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RMS is delighted in playing an integral role at the United Nations’ Global Platform for Disaster Risk Reduction in Cancun next week.  This is the first time that government stakeholders from all 193 member countries have come together on this subject since the Sendai Framework for Disaster Risk Reduction was adopted in March 2015.  Cancun looks forward to welcoming some 5,000 participants.

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Gearing Up for Action

At Sendai, the member states signed up to four priority areas for action and seven global targets.  The delivery date: 2030.

This global convening will act as a “show and tell” for member nations to outline the progress they have made over the last 26 months.  The purpose of the Cancun conference is for UN members to evidence how they are turning their disaster risk reduction (DRR) strategies into actions which substantially reduce disaster risk – and doing so at scale.

Fundamental to the successful implementation of the Sendai Framework is the first of the so-called Four Priorities, namely understanding disaster risk.  My RMS colleague, Robert Muir-Wood and I will be involved in several working sessions and ministerial roundtables at Cancun.  We will focus our contributions on this first priority.  After all, you cannot hope to effectively reduce your risks unless you comprehend them deeply – their frequency, the severity of outcomes and potential changes over time.

It is very encouraging that the United Nations Office for Disaster Risk Reduction (UNISDR) recognizes that organizations working in the private sector have a pivotal role in this endeavor.  In part, this is because the UN understands that the private sector is responsible for 70 to 85 percent of capital investment in most economies.  Ensuring those investments are made with a keen eye on resilience can make a material difference.

But there is another reason that the private sector has become a key stakeholder in the eyes of the UN.  Put simply, it is the recognition that there exists in the private sector a huge amount of expertise and experience in managing catastrophe risk.

A Measured Success

The slogan for the Cancun event speaks to this very point: “From Commitment to Action.”  There is a close link here with the second of the Four Priorities, namely strengthening governance structures around disaster risk reduction.

In this context, Robert and I will be reminding members of the old adage: if you can’t measure it, you can’t manage it – let alone be held accountable for it.  Further, we’ll be explaining why a decade of disaster data gives no meaningful perspective on the true risk of large and potentially destructive natural disasters, not to mention how that risk may be changing over time.

Take Haiti as an example. Through the nineteenth century, less than ten people were killed in earthquakes. Then, in a single afternoon in 2010, more than 200,000 died.  Looking only at a decade or two of actual losses prior to that fateful afternoon in 2010 would have provided scant indication of the true nature of the risk.building damage

Equally there is no need to wait for the experience of a disaster to understand the inherent level of disaster risk.  We can take a page from the insurance industry’s book here.  Just as no insurer would base an underwriting decision on recent claims experience alone, so member nations should not allocate scarce DRR capital without due consideration of all the dimensions of risk: hazard, vulnerability, exposure, and capacity to respond.

Where data from the historical record is insufficient, the private sector uses probabilistic modeling techniques to capture the full range of possible outcomes, both in terms of their frequency and severity, in order to adequately model extreme, ‘tail risk’.  For the Framework to succeed – and, no less importantly, to prove that success – the standard of risk analytics in the public and private sector needs to rise to levels now taken for granted by the financial markets.

Adopting the Currency of Risk Analytics

Thankfully this high standard of risk analytics, widely accepted as a “currency” for risk within the financial markets, does not need to be created.  Member states do not need to start from square one.  The private sector has already invested decades in the science and technology required to analyze the potential impact of extreme events and their likelihood.  Over the years, billions, if not trillions of dollars of private sector investment in risk have relied on such analytics.

There are lots of examples of governments working closely with commercial providers of risk analytics.  I have personally had the privilege of working around the globe at all levels of government (from cities to sovereign states), using the capabilities my organization offers, to help officials – elected and staff – to own a view of the risks they face.  Factors such as independence, reputation, and the ability to talk the language of the markets are all valued, and help to accelerate conversations with providers of risk capital.

At Cancun, Robert and I will advocate for the wide use of independent risk reports, allowing members and large corporations to regularly disclose their current levels of disaster risk and how that corresponds to their resilience targets.  Such reports are a critical governance tool.  They are central to the objective measurement of progress in achieving Sendai’s stated risk reduction goals.

Aligning Incentives

There is no point in reinventing the wheel here.  Using widely-accepted, objective risk analytics will encourage the public and the private sector alike to strengthen disaster risk governance.  It will also enable governments and corporations to articulate their growing resilience to the financial markets in a language the markets understand.

Given the UN is appropriately focused on low and middle income countries, an interesting challenge emerges, however.  How can these resilience analytics be made available for these government and private sector stakeholders at an economically viable price point?

It is well known that prudent interventions in risk reduction can yield benefits worth multiples in reducing the costs of disasters. According to the details and context of any scheme, these benefit/cost multiples can be ten or more.

Then consider that over the last 15 years, the average amount of humanitarian aid in response to natural disasters in low and low-to-middle income countries was $2.2 billion annually.  I’ve never met a donor who doesn’t wish their money went further.  By redirecting a portion of this capital to understanding and reducing risk before an event hits, donors, aid agencies and NGOs can increase the ROI of their precious dollars.

If you measure it well, you will manage it well.  And if you align commercial incentives, you will inherit the metrics you need.

This will be our mantra for Cancun.  It will focus the member states on implementing effective risk-reducing strategies.  It will enable the UNISDR to monitor the successful implementation of the Sendai Framework.  And it will open the doors to data-driven, science-based investments which reduce risk and lessen losses substantially.

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March 17, 2019
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The lack of affordable housing has led many of these low-income families to settle on the outskirts, often building haphazardly with poor quality material. According to CENAC (Centro de Estudios de la Construcción y el Desarrollo Urbano y Regional), three out of every five new homes built in Colombia today are of “informal origin”. In other words, 60 percent live in homes that are built without any legal procedures or formal design process. Despite acknowledging the issue, city governments often lack the means to effectively deal with increasingly vulnerable housing stock. Cumbersome bureaucracies complicate matters. In some neighborhoods, city officials require over six months to approve the retrofit of a single home. The result: hundreds of thousands of low-income families remain significantly at risk of death, injury and destitution in an earthquake. Change Is Building RMS has been working closely with Build Change since 2013. By sharing research, expertise and resources, we’ve been supporting the non-profit’s preventive programs in Latin America, the Caribbean, Nepal and, most recently, Southeast Asia. The partnership, focused on promoting the benefits of retrofitting homes for low-income families living in informal neighborhoods, is closely aligned with RMS’ overarching, societal purpose. After all, for the last 30 years, RMS’ mission has remained the same: to make communities more resilient through a deeper understanding of the impacts of extremes. With RMS’ support, Build Change has been able to develop the basis for successful retrofit projects. Shared value abounds… The local governments have been convinced to effect and enforce changes to urban planning and building ordinances. The local construction industry has been upskilled and employed. The local insurers are finding new opportunities to offer affordable policies. The local residents now have disaster-resilient homes and insurance coverage. Quantifying Resilience; Increasing Institutional Urgency Catastrophe risk models have been vital to this process. By combining science, technology, engineering and data to simulate the potential impacts of future disasters, RMS modeling puts a number on the potential impacts of “informal” housing. Moreover, the models can be used to evaluate how risk might reduce if mitigating measures are put in place. A virtuous circle often results: quantifying the value of building practices drives funding; funding helps protect more communities; more communities protected demonstrates the value of resilient building practices; more funding follows. For example, in 2016 RMS quantified the cost-effectiveness of a proposal for a scaled retrofit program in Bogotá, Colombia. Preliminary analysis showed that over 120,000 deaths and US$2.8 billion could be avoided in a 1-in-200-year event by retrofitting homes in the five neighborhoods studied. 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As a result, the Government of Colombia recently made the retrofitting of 600,000 homes an urgent, national priority. Of course, our work in Latin America is by no means done. And collaborations with Build Change continue in Haiti and Nepal as well. Immediate attention, however, has shifted to the Philippines. It’s too early to judge the outcomes. But with 69 million low-income people living in 15.6 million vulnerable homes today, the potential to make a difference is huge. By quantifying that potential, we hope to develop a compelling business case to address what is arguably the issue of our age. By putting a number on the resilience dividend, we hope to attract the #ResilienceFinance needed to make some of the world’s most densely populate cities significantly safer.…

November 13, 2018
Financing Resilience

Almost one and a half million people have died in natural disasters over the past 20 years. This is a waste of life; a waste of potential. Natural disasters also have a massive economic impact. Our models suggest natural catastrophes cost the world’s poorest countries almost US$30 billion a year on average. Hard-won development gains are regularly wiped out — and it is the poor and the vulnerable who are most impacted. In case anyone had forgotten the crippling impacts of natural disasters, 2017 served a painful reminder. Hurricanes Irma and Maria left vulnerable people in the Caribbean devastated. Somalia, Ethiopia and Kenya struggled with drought. Floods and landslides wrecked lives and livelihoods in Sri Lanka and Bangladesh. And then there was Hurricane Harvey which, along with the California wildfires, made 2017 the costliest on record in the United States. Whenever and wherever catastrophe strikes, our thoughts are with those so profoundly affected. We did not, however, need last summer’s tropical cyclones to understand that something is not working. We did not need Irma and Maria to learn that investments in resilience reduce losses from natural disasters. And we did not need the events of 2017 to know that incentives are too often insufficient to drive action in the most vulnerable regions. These truths are at heart of the Centre for Global Disaster Protection. Innovation is required to solve such complex humanitarian, political and economic problems. The impacts of recent disasters — and the need to finance reconstruction — have heightened the innovation imperative. They provide an opportunity to deploy financial instruments which catalyze investments in resilience; financial instruments which enable vulnerable communities to recover faster. RMS too knows that it is possible to stop manufacturing natural disasters. And RMS knows that financial mechanisms could in theory securitize — and therefore incentivize — the potential “resilience dividends” from investments in disaster risk reduction. After all, RMS has been intimately involved in some of the best-known thought-leadership in this space. Yet equally well understood is the fact that financial structures which incentivize resilience are difficult to implement in practice — in developed and in developing countries. There is no shortage of challenges. To move from theory to practice; to redirect capital at the required scale, ideas need to be fleshed out, structures need to be robustly designed and cash flows need to be tested. Any new financial mechanisms must pass muster with all stakeholders, lest the intended benefits evaporate. Since 1988, RMS’ mission has remained constant: to make communities and economies more resilient to shocks through a deeper understanding of catastrophes. Now, with the Centre’s help, experts from the finance, humanitarian and development communities have for the first time come together to refine financial instruments, address practical challenges and provide the interdisciplinary buy-in which mobilizes action. In this collaborative environment, innovation has happened. The recent launch of a new report on Financial Instruments for Resilient Infrastructure is a product of that innovation. RMS was commissioned by the U.K. Government’s Department for International Development to run the Centre for Global Disaster Protection’s first “Innovation Lab.” With support from Vivid Economics, re:focus partners and Lloyd’s of London two reports have been published — a 100-page technical report and a 50-page innovation report. Both are freely available here. The four new financial mechanisms examined in the report can help monetize the resilience dividend, thereby incentivizing both resilient building practices and risk financing. The outcome: less physical damage, fewer lives lost and faster economic recovery whenever nature proves too much. More is needed, of course. Policymakers and donors have a crucial role to play, not least in sponsoring pilots, funding the quantification of resilience, promoting risk-based pricing, supporting risk finance and advocating duties of care around life, livelihood and shelter. Thankfully the significant public benefits of resilience justify the investment. And now we have four new financial instruments for donors and the market to pilot in real-world situations.…

Daniel Stander
Daniel Stander
Global Managing Director, RMS

Daniel has spent 20 years bringing new ideas to the risk industry. He has responsibility for driving innovative, strategic solutions across RMS’ entire client base. He is also the Global Head of RMS’ Public Sector Group, leading RMS’ relationships at all levels of government.

Daniel has worked closely with public and private entities around the world, advising them on a variety of complex risks, including natural hazards, environmental stresses, malicious attacks and pandemic outbreaks. Deeply committed to education, his work is motivated by a desire to make communities and economies more resilient to acute shocks.

Prior to RMS, Daniel managed the group strategy and development function at an 80,000-employee, £10 billion global healthcare group, serving 30 million customers in over 190 countries. He also has considerable start-up experience, having been a founding team member of an award-winning, SaaS company.

The driving force behind 'Resilience', he received a City of Miami Proclamation recognizing his commitment to delivering urban resilience in the face of sea-level rise and extreme flooding. Daniel has served on the management boards of several charities in areas as varied as education, disability, interfaith social cohesion, grassroots sport and the arts.

Daniel graduated from Oxford, double-first with Honours. He also studied for a Masters at the Humboldt in Berlin and is a graduate of the Center of Creative Leadership.

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