International Journal of Disaster Risk Reduction ∎ (∎∎∎∎) ∎∎∎–∎∎∎

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International Journal of Disaster Risk Reduction

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Editorial

Special issue: Risking disaster – The role of private investment andpublic regulation in disaster risk management

(in cooperation with the Global Assessment Report on Dis-aster Risk Reduction/United Nations Office for Disaster RiskReduction)

The risk of economic loss due to floods, earthquakes, cyclonesand tsunamis is steadily on the rise. Why? Put simply, because wecontinue to invest in hazard-prone regions at an accelerated rate.In the coming decades, trillions of dollars in new investments willflow into the productive sectors and built environments of low andmiddle income countries throughout the world. How and wherethese investments are made will heavily influence the future ofdisaster risk. Our contemporary physical landscapes, built en-vironments, and the disaster risks they internalise, are reflectionsof how such investments have been made over the last 40 years orso.

Public investment typically represents 15–30% of the total in-vestment in any given country (UNISDR, 2013), providing criticalinfrastructure and services for the economy as a whole, as well asmarginal populations and small to medium enterprises in parti-cular. However, the way that disaster risk has been etched intotoday's landscapes continues to be fundamentally shaped by pri-vate investment. Therefore, whether or not enacted regulationsand incentives are successful in ensuring risk-sensitive investmentwill greatly determine if future prosperity for whole industries andeconomies in hazard-prone regions is even possible.

And yet, our understanding of the dynamic relationship be-tween public regulation, private investment and business opera-tions, and disaster risk is limited. Recognising this gap, the 2013edition of the United Nations Global Assessment Report on Dis-aster Risk Reduction (GAR13) focused on private investment andhow businesses, insurers and investors – and their relationshipwith the public sector – drive, shape and potentially reduce dis-aster risk. The analysis put forward in GAR13 and in this SpecialIssue, together with further data, case studies and papers pub-lished as part of the Report, presents a significant body ofknowledge and new evidence that will be critical in defining thefuture role of the private sector in managing disaster risk.

The example of Denarau, Fiji given by Bernard and Cook, putsthe spotlight on how small countries with limited economic di-versification are under pressure to compete for investments at thecost of their citizen's safety and their countries′ economic sus-tainability. But even larger more diversified economies succumb topressures to attract investment, foreign direct investment (FDI) inparticular. However, the steady increase in economic losses asso-ciated with recurrent physical hazards such as floods and cyclonescan have a negative impact on FDI flows. Anuchitworawong and

x.doi.org/10.1016/j.ijdrr.2014.09.01009/& 2015 Published by Elsevier Ltd.

Thampanishvong show how, in the case of Thailand, high severityevents such as the 2011 Bangkok floods can directly impact notonly business performance nationally and internationally, but alsoFDI flows into a country.

Thus, the sense of competitiveness achieved as a result of newinvestment may be but illusory short-term gain in the case ofmany countries highly exposed to hazards. While the economicgrowth and increased productivity may generate employment, taxrevenue, and investment in public infrastructure and services, inthe long run, existing risks are exacerbated with the generation ofnew social and environmental risks, as well as associated costs.Generally, these costs are born by the public, either via the state ordirectly by vulnerable households and communities, as well assmall and medium-sized businesses. In this sense, countries andsocieties are owners of a stock of risk, a pile of toxic assets that donot usually appear on any company or government department'sbalance sheet (UNISDR, 2013).

As such, there is a critical interdependence between businessand the public sector. If public infrastructure is vulnerable, busi-ness is also at risk. Examples from Delhi, India presented by Jainshow how large scale investments in infrastructure are madewithin a context of insufficient regulatory processes, with the re-sult that new urban development increases exposure and gen-erates new risks for people, property assets and local economies.Business directly suffers from this. Sarmiento and Hoberman pre-sent striking findings from their survey of more than 1000 small,medium-sized and large businesses across 6 cities in the Americas.They show that small businesses in particular are not only un-prepared for disaster risks, but also lack the capacity to assess therisks to their immediate operations, and to ensure business con-tinuity should disaster occur.

Businesses are also becoming more and more concerned withdisaster-induced direct and indirect losses in their supply chains,along with the fall in output, revenue, and profitability that thishas entailed. But business interruption is not only a consequenceof these losses, but also wider macroeconomic processes as globaltrade, financial markets and supply chains have become increas-ingly interconnected. When a local disaster occurs in a globallyintegrated economy, the impacts ripple throughout regional andglobal supply chains, causing indirect losses to businesses on theother side of the globe. Returning to the case of Thailand, Har-aguchi and Lall examine the impact that the 2011 floods had on theautomotive and electronics production industries and their supplychains – two of the industries most affected by the global ripple-effects caused by interruptions in parts production and supply to

Editorial / International Journal of Disaster Risk Reduction ∎ (∎∎∎∎) ∎∎∎–∎∎∎2

major production centres in China, India, Japan and the US. Despiteheavy losses, the outskirts of Bangkok remain an attractive loca-tion for many businesses in these sectors as other considerationssuch as labour markets, procurement and tax regulations areweighed. And so the risks remain.

With today's global economic and political turmoil, rapidtechnological change and the increasing interconnectedness ofglobal trade, financial markets and supply chains, larger busi-nesses perceive an increasingly riskier world. For business, thismeans a reality filled with an array of complex, unpredictableevents, and the likelihood of sudden change, in which risks canmanifest swiftly and unexpectedly, with far-reaching ramifica-tions. Within this landscape, the reduction of disaster risks istaking on new significance and urgency for all global players. In-vestments in disaster risk management need to be seen less as acost and more as an opportunity to strengthen resilience, com-petitiveness and sustainability. Public-private partnerships thatbuild on this notion of opportunity can become a cornerstone forfuture effective disaster risk management.

Sudmeier-Rieux and colleagues show how pressures on fragileecosystems and critical natural resource bases often driven bypublic and private investments, and the disaster risks this gen-erates, can be alleviated through risk-sensitive land use planning.Examples that are diverse yet similar in their dynamics from Ne-pal, Spain and Vietnam highlight how land pressure that createsnew exposure and vulnerabilities can be reduced through cost-effective and prospective measures in partnership with the privatesector.

There are further examples of effective resilience building andmutual benefit from sectors such as urban planning and water andsanitation that point to a way forward. Carpenter shows how, inthe context of the Mississippi Gulf Coast, physical urban space canshape social space and facilitate the building of social capital,which in turn creates stronger capacities to withstand shock.There is also need for the systematic study of the political econ-omy of disaster risk creation, and how incentives for effectivedisaster risk management can be established. Johanessen and

colleagues present evidence from the water and sanitation sectorthat point to the need for new approaches that tie the creation ofsocial space to the sustainable use of existing ecosystem services.Finally, Hamdan suggests that existing tools for institutional ana-lysis can be combined with prescriptive risk governance frame-works to assess and better understand disaster risk managementdecision-making at various levels.

The relationship between investment decisions and publicregulation continues to be a dynamic and at times fraught one.Investment decisions continue to drive disaster risk creationacross the globe, and as a consequence, disasters now pose agrowing systemic threat, not only to the private sector itself, but tothe cities, countries and societies that depend on healthy econo-mies for their welfare. The divergent trajectories of the relentlesspursuit of profit and economic growth on the one hand, and theglobal, national and local efforts to more effectively manage dis-aster risk, on the other, have to be more closely aligned in thefuture. Opportunities to bridge the gap abound as we approach theyear 2015. New international frameworks on disaster risk reduc-tion, sustainable development, and climate change mitigation andadaptation are being developed as this is being written, and withthem, new opportunities for private investors, businesses, gov-ernments and consumers, i.e. citizens, to re-set the parametersthat define and shape our values and our measures of progress andprosperity.

Coordinator Policy & ResearchDr. Bina Desai n

Risk Knowledge Section, United Nations - International Strategy forDisaster Reduction, Geneva

E-mail address: desaib@un.org

Dr. Juan Pablo SarmientoDirector, Paul C. Bell Disaster Risk Management Program Latin

American and Caribbean Center, Florida International University, USA

n Corresponding author.