The critical role of the markets and the private sector for Disaster Risk Reduction (DRR) and resilience building has been widely recognized during implementation of the first Hyogo Framework for Action (HFA) (2005-2015), and has been carried forward into the Sendai Framework for DRR (2015-2030).
The vast majority of investment in developing countries - 70 to 85% (UNISDR 2013) - comes from the private sector. Private sector investment is shaped by opportunities in markets at domestic, regional and global levels. Today, most communities are dependent on markets for the provision of their food, utilities, agricultural inputs and shelter, and for the sale of their products and employment. Markets contribute significantly to the livelihoods of the most vulnerable, and their failure when a disaster occurs can have critical consequences.
Although markets engage with poor and vulnerable people at the local level, we must not forget that most markets are connected in one way or another to national and global market systems that influence their behaviour. Therefore we need to look at the role of markets at all levels to identify how they can contribute to building the resilience of the poorest and most vulnerable.
Markets for DRR
Practical Action is actively exploring the incentives and mechanisms that create the right conditions for investment decisions that build resilience and reduce disaster and climate risk. We can help the private sector in a number of ways. We can help them be more accountable for disaster risk reduction and resilience building, so that when disasters occur - affecting their investments - the most vulnerable are not disproportionately affected. We can also help them to benefit from a more resilient supply chain. It is vital to understand the potential of markets to exacerbate and/or reduce different risks, because investment in local markets has far-reaching impacts on risk accumulation and underlying risk drivers.
We call this approach Markets For DRR (M4DRR). The goal of M4DRR is to reduce and ultimately avoid the shocks and losses experienced when disasters affect markets, through increasing the resilience of society. This can only be achieved when all the actors, including the private sector and the markets in which they operate, are themselves resilient.
- Risk Transfer
The EMMA toolkit is a guidance manual for humanitarian staff in sudden-onset emergencies. There is a growing realization that market systems play a vital role in supplying critical goods and services that ensure survival and protect livelihoods during and after disasters.
Poorly planned emergency responses that duplicate existing services - such as giving free food as aid thereby destroying demand for locally produced food - can undermine local market systems and prevent long-term sustainable recovery of the community.
EMMA aims to improve emergency response by helping relief agencies to better understand, support and make use of local market-systems during disasters. Better use of local market-systems can in turn lead to more efficient use of humanitarian resources, faster economic recovery, and reduced risk of long-term dependency on aid.
Training on how to use the EMMA toolkit is provided by Practical Action Consulting. It is aimed at humanitarian practitioners and managers in general emergency response, food security, shelter, WATSAN, livelihoods and economic recovery. It is also relevant to donors to and government partners in humanitarian response.
Natural disasters are becoming more frequent, exacerbated further by climate change, and it is the poorest and most vulnerable who will suffer the direct impact of this increasing risk. An innovative approach will be necessary to protect those who do not have the financial resources to access traditional ‘risk transfer’ mechanisms such as insurance.
‘Risk financing’ means that risks are accepted and that post-disaster funding is made available through either personal savings, the sale of valuable assets, or pre-arranged access to credit or loans. Risk transfer and risk financing, when combined with risk reduction, have the potential to reduce the risk and impact of disasters.
Risks that are perceived to be ‘low level’ are handled on an individual or household scale, whereas higher order risks may require collective responses, backed up by external support. In the worst cases, this may entail international assistance, as in for example the 2015 earthquake in Nepal.
Practical Action is working with the Zurich Flood Resilience Alliance to explore innovative risk transfer and financing mechanisms that will work for the poorest, helping them to avoid negative coping strategies such as the sale of crucial assets.