Module 1: Understanding the Financial Impact of Disasters | UNDRR

Summary

This module from the United Nations Office for Disaster Risk Reduction (UNDRR) introduces a five-step process to help countries identify financing needs and options for disaster risk reduction. It focuses on estimating the costs of disasters, explaining both direct and indirect impacts. Sudden and slow onset disasters cause immediate and long-term damage to infrastructure and productivity. Using tools like the Global Infrastructure Risk Model, countries can quantify potential losses. Proactive investments in resilient infrastructure can mitigate these impacts, reducing economic loss and stabilizing public debt. The next module will explore current spending on disaster risk reduction activities.

Takeaways

• 😀 Understanding the cost of disasters is crucial for countries to plan and manage financial risks effectively.
• 😀 The global annual cost of disasters can easily exceed $1 trillion when considering both direct and indirect costs.
• 😀 Disasters can be classified into two types: sudden onset events (e.g., floods, cyclones) and slow onset events (e.g., droughts, rising temperatures).
• 😀 Sudden onset events cause direct losses, such as infrastructure damage, while also leading to indirect losses like reduced productivity and business disruptions.
• 😀 Slow onset events, like droughts, impact productivity over time and create significant costs that accumulate over years.
• 😀 The Global Infrastructure Risk Model (GIRI) estimates the potential losses to infrastructure assets from various hazards using geolocated data and economic values.
• 😀 GIRI calculates the annual average loss for each country, providing data that helps in planning investments and safeguarding critical infrastructure.
• 😀 Indirect costs of disasters, such as delays in reconstruction, reduced productivity, and diversion of funds from future growth investments, are harder to quantify but still significant.
• 😀 Disasters can alter a country’s growth trajectory, reducing economic production and slowing recovery, even after reconstruction efforts begin.
• 😀 Proactive investment in resilient infrastructure before a disaster can significantly reduce economic shock and public debt compared to countries that do not invest ahead of time.
• 😀 Pre-disaster investment in resilient infrastructure is essential for sustainable development, mitigating the broader impact of disasters, and promoting economic stability.

Q & A

What is the primary focus of the first module in the UNDRR financing series?

The primary focus of the first module is to discuss the first step in disaster risk reduction financing, which involves estimating the cost of disasters and understanding why this is crucial for planning and investment.

What is the average annual cost of disasters globally, according to the script?

The average annual cost of disasters globally can exceed 1 trillion dollars, depending on how disasters are classified and whether both direct and indirect costs are considered.

What are the two main types of disasters classified in the video?

The two main types of disasters are sudden onset events (like floods, cyclones, and earthquakes) and slow onset events (like drought and rising temperatures).

How do sudden onset events impact economies and societies?

Sudden onset events cause direct losses in infrastructure, housing, roads, crops, and livestock, along with emergency response costs. Indirect losses occur due to reduced productivity during recovery, affecting factories, businesses, and workers.

What is the difference between direct and indirect costs of disasters?

Direct costs involve immediate damage to physical assets like infrastructure and housing, while indirect costs refer to longer-term economic impacts such as reduced productivity, business interruptions, and supply chain disruptions.

What tool is mentioned to measure potential infrastructure asset losses from various hazards?

The Global Infrastructure Risk Model (GIRI) is used to measure the potential infrastructure asset losses from various hazards such as earthquakes, cyclones, floods, and landslides.

How does the GIRI model assess disaster risk?

The GIRI model assesses disaster risk by compiling geolocated data of infrastructure assets and networks worldwide, estimating their economic value, and calculating the impact of hazards using probabilistic models and risk maps.

What does the term 'annual average loss' represent in the context of disaster risk reduction?

The 'annual average loss' refers to the expected loss to infrastructure assets on an annual basis, calculated from an average of over 10 to 20 years, providing valuable data for governments and professionals in planning investments and managing financial risks.

What long-term effects do disasters have on a country's economic growth trajectory?

Disasters disrupt a country's economic growth trajectory by initially reducing productivity. Recovery efforts can stabilize growth, but long-term effects, such as reduced productivity and recovery time, can cause the economy to stabilize at a slightly lower level than before the disaster.

How do proactive investments in resilient infrastructure affect a country's recovery from disasters?

Proactive investments in resilient infrastructure help to reduce the GDP drop during a disaster and limit the long-term negative effects on public debt and economic growth, compared to a scenario without such investments.