From Shared Risk to Shared Value; The Business Case for Disaster Risk Reduction. Global Assessment Report on Disaster Risk Reducation 2013

With the goal of making a business case for disaster risk reduction, this report presents indications of a nascent paradigm shift in disaster risk awareness and management among businesses and governments. While this is attributed to the global economic crisis and recent intense disasters, the report’s focus is on presenting the evidence for emerging risk-reducing business practices and – under the motto of moving from shared risk to shared value creation – the identification of opportunities for mutually beneficial collaboration between different stakeholders. It depicts the creation of shared value itself as a huge business opportunity and, correspondingly, disaster risk management as a new business sector. This can be stimulated, for instance, by the introduction of new certification and standards, and would correspond to an observable change in consumer values. However, the need for governments to act is clearly emphasized, especially with regard to concerns compelling businesses to report risk, and clarity about the ownership of risk. Chapter 13 discusses current information asymmetries resulting from the risk-modelling industry, and how improvements in open access constitute an opportunity for change; and Chapters 11 and 15 elaborate how new applications are emerging that can visualize risk and therefore contribute to changing the ways in which businesses approach risk – from (reactive) contingency planning to (proactive) risk management. Such inclusion of risk information into business planning can, in turn, incentivize the public sector to provide more risk-sensitive business environments – a mutually reinforcing cycle that could radically redefine the understanding of value. Ultimately, despite the different degrees of vulnerability in different types of businesses (large global, small and medium enterprises and businesses in the informal sector), they stand among themselves as well as with the public sector in a critical relation of interdependence. The report’s message is that the way forward is public−private risk governance with a reframing of “competitiveness” to embrace “… sound infrastructure, macroeconomic stability and a healthy and educated workforce” (page 33).

Part I of the report, “The Globalized Landscape of Disaster Risk”, presents the different types of risk and risk layers that have accumulated over time. Forming the backdrop to following chapters, Chapter 2 sets out how past investment has increased levels of risk, engendered new patterns of risk and generated new hazards, while also contributing to an increased understanding of the full scale of disaster losses beyond measures of insured and direct losses, embracing uninsured, non-direct and extensive (i.e. low-severity and high-frequency disasters usually related to localized hazards) losses.

Part II, “Private Investment and Disaster Risk”, elaborates whether, how and why businesses have included risk considerations in their decision-making and examines the perceived trade-offs in three key sectors: urban development (Chapter 8), tourism (Chapter 9) and agribusiness (Chapter 10). Chapter 8 highlights a critical threshold in urban development − as the built environment will see massive investment over the next 40 years, especially in hazard-exposed countries with weak risk management systems, “… how disaster risk is addressed in the construction and real estate development sectors is therefore going to shape the future of disaster risk reduction” (page 122). However, despite this grand challenge and the presence of powerful disincentives to risk-sensitive investment in low- as well as high-income countries, the chapter emphasizes the unique opportunity that this presents and points to diverse evidence of expanded risk governance frameworks. Part III, “Business Strategies and Risk Governance”, discusses how the assessment of disaster risk by stakeholders such as governments, insurance companies and investors influences business decisions (Ch