87% of case studies show that disaster risk reduction is good value for money

87% of case studies show that disaster risk reduction is good value for money

By Thomas Neumann & David Hugenbusch

A new synthesis assessment of available case studies has shown that 87% of them report that disaster risk reduction (DRR) measures make economic sense. The study, commissioned by Aktion Deutschland Hilft e.V., also shows that structural interventions (based on physical infrastructure) represented were less cost effective than non-structural measures, such as land use planning.

The cost-efficient nature of DRR is frequently acknowledged in scientific discourse and political statements. It is seen as a particularly effective way to limit damage and fatalities when compared to response and recovery. The estimation that every one USD invested in DRR saves seven USD in disaster response, allegedly coming from the World Bank, enjoys a certain celebrity status in this context. To this day this figure is repeatedly quoted in a DRR context. The source of this, however, remains unclear and the World Bank itself advises against using this ratio.

A substantial number of case studies are available that investigate the efficiency of a huge range DRR measures for all kinds of hazards. However, for two main reasons, it is only partially possible to draw general conclusions from them. Firstly, the case studies are usually highly contextual (with regards to the measure, hazards and geographical setting for example) which limits the transferability of the results. Secondly, the available data is intricate and uses widely differing methodologies. Consequently, there is a need for a comprehensive overview of existing case studies as well as a standardised methodological framework to allow for direct comparison between the case studies.

The study developed a structured synthesis of 117 available case studies to create generalised statements about the economic efficiency of DRR, both, over the whole study catalogue and specifically for different hazard types to allow for a comparison of DRR across a range of natural hazards. Structuring the case studies along a consistent methodological framework allows a comparison of the results and their assumptions across all case studies and allows us to draw general statements concerning the cost efficiency of disaster prevention measures. This framework may be used to conduct future cost-benefit analyses to enhance the significance of future case studies and underpin the value of DRR by applied research.

Main conclusions include:

  • DRR pays off – Based on 117 case studies, 102 report average cost-benefit ratios above the economic equilibrium. This is a powerful argument for future investments in disaster prevention.
  • Non-structural measures (those measures that are not based on engineered, physical infrastructure; however, they also include also include early warning systems which are also based on physical infrastructure even though the outcome is data) are on average more cost efficient than their structural counterparts – A greater proportion of structural measures fail to reach the economic equilibrium. Half of all structural measures (n=34) are either within their lower uncertainty margin or below the economic equilibrium. This result was significantly lower for the non-structural measures (n=3 out of a total of 32). We believe that non-structural measures are more flexible and robust in addressing future DRR uncertainties.
  • DRR prevention and preparedness strategies are equally efficient – Based on all 117 case studies no discernible trend preferring either prevention or preparedness measures is visible.
  • The lower the Human Development Index (HDI) of a country the higher the economic gain of DRR measures – On average there is a higher gain from DRR measures in countries with a low HDI compared to highly developed nations. This is a powerful argument for the expansion of DRR measures in world’s poorest countries. The significance of this result is enhanced if we consider that in the past, case studies utilised high discounting and assumed low durations of effect in these countries. However, countries with a low human development index are underrepresented in the case studies.

The results can be used to inform politicians, decision makers, donors, and IFIs about potential efficiency benefits of DRR.

Read the full study by clicking here.

Cover photo by Scott Catron (CC BY-SA 3.0)

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