IPCC_Managing Risks of Extreme Events.pdf - Climate Access

Chapter 6National Systems for Managing the Risks from Climate Extremes and DisastersDifferent levels of governments – national, sub-national, and locallevel – as well as respective sectoral agencies play multiple roles inaddressing drivers of vulnerability and managing the risk of extremeevents, although their effectiveness varies within a country as well asacross countries. They are well placed to create multi-sectoral platformsto guide, build, and develop policy, regulatory, and institutionalframeworks that prioritize risk management (Handmer and Dovers, 2007;UNISDR, 2008b; OECD, 2009); integrate disaster risk management withother policy domains like development or environmental management,which often are separated in different ministries (UNISDR 2004, 2009c;White et al., 2004; Tompkins et al., 2008); and address drivers ofvulnerability and assist the most vulnerable populations (McBean, 2008;CCCD, 2009). Governments across sectors and levels also provide manypublic goods and services that help address drivers of vulnerability aswell as those that support disaster risk management (White et al., 2004;Shaw et al., 2009) through education, training, and research (Twigg,2004; McBean, 2008; Shaw et al., 2009).Governments also allocate financial and administrative resources fordisaster risk management, as well as provide political authority (Spence,2004; Twigg, 2004; Handmer and Dovers, 2007; CCCD, 2009). Evidencesuggests that successful disaster risk management is partly contingenton resources being made available at all administration levels, but todate, insufficient policy and institutional commitments have been madeto disaster risk management in many countries, particularly at the localgovernment level (Twigg, 2004; UNISDR, 2009d). It is argued thatgovernments also have an important role to guide and support the privatesector, civil society organizations, and other development partners inplaying their differential roles in managing disaster risk (O’Brien et al.,2008; Prabhakar et al., 2009).6.2.2. Private Sector OrganizationsThe private sector plays a small, but increasingly important role indisaster risk management and adaptation, and some aspects of disasterrisk management may be suitable for nongovernmental stakeholders toimplement, albeit this would often effectively be coordinated within aframework created and enabled by governments. Three avenues for privatesector engagement may be identified: (1) corporate social responsibility(CSR); (2) public-private partnerships (PPP); and (3) businesses modelapproaches. CSR involves voluntary advocacy and raising awareness bybusinesses for disaster risk reduction as well as involving fundingsupport and the contribution of volunteers and expertise to implementrisk management measures. PPPs focus on enhancing the provision ofpublic goods for disaster risk reduction in joint undertakings betweenpublic and private sector players. The business model approach pursuesthe integration and alignment of disaster risk reduction with operationaland strategic goals of an enterprise (Warhurst, 2006; Roeth, 2009).While CSR and PPP have received substantial attention, business modelapproaches remain rather untouched areas, one very important exceptionbeing the insurance industry as a supplier of tools for transferring andsharing disaster risks and losses.In terms of business model approaches, insurance is a key sector. Inexchange for pre-disaster premium payments, disaster insurance andother risk transfer instruments in 2010 covered about 30% of disasterlosses overall (Munich Re, 2011). In terms of weather-related events, forthe period 1980 to 2003, insurance overall covered about 20% of thelosses, yet the distribution according to country income groups isuneven, with about 40% of the losses insured in high-income ascompared to 4% in low-income countries (Mills, 2007). In developingcountries, despite complexities and uncertainties involved in bothsupply and demand for risk transfer, risk financing mechanisms havebeen found to demonstrate substantial potential for absorbing thefinancial burden of disasters (Pollner, 2000; Andersen, 2001; Varangis etal., 2002; Auffret, 2003; Dercon, 2005; Hess and Syroka, 2005;Linnerooth-Bayer et al., 2005; Skees et al., 2005; World Bank, 2007;Cummins and Mahul, 2009; Hazell and Hess, 2010). There is, though,some uncertainty as to the extent to which the private sector wouldcontinue to play this role in the context of a changing environment dueto uncertainty and imperfect information, missing and misalignedmarkets, and financial constraints (Smit et al., 2001; Aakre et al., 2010).Private insurers are concerned about changes in risks and associated riskambiguity, that is, the uncertainty about the changes induced by climatechange in terms of potentially modified extreme event intensity andfrequency. Accordingly, as climate change, and other drivers such aschanges in vulnerability and exposure (see Chapters 1, 2, and 3), areprojected to lead to changes in frequency and intensity of someweather risks and extremes, insurers may be less prepared to underwriteinsurance for extreme event risks. Innovative private-public sectorpartnerships may thus be required to better estimate and price risk aswell as develop robust insurance-related products, which may besupported in developing countries by development partner funds aswell (see Section 6.5.3 and Case Study 9.2.13).Professional societies (such as builders and architects) and tradeassociations also play a key role in developing and implementingstandards and practices for disaster risk reduction. These practices mayinclude national and international standards and model building codesthat are adopted in the regulations of local, state, and nationalgovernments. Although the potential for private sector players indisaster risk reduction in sectors such as engineering and construction,information communication technology, media and communication, aswell as utilities and transportation seems large, limited evidence ofsuccessful private sector activity has been documented, owing to anumber of reasons (Roeth, 2009). The business case for private sectorinvolvement in disaster risk reduction remains unclear, hampering privatesector engagement. Companies may also be averse to reporting activitiesthat are fundamental to their business; and, in more communityfocusedprojects, companies often work with local nongovernmentalorganizations (NGOs) and do not often report such efforts. Consideringclimate variability and change within the business model, companies maybe an important entry point for disaster risk reduction, particularly interms of guaranteeing global value chains in the presence of potentiallylarge-scale disruptions triggered by climate-related disasters. For example,the economic viability of the Chinese coastal zone – the economic347