Concept
Programme Activities
Methodologies
Related Initiatives
Costs and Benefits of Disaster Risk Reduction
Our approaches to evaluating the costs and benefits of disaster risk reduction are evolving as we seek to expand existing techniques to capture the conditions encountered in diverse contexts. Current methodologies are described in detail in the program methods section of this web site. These methodology pieces will be updated and supplemented as the program proceeds. Without going into detail on the evolving methodologies a few central points relevant to our approaches are outlined below.
Supplementing Probabilistic Approaches
The value of any intervention to reduce the risk of disaster depends heavily on the probability that a given event will occur. Most approaches to estimating the costs and benefits of DRR are, as a result, probabilistic. They evaluate the historical frequency and magnitude of events and the lives, damage and other losses such events caused and project these into the future. Changes in such losses due to DRR interventions along with the costs of such interventions are then compared to baseline (no-intervention) loss projections to estimate the costs and benefits.
This type of approach faces basic challenges in the case of climate change. Climate related events have historically accounted for roughly 70% of disasters. When the probability of events (such as floods, droughts or storms) or their magnitudes are subject to change, historical data on events or losses may provide little guidance to future events or the losses associated with them. Probabilistic approaches remain at the heart of any technique for estimating the costs and benefits of DRR – but now more than ever such approaches need to be subject to extensive sensitivity analysis and supplemented with scenario-based techniques. This is a central point of methodological development within our program.
Portfolios in Data and Capacity Limited Environments
Estimating the costs and benefits of single specific interventions, such as the construction of protective structures, in relation to well documented hazards where probabilities are well known is relatively straight forward. In most “real-life” situations, however, DRR programs consist of a portfolio of interventions and are taking place in contexts where data are either limited or unavailable. In addition, the organizations working in such contexts often lack capacity to undertake the detailed types of probabilistic or scenario-based modeling required for quantitative analysis. Given this reality, the development of methods that are capable of generating reasonable cost-benefit insights under complex conditions where data and capacity are limited is essential.
Initial steps toward such methodologies are being undertaken through our program. In specific we are developing and testing methods that will assist organizations in estimating the costs and benefits of portfolios of activities under data limited conditions by working with communities and other actors to rank and evaluate potential components of portfolios in ways that ensure each component is likely to have a high benefit cost ratio even if this can not be quantitatively calculated. Such community-based tools are seen as providing an important “first-cut” evaluation of the likely benefits and costs associated with different activities. We also view the development of simple scenario-based modeling tools that allow more quantitative estimation of the costs and benefits of portfolios of DRR/Climate-adaptation activities and the components within them as important. Although this is not funded under our current program, we are actively seeking support for it. The goal of such scenario tools will not be to produce fixed benefit-cost estimates but will, instead, focus on testing whether or not assumptions regarding risks, benefits and costs are robust given on-going change processes, data limitations and other uncertainties. All of the tools we are working on are intended to complement the tools currently being developed by organizations such as the World Bank and SEI for screening investment portfolios of multilateral and bilateral development organizations. In addition, however, they are intended as practical tools any organization working on DRR and climate adaptation can use at an operational level.
Equity and Synergy
In addition to the pure financial costs and benefits of risk reduction strategies, our approach emphasizes social equity or “fairness” and synergies with environmental protection and overall development approaches.
Philosophically, we see social equity -- that is the equitable distribution costs and benefits associated with any given approach -- as central to analysis of disaster and climate risk reduction strategies. Understanding how the costs and benefits are distributed is essential in order to identify whether or not risk management strategies actually contribute to major global development objectives such as poverty alleviation. It is also essential on an operational level. We believe that strategies that where the costs and benefits are highly skewed run a much higher risk of generating social opposition -- and thus failing to deliver projected benefit -- than strategies where costs and benefits are shared fairly. Overall, the identification of approaches to DRR that, by spreading costs and benefits equitably, contribute to basic development objectives should, we believe, be central to any evaluation. This leads to our final point on synergy.
Methodologically, our approach to evaluation of the costs and benefits of DRR and climate adaptation strategies emphasizes synergy. The core point here is that strategies for DRR and adaptation that are embedded in development approaches are likely to have a far better benefit to cost ratio than ones that are “stand alone.” The costs are shared and may be greatly reduced. In addition, new benefit streams may be generated. Many examples illustrate this. The costs of developing cyclone shelters, for example, are far lower when they are constructed as dual-purpose public buildings (offices, schools, etc.). In this case construction of the buildings and their maintenance are core part of their other public functions. Strengthening and emergency supplies are the only DRR direct costs. Similar savings are present when early warning systems are part of multi-purpose communication systems. In this case, most of the costs of the system are incurred to meet the basic communication function with additional investments in robustness of the system, procedures for communication and information being the primary “early warning” additions while benefit and revenue streams associated with the communication function support the basic system. Similar, although more complex, examples exist for almost all approaches to disaster and climate risk management. As a result, evaluating the degree to which strategies for risk management can be met through multi-function interventions as part of an overall approach to development is central to evaluating their costs and benefits.
