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2018 DRR Financing 5.5 Daniel Stander

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Measure, Manage, Finance. Models: The Language of Resilience

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2018 DRR Financing 5.5 Daniel Stander

  1. 1. 1Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 MEASURE MANAGE FINANCE MODELS: THE LANGUAGE OF RESILIENCE #ResilienceFinance Daniel Stander | RMS Istanbul | 5th October, 2018
  2. 2. 2Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 ALL MODELS ARE WRONG, … …BUT SOME ARE USEFUL DISCLAIMER #1 ..Но некоторые полезны Все модели неверны ...
  3. 3. 3Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 AGENDA ▪ PURPOSE ▪ WELCOME KIT COMPONENTS ▪ BUDGET/COST Каждое событие учит нас новому EVERY EVENT TEACHES SOMETHING NEW DISCLAIMER #2
  4. 4. 4Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 44Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 FUNDAMENTAL TO STRATEGIC ACTION #1 – Analytics are…
  5. 5. 5Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 Shock Quantify Reduce Finance Precover Strategy FIVE PILLARS OF RESILIENCE
  6. 6. 6Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 Shock Quantify Reduce Finance Precover Strategy LIKE EVERYTHING ELSE, IT BEGINS WITH ANALYSIS
  7. 7. 7Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 77Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 ANALYTICS MUST BE FIT FOR PURPOSE #2 – Analytics must…
  8. 8. 8Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 If you can't measure it, you can't manage it and you can't fix it (whatever, wherever)
  9. 9. 9Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 99 INDICATORS
  10. 10. 10Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1010 METRICS
  11. 11. 11Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1111Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 SIMULATE FULL RANGE OF POSSIBLE FUTURES #3 – Analytics must…
  12. 12. 12Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 10 deaths in 100 years CANNOT SAY THE WORST CASE WILL NEVER HAPPEN 200,000 deaths in one afternoon
  13. 13. 13Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 WHY RMS MODELLING? Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. extremes: infrequent and severe + historical techniques: don’t capture full range of possibilities Ergo such methods: inadequate to quantify resilience
  14. 14. 14Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1414Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 История не является хорошим прецедентом для будущего HISTORY = INADEQUATE PRECEDENT FOR FUTURE
  15. 15. 15Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1515Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 millions of versions of next year and future years + combinations of events that haven’t occurred, but could
  16. 16. 16Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1616Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 CHARACTERIZE FREQUENCY / SEVERITY DISTRIBUTION OF IMPACT #4 – Analytics must…
  17. 17. 17Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 STOCHASTIC HAZARD EXPOSURE FINANCIAL SIMULATED FUTURE? HEIGHT OF THE WATER AT (X,Y)? VULNERABILITY HOW TRANSLATE TO ECONOMIC & HUMAN IMPACT? WHAT, WHERE & HOW MUCH? HOW RESISTANT TO SHOCK & STRESS?
  18. 18. 18Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 % $ QUANTIFIED UNDERSTANDING OF NET ECONOMIC IMPACT OF POTENTIAL SHOCKS & STRESSES
  19. 19. 19Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1919Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 WELL CALIBRATED & VALIDATED #4 – Analytics must be…
  20. 20. 20Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 202020 0 2 4 6 8 10 12 14 16 18 20 Ivan Katrina Rita Wilma Ike Sandy Loss($USBillions) NFIP Modeled Actual vs. RMS Modeled Actual Modeled …and validated against each new event Calibrated to historical loss experience…
  21. 21. 21Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 212121 SPEAK THE LANGUAGE OF THE MARKET #5 – Analytics must…
  22. 22. 22Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 2222Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 of the private market uses RMS’ view of risk + resilience Source: FEMA
  23. 23. 23Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 2323Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 ARTICULATE OBJECTIVES IN THE FACE OF SHOCKS & STRESSES #6 – Analytics must…
  24. 24. 24Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 Unlikely Ruin Likely Attrition $50bn 1.0% 0.1% 10% $30bn$10bn MUNICIPALITY’S RESILIENCE TODAY? Today
  25. 25. 25Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 Unlikely Ruin Likely Attrition 0.1% 10% $30bn$10bn $50bn 1.0% HOW, WHERE & WHY IS IT DETERIORATING? Today Inaction
  26. 26. 26Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 Unlikely Ruin Targets Likely Attrition $50bn 1.0% 0.1% 10% $30bn$10bn Today Inaction CAN YOU ARTICULATE SUCCESS?
  27. 27. 27Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 Unlikely Ruin Targets Likely Attrition Gap #2 $50bn 1.0% 0.1% 10% $30bn$10bn Gap #1 Today Inaction WHICH RESILIENCE GAPS, WHEN AND HOW?
  28. 28. 28Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 2828Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 SUPPORT ALL FACETS OF RESILIENCE #6 – Analytics must…
  29. 29. 29Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 DIFFERENT INTERVENTIONS HAVE VERY DIFFERENT ROI… …AND OPTIMAL SOLUTION IS VERY SENSITIVE TO GOALS $0 $100 $200 $300 $400 $500 0%1%2%3%4%5% ReductioninEconomic Impact(MM) Exceedance Probability 8ft is worth $350m @ 1% 4-6ft might suffice to protect to 2%
  30. 30. 30Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 超越概率 当前状况 加固建筑物 加固并移民内陆 #2
  31. 31. 31Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 QUANTIFYING RESILIENCE DIVIDEND OF NATURE Increase in surge loss without wetlands Wetlands prevented $500m in losses
  32. 32. 32Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018Copyright © 2016 Risk Management Solutions, Inc.. TIDAL GAUGE TRIGGER WE ARE NOW IN A STRONGER POSITION SHOULD WE FACE A LARGE-SCALE STORM-SURGE EVENT. CHAIRMAN & CEO NEW YORK TRANSIT AGENCY
  33. 33. 33Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
  34. 34. 34Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 3434Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 DO A LOT WITH A LITTLE #7 – Analytics must…
  35. 35. 35Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1. Build a picture, tell a story 2. Develop greater focus 3. Refine analysis; demand more data 4. Reduce uncertainty; refine story
  36. 36. 36Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 Source: Leveraging Catastrophe Bonds As a Mechanism for Resilient Infrastructure Project Finance – RE.bound YOU CAN DO A LOT WITH A LITTLE

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