Managing disaster risk in developing countries: a global challenge

Published: 27 October 2004



The purpose of these keynote addresses is to introduce the burdens faced by developing countries in regards to natural disasters, stress that these burdens pose huge challenges for the international humanitarian system and more importantly undermine development efforts.

But disasters are not just a humanitarian or development problem; disasters are a global challenge that increasingly affects all regions and all parts of society, including business. Innovative solutions are needed and the private sector should feel compelled to engage not only for reasons of corporate social responsibility, but also out of their own business interests.

1. Introduction to ProVention and purpose of conference

- First, a few words on The ProVention Consortium and a brief background to today's conference:

ProVention was founded in 2000 by The World Bank in response to the growing frequency and severity of natural disasters and their impact on development. The Consortium brings together international organisations, donor governments, the private sector and non-governmental organisations into a global partnership dedicated to reducing the impacts of disasters in developing countries.

- In short, ProVention aims to advance disaster risk management through forging partnerships, advocating amongst policy decision makers, demonstrating innovative approaches to the practice of risk management, and sharing knowledge and resources.

- The potential of risk transfer and risk sharing is of particular concern to the work of ProVention and its efforts to promote effective risk management in developing countries.

- The private sector can play a vital role in managing risk and has much to contribute in terms of expertise, innovations and resources towards global disaster reduction efforts. We also believe that the private sector can also benefit from a reduction in natural hazard risk and a safer operational environment in developing countries. But most of all the management of disaster risk must be seen as a corporate social responsibility.

- Through ProVention a number of initiatives have been launched in collaboration with the private sector. Much of this work has focused on the use of risk transfer, risk sharing and financial instruments of risk management - we will be hearing about some of those initiatives today as well as other innovative approaches to disaster mitigation.

- But ProVention has also provided a valuable forum for establishing new partnerships and linkages between the private sector and the development and humanitarian community. This is one of the objectives of today's conference and I hope that despite our different perspectives - and because of our different perspectives - on the subject of risk and the diverse sectors and interests we represent we can establish links today and actively participate in global dialogue.

Building links and joining efforts is paramount if we are to make any impact on reducing disaster risk. And we know that much innovation takes place in areas where new and unexpected connections are made. I think we should start to mix with the "wrong people" so to say, work across sectors much more than we do.

2. The importance of managing disaster risk: an IFRC perspective " But let me move on to why the IFRC sees this conference as an important initiative and highlight our hopes and expectations that global dialogue here in Zurich today can contribute in some ways to reducing the risks faced by many poor communities whose lives and livelihoods are increasingly vulnerable to the threats of disasters.

Firstly, we should recognize that it is the poorest people who live in the least developed countries who tend to be the most vulnerable, hit hardest by disaster shocks and with the least capacity to cope and recover

eg tragically illustrated by Hurricane Ivan which killed over 3000 people in Haiti and caused devastating destruction throughout the Caribbean. Take Grenada which lost more than 90 % of its houses and infrastructure, and the nutmeg trees, the main livelihood. It takes seven years before the nutmeg tree bears fruit.

The two earthquakes in California on 22 December 2003 and in the Iranian city of Bam only four days later were of the same strength on the Richter scale, Bam killed more than 26,000, California only two. The UN has calculated that 97% of all deaths related to natural disasters occur in developing countries.

- It is the poor who occupy high risk locations, such as flood plains, river banks, steep slopes and reclaimed land exposed to disasters. And the poor often lack the financial and material resources needed to protect their lives and livelihoods from disasters.

- And, it is often the indirect costs of disasters that are felt most- the impact on livelihoods, on economic activity, and the impact on social infrastructure and social networks which cannot be calculated.

- Disasters can undermine development, in some cases wiping out 20 yrs of development in a matter of hours. The post-disaster assistance that follows is crucial in saving lives and rebuilding communities but this merely redirects much needed development assistance towards relief and reconstruction;

Secondly, disaster vulnerability is on the increase as rapid population growth, unplanned urbanisation, environmental degradation and global climate change all contribute to the growing frequency of disasters and their impacts on developing countries.

The key factor is not the increase in the occurrence of hazard events but rather a significant increase in human vulnerability as an ever-growing number of people are exposed to disaster risk.

- RCRC World Disasters Report data shows an alarming increase in disaster terms - the human cost in lives lost is devastating (75,000 deaths in 2003) while the numbers affected continues to soar (tripled over the past 30 yrs); the rise in economic cost is equally dramatic (MunichRe now reports an annual average of $65billion direct economic losses from natural disasters but this only refers to insured losses).

- We need to reverse this trend of increasing vulnerability through the effective management and reduction of risk. The steady increase in disaster vulnerability has caused the RC to pay growing attention to disaster preparedness and risk reduction measures rather than just waiting for disasters to strike.

We have learned from local experience that much can be done to avoid disaster losses and minimize risk.

Let me just give you one example here: Mangrove trees planted by Viet Nam Red Cross to protect 110 km of the 3000 km sea dyke system that runs un and down Viet Nam's coast line. The benefits are staggering. The planting and protection of 12 000 hectares of mangroves has cost US $ 1.1 million, but has helped to reduce the cost of dyke maintenance by US$ 7.3 million per year.

In lives spared we need only to look to the typhoon Wukong in 2000. This typhoon pummelled three northern provinces, but left no damage to the dykes behind regenerated mangroves and no deaths inland of the protected dykes.

As well as lives, possessions and property saved from floods, the Vietnamese Red Cross estimated that 7 750 families have been able to go on earning income from selling shrimps, molluscs and crabs - as well as supplementing their diet.

- The experience of the humanitarian community demonstrates that effective disaster preparedness and response systems can play a vital role in reducing loss of human life. Indeed, data on disaster losses indicate a steady decline in fatalities over the past 30 years.

Hence, organisations like the Red Cross & Red Crescent and the UN system, are paying increasing attention to preparedness. However, it is also clear that much can be done to avoid disaster losses through effective management of disaster risk. Global and local disaster response must be supported by investment in disaster mitigation and prevention.

- There is a gradual shift of global attention towards disaster reduction but it must be said that the international system is still driven by high profile disaster response and limited investment is directed towards the effective management of disaster risk.

We need greater commitment to promote disaster reduction as a global priority for developing countries with dedicated resources, innovative solutions and a more collaborative approach to the problem.

Indeed, managing disaster risk is a global challenge requiring collective action from more than just the humanitarian and development community.

3. Involvement of the private sector

- But why should the private sector engage in the global effort to manage disaster risk? And how in particular can insurance play a role? These are key questions that will be addressed and debated today.

- From the perspective of the IFRC and I know others within the humanitarian community, we see a strong need for private sector involvement in disaster risk management:

o It is clear that countries and communities at risk need a range of strategies to mitigate disasters and financial instruments, in particular insurance, can play a key role in protecting vital assets, livelihoods and development investments from disaster shocks. Risk transfer and risk sharing needs to become a central part of global disaster reduction efforts. The private sector has a key role to play in this area.

o Expertise and involvement of different organizations and entities from different sectors is needed to address the problem of disaster. The insurance industry is of course an important actor in risk management, bringing much knowledge and strength in this area of risk transfer. We will hear today about a number of initiatives involving the insurance industry and how these have contributed to reducing disaster risk. But it must be said that involvement is limited and we need to find new ways and more ways to engage the private sector in global disaster reduction efforts.

- Today we will explore a diverse range of approaches to managing disaster risk involving the private sector:

o Use of micro-insurance for mitigation of disaster risk in developing countries

o Innovative approach to using insurance to address the problem of acute hunger

o Approaches to the use of catastrophe pools for Small Island Development States

o A novel idea for utilising currently untapped flow of remittances to support disaster mitigation schemes.

o Examine partnerships- what makes an effective public-private partnership? What are the particular challenges of building partnerships around insurance and risk transfer?

4. Real Challenges

But of course there are some real challenges we should acknowledge:

- Challenges of developing partnerships when the different actors speak a different "language" and have different over-arching goals.

- Challenges to make the links between global level and the local level, how to link global financial players with extremely poor developing countries.

- We should also not be naïve to the fact that the private sector has many concerns regarding business operations in developing countries:

o How to guarantee profit in poor countries?

o Risks of instability of governments and unknown markets

o Is it really worth trying to help develop markets in emerging economies?

o How could a global company reach the clients in these countries?

- These concerns and questions will I hope be addressed today

5. Conclusions

- This conference provides a rich opportunity to exchange experiences, views and learn from other organizations and sectors outside our own. While we all come to today from different places and different perspectives. I hope that we can all share one common objective- to reduce the unacceptable cost of disasters in developing countries.

- The private sector has a key role to play in this area but it will also require some risk-taking on their part to engage in the long-term with emerging and developing countries and new partners. But it is clear that it is everyone's interest to help build a less risky world.