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Bullet Economics of DRR
Home » Themes &Issues » Economics » Economics of DRR

Economic analysis is one of the mainstream tools for disaster reduction. There has been little effort to incorporate disaster risks into economic analysis to strengthen the hazard resilience, even in high risk areas. However, there have been few detailed economic analyses in the risk reduction projects, particularly in the developing countries. Results have shown that benefits of risk reduction are limited and highly context specific.

The lack of evidence on the benefits of disaster risk reductions has proved to be a major stumbling block in attracting the interest and commitment of policy makers to disaster risk reduction. Two steps need to be taken so that economic risks of a disaster are well assessed.
  • Firstly, the economic risks must be identified and given a priority and
  • Secondly, the analysis of economics of a disaster risk should be applied early in a project cycle so that findings can be taken into account in the design of both disaster risk reduction projects and other development projects in the hazard prone area.

A reduction of disaster can sometimes be achieved via different methods ranging from large scale technical projects to small scale community based initiatives. Many of the disaster risk reduction measures, whether undertaken in the disaster risk reduction project related directly or indirectly to the losses that will ensuing a hazard. Finally, it is important of any proposed disaster risks reductions and monetary value of the expected related flows of direct and indirect benefits into account in order to determine whether a project is economically viable or not. Sometimes it becomes very hard to estimate the benefits as they are realistic, with the actual level of benefits depending on the level of hazard, hence cost-benefit analysis is very important to study the economic dimensions of a disaster.

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