The document discusses the significant economic damages resulting from man-made and natural disasters, totaling USD 1.5 trillion over the past decade, highlighting the need for improved resilience through innovative risk governance. It emphasizes the challenges posed by increasing urbanization, demographic changes, and environmental conditions, outlining the importance of prioritizing resilience measures under fiscal constraints. Additionally, the text notes the persistent gaps in disaster risk management and the importance of trust in government for effective resilience strategies.

1. BOOSTING RESILIENCE THROUGH
INNOVATIVE RISK GOVERNANCE
Catherine Gamper
Public Governance and Territorial Development Directorate
Storm Surge, Norfolk, United Kingdom, December 2013

2. • Past decade: USD 1.5 trillion in economic damages from man-
made disasters (industrial accidents, terrorist attacks) and natural
disasters (primarily storms and floods)
Why boosting resilience matters
0
50
100
150
200
250
300
350
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
AnnualeconomiclossesinUSDbillion
Source: EM-DAT: The OFDA/CRED International Disaster Database, Université catholique de Louvain, Brussels, Belgium, www.emdat.be
(accessed 14 November 2013).
Economic losses due to disasters in OECD
and BRIC countries, 1980-2012 (USD Billion)

3. • Driven by significant increase in intensity and complexity:
o Increased concentration of populations , especially elderly, more vulnerable
groups, and economic assets in risk prone areas
o Accelerated urbanisation
o Increased global economic integration, facilitated by transport mobility and
communication
o Deteriorating environmental conditions coupled with climatic changes
Why boosting resilience matters
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Australia
Austria
Belgium
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Japan
Korea
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
OECDTotal
% of population aged 65 and over
2009 2050
Source: OECD (2009), OECD Factbook 2009: Economic, Environmental and Social Statistics.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Luxembourg
Korea
CzechRep.
SlovakRep.
Ireland
Belgium
Netherlands
Hungary
Finland
Austria
Sweden
Estonia
Norway
Slovenia
Switzerland
Chile
Portugal
Denmark
Israel
Germany
Poland
Japan
France
Australia
Greece
UnitedKingdom
Mexico
Spain
Italy
UnitedStates
Turkey
Canada
NewZealand
Global value chain participation index
Source: Mirdoudot, S. and K. De Backer (2012), “Mapping Global Value Chains”.

4. OECD countries have made substantial
progress in achieving resilience…
Source: Source: EM-DAT: The OFDA/CRED International Disaster Database, www.emdat.be - Université catholique de Louvain - Brussels - Belgium". Data for
OECD and BRIC countries (1980-2012). Figures are shown true to the year of the event. OECD Stat National Accounts GDP per capita in US$, constant prices,
reference year 2005
Australia
Bangladesh
Bolivia
Chile
Costa Rica
Egypt
Estonia
Ethiopia
Fiji Finland
France
Germany
Greece
Haiti
Honduras
India
Indonesia
Iran
Italy
Jamaica
Japan
KenyaMadagascar
Malawi
Mexico
Mozambique
Nepal
Netherlands
New Zealand
Norway
Pakistan
Philippines
Poland
Portugal
Slovenia
Thailand
Turkey
United Kingdom
United States
Venezuela
Yemen
0.5
1
1.5
2
2.5
3
3.5
2.7 3.2 3.7 4.2 4.7
AverageDeathTollperDisaster1980-2013
(log)
Real GDP per Capita, Year 2010 (log)
Significant decrease in fatality rates from disasters with increasing income
1980-2013
OECD Non-OECD

5. … but considerable economic damages
challenge even highest income countries
Source: EM-DAT: The OFDA/CRED International Disaster Database, www.emdat.be - Université catholique de Louvain - Brussels - Belgium; OECD (2013),
“Gross domestic product (GDP) MetaData : GDP per capita, US$, constant prices, reference year 2005”, National Accounts OECD Statistics Database,
accessed on 14 November 2013, http://stats.oecd.org/

6. • Some disasters caused economic losses in
excess of 20% of GDP (Chile, NZ), with local
economies especially affected
• Shocks propagate across economic sectors
and geographic boundaries through
interconnected economies
• Considerable uncertainty challenges good
policy making for resilience
Why boosting resilience matters

7. • Disasters can be even more disruptive if they occur in times of
economic difficulties (e.g. Fukushima, Japan 2011)
• Governments need guidance on prioritising resilience under fiscal
constraints
• Optimal risk reduction level under constrained resources:
Prioritising resilience under fiscal
constraints?
Source: Ammann, W. et al. (2006), “Risk concept, integral risk management and risk governance”, in RISK21 – Coping
with Risk due to Natural Hazards in the 21st Century, Taylor & Francis Group, London.
Collective
risk (EUR) risk baseline
cost-benefit value of the optimal measures
marginal costs criteria (1 : 1)
Costs of risk
reduction measures
1 EUR risk reduction =
1 EUR investment costs

8. • Past disasters questioned whether governments pursued a high
enough level of resilience
• Citizens prosecuted their governments for failing to protect them
(e.g. Austria after 2003 floods)
• „ZERO RISK“ neither technically possible, nor financially feasible
• So: what residual risk is society choosing to accept?
• Decision support systems (e.g. CBA, MCA, etc.) can help making
trade-offs:
Can governments define “optimal”
resilience levels?
Source: Hochrainer-Stigler, S. et al. (2010), “The Costs and Benefits of Reducing Risk from Natural Hazards to
Residential Structures in Developing Countries”, Wharton Risk Management and Decision Processes Center.

9. • The UK Health and Safety Executive (HSE) determines
acceptable levels of risk with regard to work related
hazards based on the criteria elaborated by the HSE
• Iceland includes definitions of acceptable risk levels
for snow avalanches and landslides in national law
(The Ministry of the Environment, 2000)
• Liu and Xie (2008) propose different acceptable
earthquake risk levels in China based on city size and
probable earthquake intensity
How have countries used concepts of
acceptable risk levels?

10. • Improved disaster risk management framework
conditions:
o General level of social and economic welfare
o Facilitating institutional environment
• Concrete and successful disaster risk management
measures:
o Increased understanding of risks
o Central government leadership
o Mainstreaming of disaster risk management across public
policy areas
o High level of risk awareness and information sharing
OECD countries have made substantial
progress in achieving resilience…

11. … In protective infrastructure and its maintenance
(e.g. dam breaks during floods in 2002/13 in
Europe; great infrastructure destruction during
Great East Japan Earthquake in 2011)
… Lagging regulatory reforms
(e.g. building codes that are not adapted to new housing design -
in Italy L’Aquila 2009; rigidity in air safety regulations during
volcanic eruption in Iceland 2010)
… Lagging enforcement of regulations
(e.g. significant increase in population around the Vesuvius despite
known hazard exposure; informal construction of houses in Mexico
in risk-prone areas)
But gaps are persistent…

12. … Private sector–gaps in business continuity planning
(e.g. large bankruptcy rate during Great East
Japan Earthquake 2011; UK floods 2007 –
average of 9 days of interruption);
… Individual households do not invest in self-protection
(e.g. 84% of population affected by UK floods 2007 believe nothing
they can do to protect better; only a fifth of population of Istanbul
took protective action after the Marmara EQ in 1999; in Germany
only 25% of HH insured against flood risk)
… Low levels of international collaboration
(e.g. lack of incentives to share information; lack of appreciation of
benefits of joint investments; diverging capacity levels across
borders)
… but also among non-governmental
stakeholders

13. … undermining trust
in government
Source: BP (2014), "BP ADS Share Price History", British Petroleum, http://ir2.flife.de/data/bp/hpl_us.php
(accessed 8 April 2014); McDermott, M. (15 November 2012), “BP will pay biggest criminal fine in US history
for Gulf oil spill”, Treehugger, www.treehugger.com/energy-disasters/bp-will-pay-biggest-criminal-fine-u-
s-history-gulf-oil-spill.html.
Trust in government put to particular
test during disasters:
o previous neglects in resilience measures
has disproportionately negative effects on
trust in government
o Governments and also companies have to
react with drastic
measures to restore trust
(e.g. resignation of government officials in
charge)
o and implement expensive
spending measures,
e.g. bank liquidity injection
after 9/11; clean-up costs and
compensation funds
after Deepwater Horizon

14. • Shortcomings in risk governance may be an important and
often overlooked cause
→ Risk governance mechanisms determine whether an actor
participates in putting resilience measures in place; for
example:
o Households may decide not to self-protect in expectation
of governments doing so for them
o Local governments may not build protective measures as
result of other jurisdictions benefiting but not contributing
to the costs
o Central government actors reluctant to invest in resilience
– ex-ante investments not visible and levels of rewards low
o Countries may not collaborate because of disincentives for
data-sharing
Why do resilience gaps persist?

15. For further information please contact:
catherine.gamper@oecd.org
Or consult:
http://www.oecd.org/gov/risk/boosting-resilience-through-
innovative-risk-management.htm