Disaster resilience is underfunded (DFID, 2011a, p. 16; GFDRR, 2010), and the evidence about the costs and cost-effectiveness of interventions for resilience is limited, but growing. Multi-year funding for disaster resilience is often advocated, especially for protracted crises (e.g. Frankenberger et al., 2012, pp. 10-11). A DFID-commissioned desk-based study examining the value for money of multi-year humanitarian funding found that multi-year funding generates gains in economy, efficiency and effectiveness throughout the disaster management cycle, but evidence is limited and benefits depend on the type of crisis (Cabot Venton, 2013).
Allocating scarce resources is always difficult, and resilience programming inherently involves trade-offs among sectors and groups (Frankenberger et al., 2012). ‘Building back better’ implies higher costs to meet stricter building standards and more technical solutions, which may exclude those most in need from assistance (Levine et al., 2012, p. 3). In protracted crises, building resilience among vulnerable people through small-scale livelihood diversification may come at the expense of economic growth in the form of larger agricultural and industrial projects (Frankenberger et al., 2012, pp. 9-13).
Despite these challenges, some studies show that building disaster resilience is cost-effective compared to late humanitarian response (Cabot Venton, et al. 2013; GFDRR, 2010). For example, Bangladesh spent modest sums on shelters, weather forecasting, warning systems, and evacuation plans, which proved very effective in reducing deaths from cyclones (GFDRR, 2010, p. 2). Based on statistical evidence, GFDRR advocates spending on an early warning system, well-maintained critical infrastructure that functions during and after disasters, and environmental buffers for physical protection (GFDRR, 2010, pp. 3-10, 17-18). It adds that the cost-effectiveness of prevention will be enhanced where:
- Governments make information and analysis about hazards easily accessible.
- Governments ensure that property values reflect hazard risks, through land and housing markets and public action where needed. Government also need to expand the choices of the poor, for instance through security of property or targeted availability of land in safer locations coupled with transportation and other services.
- Governments provide adequate infrastructure and services. Effectiveness depends on quality, so spending should be prioritised properly. High-return spending like maintenance must not be deferred. New infrastructure should not introduce new risks. Where a safe location is impossible, multipurpose infrastructure (such as roads that also help drain water) is promising. Higher margins of safety must be applied to critical infrastructure.
- Governments and donors assess in the specific context each type of financial coping mechanism (insurance, borrowing, dedicated funds, remittances, aid). Assessment should consider benefits but also uncertainties, drawbacks or negative consequences on prevention and cost-effectiveness.
- Decision-makers permit public dissent, information, involvement, oversight and experimentation by an array of entities including the media, neighbourhood associations, engineering groups and businesses. Diverse sets of organisations that facilitate collective action by large groups of citizens will be able to press more effectively for information, prevention and cost-effectiveness.
- Donors earmark development (rather than humanitarian) aid for prevention.
The long road to resilience. Impact and cost-benefit analysis of disaster risk reduction in Bangladesh
This independent, mixed methods study evaluated a Community-Based Disaster Risk Reduction (CBDRR) programme implemented by the Bangladesh Red Crescent Society between 2005 and 2011. The evaluation found that in the four communities studied, the benefits of resilience programming benefits exceeded the costs. At a minimum, benefit-cost ratios stood at between 1.18 and 3.04, and between 3.05 and 4.90 when future protective benefits over the next 15 years were included.
Specific lessons learned on programme efficiency include:
- Continue to support community development and awareness: Cost-efficient measures include improving community organisation and promoting behaviours such as protecting the environment and cleaning dredging channels.
- Extend support to middle-income groups: They are able to cover their expenditures, which keeps costs low, and benefits are likely to be significantly higher compared to an exclusive focus on the most vulnerable.
- Stay longer to increase impact: Initial set-up costs were relatively high and benefits relatively low. A consolidation period would reap far greater returns.
Source: IFRC, 2012a
However, the evidence remains lacking in many areas with regards to costs and benefits (DFID, 2011a, pp. 13, 16). Only a few aspects, such as community-based DRR, have been appraised. A number of detailed quantitative studies on market-oriented costing and financing are available from the World Bank and the GFDRR. Further studies are needed to assess long-term resilience benefits and costs, especially on expensive interventions such as education and roads: while many interventions are likely to represent value for money, some resilience-building activities ‘may be a waste of time and resources’ (Cabot Venton et al., 2012, pp. 77-9). Efficiency depends on the context, hence the need for local participation and buy-in (Cabot Venton, et al. 2013).
Disaster risk financing and insurance are receiving increasing attention, although evidence is still limited. A World Bank study (2011, pp. 4-6) argues that innovation is needed:
- Private insurance and capital markets could be used in sovereign disaster risk financing. Examples include Mexico’s 2009 cat bond issuance and the Caribbean Catastrophe Risk Insurance Facility.
- Innovations from property catastrophe risk insurance could increase the financial resilience of households, agriculture and businesses while reducing contingent governmental liability.
- Disaster micro-insurance for low-income populations has had uneven success rates. Noteworthy innovations have included the following: the Horn of Africa Risk Transfer for Adaptation Programme had a ‘holistic approach to risk management for vulnerable populations’; the Kilimo Salama pilot lowered distribution costs and facilitated scale-up with mobile technology; and an El Niño insurance programme drew on ‘forecast index insurance’ for advance payouts.
- An international platform with public and private funding should offer assistance and public goods.
- Cabot Venton, C. (2013). Value for Money of Multi-year Approaches to Humanitarian Funding. DFID.
See document online - Cabot Venton, C., et al. (2012b). The Economics of Early Response and Disaster Resilience: Lessons from Kenya and Ethiopia. Final report. DFID.
See document online - Cabot Venton, C. et al. (2013). The Economics of Early Response and Resilience: Approach and Methodology. DFID.
See document online - DFID (2011a). Defining Disaster Resilience: A DFID Approach Paper. DFID.
See document online - Frankenberger, T.R., et al. (2012). Enhancing Resilience to Food Insecurity amid Protracted Crisis. UN High-Level Expert Forum.
See document online - GFDRR. (2010). Natural Hazards, UnNatural Disasters. The Economics of Effective Prevention. United Nations, World Bank.
See document online - IFRC (2012a). The long road to resilience. Impact and cost-benefit analysis of community-based disaster risk reduction in Bangladesh. IFRC.
See document online - Levine, S., Pain, A., Bailey, S., & Fan, L. (2012). The relevance of ‘resilience’? ODI.
See document online - World Bank (2011). Innovation in Disaster Risk Financing for Developing Countries: Public and Private Contributions. World Bank.
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