Disaster Risk Management in Public Investment Projects
The fourth edition of the United Nations Global Assessment Report on Disaster Risk Reduction (GAR, 2015) finds that economic losses due to disasters have reached an average of US$ 250 to 300 billion each year, while future losses are estimated at US$ 314 billion in the built infrastructure alone. Apart from direct expenditures for emergency relief, rehabilitation, reconstruction and the provision of alternative services, disruptions in public services and infrastructure have long-term impacts on economic development. Economic growth often drops in the wake of large-scale events. On the one hand, demand reduces as private investment in recovery, asset protection and insurance inhibits investments in value creation, and on the other hand, there is insufficient supply, as a lowered provision of public services and private goods interrupts the value chain thus slowing down or inhibiting value creation. This is particularly true for Latin America, where a high degree of urbanization (80%) and the effects of climate change exacerbate such risks.
Short-term disruptions or failures of such infrastructures can affect large parts of the population and the economy and may lead to devastating supply shortfalls and considerable economic losses. For example, the explosion of the Icelandic volcano Eyjafjallajökull and its ash cloud interrupted air traffic in north-western Europe on April 15, 2010, resulting in the closure of airports and airspace over most of northern and central Europe, as well as the cancellation of more than 20,000 flights.
Thus, as risk-informed planning and evaluation are key sustainability factors, the protection and the development of resilient critical infrastructure must be a priority in disaster risk management (DRM). The key challenge lies in acknowledging that disaster risks and climate change adaptation (CCA) are currently insufficiently considered in the management of public investments.
Our development objective of integrating DRM and CCA in public investment strived to safeguard developmental achievements and to stabilize further economic development. Interventions aimed at mainstreaming DRM and CCA in processes related to prospective and corrective management of public investments.
Our approach aimed at incorporating the DRM perspective into public investment projects by integrating quantified risk analyses and mitigation measures to make infrastructure more resilient and to reduce financial losses when an event strikes. To achieve this, four main steps are to be considered in the public investment cycle. We call this the CCC+F methodology:
- Concepts: In a first step, it is necessary to analyse and review the basic guidelines and instruments, which then incorporate the risk variable. Based upon existing instruments and guidelines, which establish the process of public investment in a given context, the country-specific conceptual framework can then be developed. This conceptual framework outlines how the risk variables can be inserted in the design, planning and implementation stages of investment projects.
- Costing: This is the most complex step, as it involves modelling the disaster risk associated with a specific project probabilistically in risk curves based upon the associated return period of the project. Prior knowledge about how hazards affect a certain investment type (e.g. a two-pillar pedestrian bridge) in a given geographical setting and about the associated costs of reconstruction provides the basis for the cost calculation. Then, the probable cost during the return period of the investment can be calculated. Where a hazard impacts the minimum return period of an investment, risk reduction measures should be applied. As the quality of the modelling depends on the available information and capacities of a country, it may be preferable to apply a cost estimation method.
- Cases: As a third step, the results from the concept and costs stage are applied to pilot cases to a) test the strength and utility thereof, and b) showcase the methods and demonstrate the relevance of risk reduction and adaptation measures for the longevity of investment projects in hazardous and exposed contexts.
- Feedback: The accumulated results of the application, its effectiveness, efficiency, and impacts in terms of reduced costs or losses are measured, systemized and explained. This is typically done using the methods of ex-post evaluation in public investment cycles. With these, the results of the pilot cases are analysed and concepts and methods are adapted in accordance with the experience. This step, therefore, corresponds to the verification of the methodologies, their adaptation and the feedback to the databases.
The above-mentioned steps summarized in a standard public investment cycle:
GIDRM I offered the following services:
- Technical expertise, facilitation and advice to develop a multi-level tailor-made and integrated conceptual framework and the related risk costing method,
- Facilitation at the national level to bring together DRM/CCA-analysts, public investment units and line ministries involved in investment planning,
- Technical assistance at the interface between the national/subnational institutions involved, to ensure concepts and costing methods are understood and can be applied at subnational and line ministry levels,
- Technical assistance and advice during pilot and feedback phases.
GIDRM I also facilitated technical exchange between countries:
- With regional networks, such as the Latin American Network of National Investment Systems Red SNIP,
- With the technical support of regional research institutes, such as Latin American Faculty for Social Sciences (FLACSO), and German science institutions such as German Aerospace Center (DLR), GFZ German Research Centre for Geosciences, the Technical University of Cologne and the Potsdam Institute for Climate Impact Research (PIK).
There is growing recognition for the importance and value of DRM in public investments in Latin America and beyond, as a systematic approach to ensure long-term competitiveness, profitability and sustainable growth.
Achieving this requires a comprehensive framework for the respective partner country context to address existing disaster risks, to prevent the creation of future risks and to strengthen the resilience of critical sectors at the national and subnational levels.
With the technical knowledge and implementing experience of GIZ and its network partners combined, GIDRM I was able to develop tailor-made solutions for different partner countries as well as to foster exchange between countries with similar systems or challenges.