BOOSTING RESILIENCE THROUGH

INNOVATIVE RISK GOVERNANCE

OECD High Level Risk Forum

Public Governance and Territorial Development Directorate

• Past decade: USD 1.5 trillion in economic damages from man-made disasters (industrial accidents, terrorist attacks) and natural disasters (primarily storms and floods)

Why boosting resilience matters

0

50

100

150

200

250

300

350

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Annu

al ec

onom

ic los

ses i

n USD

billio

n

Source: EM-DAT: The OFDA/CRED International Disaster Database, Université catholique de Louvain, Brussels, Belgium, www.emdat.be (accessed 14 November 2013).

Economic losses due to disasters in OECD and BRIC countries, 1980-2012 (USD Billion)

• Driven by significant increase in intensity and complexity: o Increased concentration of populations , especially elderly, more vulnerable

groups, and economic assets in risk prone areas o Accelerated urbanisation o Increased global economic integration, facilitated by transport mobility and

communication o Deteriorating environmental conditions coupled with climatic changes

Why boosting resilience matters

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Austr

alia

Austr

iaBe

lgium

Cana

daCz

ech R

epub

licDe

nmar

kFin

land

Fran

ceGe

rman

yGr

eece

Hung

ary

Icelan

dIre

land

Italy

Japa

nKo

rea

Luxe

mbou

rgMe

xico

Nethe

rland

sNe

w Ze

aland

Norw

ayPo

land

Portu

gal

Slov

ak R

epub

licSp

ainSw

eden

Switz

erlan

dTu

rkey

Unite

d King

dom

Unite

d Stat

esOE

CD T

otal

% of population aged 65 and over

2009 2050

Source: OECD (2009), OECD Factbook 2009: Economic, Environmental and Social Statistics.

0%

10%

20%

30%

40%

50%

60%

70%

80%

Luxe

mbou

rgKo

rea

Czec

h Rep

.Sl

ovak

Rep

.Ire

land

Belgi

umNe

therla

nds

Hung

ary

Finlan

dAu

stria

Swed

enEs

tonia

Norw

aySl

oven

iaSw

itzer

land

Chile

Portu

gal

Denm

ark

Israe

lGe

rman

yPo

land

Japa

nFr

ance

Austr

alia

Gree

ceUn

ited K

ingdo

mMe

xico

Spain Ita

lyUn

ited S

tates

Turke

yCa

nada

New

Zeala

nd

Global value chain participation index

Source: Mirdoudot, S. and K. De Backer (2012), “Mapping Global Value Chains”.

• Some disasters caused economic losses in excess of 20% of GDP (Chile, NZ), with local economies especially affected

• Shocks propagate across economic sectors and geographic boundaries through interconnected economies

• Considerable uncertainty challenges good policy making for resilience

Why boosting resilience matters

-10%

-5%

0%

5%

10%

15%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Annu

al R

egio

nal G

DP g

row

th

to p

revi

ous y

ear

The impact of disasters on local economies

Abruzzo Queensland New York

9/11 Attacks L‘Aquila Earthquake 6/4/2009

Queensland Flooding 2010/11

Source: OECD (2012), Large regions, TL2: Demographic statistics, OECD Regional Statistics (database), accessed on 14 November 2013, doi: 10.1787/data-00520-en

Why boosting resilience matters

Disasters occurring in times of economic crises are even more challenging for governments to deal with: • Japan was struck by the earthquake in 2011 in the

midst of a restructuring programme – Japanese economy contracted by 0.7% in real GDP and fiscal deficit increased to 9.5% as a result of the disaster in 2011

Resilience is…

… the capacity of a system to absorb disturbance and reorganise while undergoing change so as to still retain essentially the same

function, structure, identity, and feedbacks.

Source: OECD (2014). Boosting Resilience through Innovative Risk Governance. OECD Publishing, Paris.

OECD countries have made substantial progress in achieving resilience…

Source: Source: EM-DAT: The OFDA/CRED International Disaster Database, www.emdat.be - Université catholique de Louvain - Brussels - Belgium". Data for OECD and BRIC countries (1980-2012). Figures are shown true to the year of the event. OECD Stat National Accounts GDP per capita in US$, constant prices, reference year 2005

Australia

Bangladesh

Bolivia Chile

Costa Rica

Egypt

Estonia

Ethiopia

Fiji Finland

France Germany

Greece

Haiti

Honduras India

Indonesia Iran

Italy

Jamaica

Japan

Kenya Madagascar Malawi

Mexico

Mozambique

Nepal Netherlands

New Zealand

Norway

Pakistan

Philippines

Poland

Portugal

Slovenia

Thailand Turkey

United Kingdom United States

Venezuela

Yemen

0.5

1

1.5

2

2.5

3

3.5

2.7 3.2 3.7 4.2 4.7

Aver

age

Dea

th T

oll p

er D

isas

ter 1

980-

2013

(lo

g)

Real GDP per Capita, Year 2010 (log)

Significant decrease in fatality rates from disasters with increasing income 1980-2013

OECD Non-OECD

• Improved disaster risk management framework conditions: o General level of social and economic welfare o Facilitating institutional environment

• Concrete and successful disaster risk management measures: o Increased understanding of risks o Central government leadership o Mainstreaming of disaster risk management across public

policy areas o High level of risk awareness and information sharing

OECD countries have made substantial progress in achieving resilience…

… but considerable economic damages challenge even highest income countries

Source: EM-DAT: The OFDA/CRED International Disaster Database, www.emdat.be - Université catholique de Louvain - Brussels - Belgium; OECD (2013), “Gross domestic product (GDP) MetaData : GDP per capita, US$, constant prices, reference year 2005”, National Accounts OECD Statistics Database, accessed on 14 November 2013, http://stats.oecd.org/

Significant gaps are made apparent during disasters…

Storm Surge, Norfolk, United Kingdom, December 2013

… In protective infrastructure and its maintenance (e.g. dam breaks during floods in 2002/13 in Europe; great infrastructure destruction during Great East Japan Earthquake in 2011) … Lagging regulatory reforms (e.g. building codes that are not adapted to new housing design - in Italy L’Aquila 2009; rigidity in air safety regulations during volcanic eruption in Iceland 2010) … Lagging enforcement of regulations (e.g. significant increase in population around the Vesuvius despite known hazard exposure; informal construction of houses in Mexico in risk-prone areas)

Revealing resilience shortcomings on the part of the government …

… Private sector–gaps in business continuity planning (e.g. large bankruptcy rate during Great East Japan Earthquake 2011; UK floods 2007 – average of 9 days of interruption); … Individual households do not invest in self-protection (e.g. 84% of population affected by UK floods 2007 believe nothing they can do to protect better; only a fifth of population of Istanbul took protective action after the Marmara EQ in 1999; in Germany only 25% of HH insured against flood risk) … Low levels of international collaboration (e.g. lack of incentives to share information; lack of appreciation of benefits of joint investments; diverging capacity levels across borders)

… but also among non-governmental stakeholders

Trust in government put to particular test during disasters: o previous neglects in resilience measures

has disproportionately negative effects on trust in government

o Governments and also companies have to react with drastic measures to restore trust (e.g. resignation of government officials in charge)

o and implement expensive spending measures, e.g. bank liquidity injection after 9/11; clean-up costs and compensation funds after Deepwater Horizon

… undermining trust in government

Source: BP (2014), "BP ADS Share Price History", British Petroleum, http://ir2.flife.de/data/bp/hpl_us.php (accessed 8 April 2014); McDermott, M. (15 November 2012), “BP will pay biggest criminal fine in US history for Gulf oil spill”, Treehugger, www.treehugger.com/energy-disasters/bp-will-pay-biggest-criminal-fine-u-s-history-gulf-oil-spill.html.

• Constraint resources • Lack of awareness (households, private sector

etc.) • Limited knowledge of resilience measures

among stakeholders • BUT shortcomings in risk governance may be

an important and often overlooked cause

Why do resilience gaps persist?

→ Risk governance mechanisms determine whether an actor participates in putting resilience measures in place; for example:

o Households may decide not to self-protect in expectation of governments doing so for them

o Local governments may not build protective measures as result of other jurisdictions benefiting but not contributing to the costs

o Central government actors reluctant to invest in resilience – ex-ante investments not visible and levels of rewards low

o Countries may not collaborate because of disincentives for data-sharing

o …

Why do resilience gaps persist?

• How to identify governance shortcomings and addressing them?

→ Employ diagnostic framework that can identify institutional barriers and realign incentives

How to address governance gaps?

Policy Recommendations

INCLUSIVENESS Adopt a whole-of-society approach to engage all actors in strengthening resilience.

RISK OWNERSHIP

Emphasise the role of risk ownership by increasing risk communication, raising awareness, engaging in risk dialogues among all stakeholders and owners and managers of risks.

REWARDS Build a culture of rewards that encourages pro-active behaviour to increase resilience.

TRUST Emphasize the role of trust already prior to disasters to avoid costly measures to restore trust in the aftermath of an event.

COOPERATION Encourage joint action through international collaboration, public-private partnerships and across governmental sectors and levels to address the trans-boundary and complex nature of future risks.

SHARING Increase the collection and sharing of risk information by taking advantage of „Big Data“. Triangulate information from governments and the private sector as well as use crowding information from web-based sources.

MONITORING Ensure resilience measures adapt to changing risk patterns by monitoring and evaluation risk trends and efforts based on a multi-hazard analyses.

OECD Council Recommendation on the Governance of Critical Risks

Five Core Principles

Establish a comprehensive, all-hazard and trans-boundary approach to risk governance at the national level

Anticipate and build preparedness through foresight capacities and financing frameworks

Raise awareness to foster whole-of-society investments in prevention

Develop adaptive and inter-agency crisis management capacities

Include principles of good governance in risk management decision-making including transparency, accountability and continuous improvement

For further information please contact: catherine.gamper@oecd.org