLS 44
  45. 45. NATIONAL GOVERNMENTS  POOR COMMUNITIES ALSO DEPEND ON EFFECTIVE REGULATORY GUIDANCE AND FINANCIAL ASSISTANCE FROM THEIR NATIONAL GOVERNMENTS FOR BOTH PRE- DISASTER RISK REDUCTION AND POST- DISASTER RELIEF AND RECOVERY ASSISTANCE.  TO DO THIS, NATIONAL GOVERNMENTS NEED TO PROTECT THEIR OWN INVESTMENTS AND MAINTAIN ACCESS TO SUFFICIENT AND READILY AVAILABLE FINANCIAL RESOURCES.  YET TOO OFTEN GOVERNMENTS THEMSELVES LACK ACCESS TO EFFECTIVE RISK FINANCING. TARGETS OF RISK FINANCE TOOLS 45
  46. 46.  RISKS FROM INJURY, SICKNESS, OR DISASTER ARE A CRITICAL DIMENSION OF POVERTY AND CAN EASILY THREATEN THE SMALL SAVINGS AND FRAGILE LIVELIHOODS OF POOR FAMILIES.  MICROFINANCE IS AN EFFECTIVE MEANS FOR STRENGTHENING ACCESS TO CREDIT, SAVINGS, AND OTHER FINANCIAL SERVICES IN POOR AND VULNERABLE COMMUNITIES AND HAS CHANGED PERCEPTIONS OF THE POOR, AND WOMEN IN PARTICULAR, AS UNCREDITWORTHY AND ‘UNBANKABLE’  MICROFINANCE CAN INCREASE FINANCIAL RESILIENCE BY PROVIDING ACCESS TO CREDIT AND OTHER FINANCIAL SERVICES TO  ENABLE INVESTMENT IN HIGHER YIELD LIVELIHOOD STRATEGIES.  DIVERSIFY LIVELIHOOD STRATEGIES.  ENABLE INVESTMENT IN RISK REDUCTION MEASURES TO LIMIT EXPOSURE OF LIVELIHOODS TO DISASTER SHOCKS. TOOLS OF DISASTER RISK FINANCE: MICROFINANCE 46
  47. 47.  SOCIAL FUNDS ARE PROGRAMS THAT PROVIDE BLOCK GRANTS FOR PROJECTS TO BUILD UP COMMUNITY ASSETS SUCH AS COMMUNITY FACILITIES, INFRASTRUCTURE OR IMPROVED SERVICES, INCLUDING MICROFINANCE AND MICROINSURANCE SERVICES TO BUILD LIVELIHOOD SECURITY AND RESILIENCE FOR POOR AND VULNERABLE HOUSEHOLDS.  REPRESENT INNOVATIVE APPROACH TO COMMUNITY-DRIVEN DEVELOPMENT, ALLOWING LOCAL STAKEHOLDERS TO PRIORITIZE ACTIVITIES AND GUIDE IMPLEMENTATION DECISION-MAKING.  TYPICALLY SETUP AND COORDINATED AS AUTONOMOUS GOVERNMENT AGENCIES AND MAY SERVE AS A CHANNEL FOR FINANCIAL SUPPORT COMING FROM INTERNATIONAL FINANCIAL INSTITUTIONS OR OTHER DONORS.  HOWEVER IT IS THE COMMUNITY ROLE THAT DISTINGUISHES SOCIAL FUNDS FROM OTHER APPROACHES. THE COMMUNITIES THEMSELVES SUBMIT PROPOSALS AND THE LOCALIZED ADMINISTRATION ALLOWS QUITE SPECIFIC GEOGRAPHIC AND POVERTY TARGETING AND ENCOURAGES PROPOSALS DIRECTLY FROM POOR AND VULNERABLE COMMUNITIES. TOOLS OF DISASTER RISK FINANCE: SOCIAL FUNDS 47
  48. 48.  A POTENTIAL SOLUTION FOR EXTENDING INSURANCE COVERAGE IN POOR COMMUNITIES  PROVIDES ACCESS TO POST-DISASTER FINANCIAL RESOURCES IN FAST, RELIABLE AND PREDICTABLE MANNER ALLOWING THE POOR TO PROTECT THEIR INVESTMENT AND RETAIN THEIR FINANCIAL GAINS IN THE FACE OF DISASTERS.  PROMOTES DIGNITY AND SELF-RELIANCE BY PROVIDING IMMEDIATE LIQUIDITY TO THE POOR.  PROMOTE INCREASED LEVELS OF RESILIENCE BY  INCREASING ACCESS TO FINANCES AFTER SHOCKS THUS STRENGTHENING COPING AND REDUCING THE LIKELIHOOD OF DISASTROUS IMPACTS.  PROVIDING GREATER DISCRETION TO HOUSEHOLDS AND SMALL BUSINESSES IN PURSUING COPING AND RECOVERY STRATEGIES. TOOLS OF DISASTER RISK FINANCE: MICRO INSURANCE 48
  49. 49.  PROVIDE A MECHANISM FOR CATALYZING THE PROVISION OF INSURANCE IN MARKETS WHERE THERE HAVE BEEN IMPEDIMENTS TO PRIVATE INSURERS OFFERING DISASTER COVERAGE.  THESE POOLS TYPICALLY COMBINE A RANGE OF GOVERNMENTAL, PRIVATE SECTOR AND DONOR SUPPORT – OFTEN FOCUSED ON ADDRESSING DISTINCT LAYERS OF RISK – TO ENGAGE MARKET INTEREST AND ESTABLISH A VIABLE INSURANCE FUND.  THE POOLING CAN BE EITHER AMONG CITIZENS IN A PARTICULAR COUNTRY OR SET OF COUNTRIES OR AMONG GOVERNMENTS TO LIMIT THEIR OWN EXPOSURE TO DISASTER RISKS.  CATASTROPHE POOLS CAN PROMOTE INCREASED LEVELS OF RESILIENCE BY  INCREASING ACCESS TO FINANCIAL LIQUIDITY AFTER DISASTER SHOCKS (FOR BOTH INDIVIDUALS AND GOVERNMENTS)  TRANSFERRING A PORTION OF THE RISK TO EXTERNAL AND/OR CAPITAL MARKETS TOOLS OF DISASTER RISK FINANCE: CATASTROPHE POOLS/BONDS 49
  50. 50. TOOLS OF DISASTER RISK FINANCE: OTHER TOOLS CONDITIONAL CASH TRANSFERS  CASH TRANSFERS AND PUBLIC WORKS BOLSTER SAFETY NETS AND PROMOTE HOLISTIC SOCIAL RISK MANAGEMENT.  SUPPORT LOCAL CHOICE AND SELF-MANAGEMENT IN DRIVING RECOVERY AND PRIORITIZING INVESTMENTS FOR LIVELIHOODS DEVELOPMENT AND RESILIENCE.  USED IN PARTICULAR TO PROTECT CHILDREN’S SCHOOL ENROLMENT FROM BEING AFFECTED BY ADVERSE RISK COPING.  THE INCOME HELPS POOR HOUSEHOLDS AVOID SALE OF ASSETS, FOREGOING OF HEALTH EXPENDITURES, OR WITHDRAWAL OF CHILDREN FROM SCHOOL.  PUBLIC WORKS PROGRAMS USED TO STRENGTHEN LABOR MARKETS TO PROTECT AGAINST THE RISK OF UNEMPLOYMENT AND ALSO TO SUPPORT PUBLIC INVESTMENTS THAT CAN LINK TO PREVENTION STRATEGIES. 50
  51. 51. TOOLS OF DISASTER RISK FINANCE: OTHER TOOLS CASH FOR WORK PROGRAMS.  BASIC EMPLOYMENT PROGRAMS WITH THE WORK TARGETED TOWARD SOCIAL OR COMMUNITY OBJECTIVES.  HELP TO RESTORE EARNING CAPACITY AND LIVELIHOODS, REPAIR AND RECONSTRUCT DISASTER DAMAGE, AND CONTRIBUTE TO LONG- TERM DEVELOPMENT.  AFTER THE INDIAN OCEAN TSUNAMI IN 2004, A NUMBER OF AGENCIES ESTABLISHED CASH GRANT PROGRAMS TO SUPPORT THE HOUSING RECONSTRUCTION.  IN SRI LANKA THE GOVERNMENT-ORGANIZED OWNER-DRIVEN HOUSING RECOVERY PROGRAM REQUIRED THAT HOUSES RECONSTRUCTED UNDER THE PROGRAM BE BUILT ON REINFORCED CONCRETE PILLARS TO REDUCE DAMAGE IN FUTURE TSUNAMIS.  COMBINATION OF TECHNICAL ASSISTANCE AND CASH GRANTS USED EFFECTIVELY FOR THE TRANSITIONAL SHELTER PROGRAM ORGANIZED BY THE IFRC IN YOGYAKARTA AFTER THE EARTHQUAKE IN 2006. 51
  52. 52. TOOLS OF DISASTER RISK FINANCE: OTHER TOOLS ALTERNATIVE CURRENCIES  COMPLEMENTARY OR LOCAL CURRENCIES USED IN A NUMBER OF LOCATIONS TO STIMULATE LOCAL ECONOMIC ACTIVITY BY ISSUING A SCRIP CURRENCY TO FACILITATE THE EXCHANGE OF LOCAL SERVICES IN AREAS WHERE AVAILABILITY OF THE NATIONAL CURRENCY IS LIMITED (AS IT MIGHT BE IN POOR COMMUNITIES).  THESE TYPES OF ALTERNATIVE CURRENCIES HAVE BEEN USED TO SUPPORT LOCAL DEVELOPMENT, INCLUDING IN POST-DISASTER RECOVERY CONTEXTS. 52
  53. 53. TOOLS OF DISASTER RISK FINANCE: OTHER TOOLS INSURANCE FOR DISASTER RESERVES FOR PRIVATE COMPANIES UNITED NATIONS ENVIRONMENT PROGRAMME FINANCE INITIATIVE (UNEP FI) CURRENTLY EXPLORING A PROGRAM THAT WOULD OFFER INSURANCE TO COMPANIES IN LIEU OF MAINTAINING RESERVES FOR RESPONDING TO DISASTER EVENTS, THUS ALLOWING THOSE COMPANIES TO INVEST MUCH OF THE FUNDS THAT WOULD HAVE BEEN PUT IN THESE RESERVES IN OTHER WAYS. CONTINGENT CREDIT GOVERNMENTS OR PRIVATE SECTOR COMPANIES OBTAIN THE RIGHT TO TAKE OUT A PRE-SPECIFIED POST-DISASTER LOAN THAT IS REPAID ON FIXED TERMS , PROVIDING IMMEDIATE LIQUIDITY AFTER A DISASTER. SUCH CREDIT MIGHT BE OFFERED AS PART OF A DEVELOPMENT AID PACKAGE TO GOVERNMENTS OR IN EXCHANGE FOR AN ANNUAL FEE. 53
  54. 54. CONCLUSION 54
  55. 55. RECAPITULATION  THE COST OF DISASTERS IS INCREASING, AND VULNERABLE PEOPLE (ELDERLY, WOMEN, CHILDREN), AND NATIONS (DEVELOPING COUNTRIES) ARE BEING DISPROPORTIONALLY AFFECTED.  DEVELOPMENT ASSISTANCE FOR DRR IS A SMALL FRACTION OF TOTAL INTERNATIONAL AID FINANCE. ONLY A SMALL AMOUNT OF FUNDS ARE ALLOCATED SPECIFICALLY FOR DRR PURPOSES.  WITHIN DRR FUNDING, MUCH OF THE EXPENDITURE AND ATTENTION IS FOCUSED ON DISASTER PREPAREDNESS AND RECOVERY, RATHER THAN ON UNDERSTANDING AND MITIGATING THE UNDERLYING CAUSES OF VULNERABILITY.  DEVELOPMENT ASSISTANCE FOR DRR IS CONCENTRATED IN A SMALL NUMBER OF COUNTRIES. POORER AND DROUGHT PRONE COUNTRIES ARE INADEQUATELY REPRESENTED.  FUNDS FOR DRR COME FROM VARIED SOURCES AND TARGET MANIFOLD ASPECTS OF DISASTER RISK; THIS MAKES UNDERSTANDING FUNDING MECHANISMS, AND THEIR IMPACT ON DRR, DIFFICULT. 55
  56. 56.  DATA ON NATIONAL EXPENDITURE FOR DRR ARE SCARCE BUT EVIDENCE THAT DOES EXIST DEMONSTRATES ITS IMPORTANCE.  NEW FUNDS ARE INCREASINGLY BEING ALLOCATED TO MITIGATE THE EFFECTS OF CLIMATE CHANGE AND BUILD RESILIENCE TO EXTREME CLIMATE EVENTS.  RISK REDUCTION AND MANAGEMENT SHOULD BE PUT AT THE CENTRE OF THE DEVELOPMENT AGENDA. HOWEVER DRR FINANCE INVOLVES MORE THAT JUST DEVELOPMENT ASSISTANCE.  GOVERNMENT (PUBLIC SECTOR) AND PRIVATE SECTOR CAN BOTH PLAY A CRUCIAL ROLE IN FINANCING DRR. THE PRIVATE SECTOR IS INVESTING IN RISK REDUCTION AND MAKING CHOICES BASED ON RISK AND RESILIENCE CONSIDERATIONS.  INTERNATIONAL AGREEMENTS (E.G. SENDAI FRAMEWORK FOR DRR 2015- 2030) CAN PLAY A HUGE ROLE IN CATALYSING DRR ACTIVITIES IN DISASTER-PRONE COUNTRIES. RECAPITULATION 56
  57. 57. THANK YOU 57

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