Disaster risk management decision-making review: Full cost accounting of disaster risk management decisions

Report prepared by Nicky Smith, Charlotte Brown, Wendy Saunders 

Resilient Organisations Research Report 2016/04, March 2016


Natural disasters bear a heavy cost for New Zealand both in terms of financial losses and societal and environmental disruption. A number of studies have illustrated that the benefits from disaster risk reduction and mitigation can potentially far exceed the financial costs involved. But effective Disaster Risk Management (DRM) decision-making requires methodologies and frameworks that provide a good ‘evidence base’ and comprehensively assess the costs and benefits of DRM on our societal well-being.

Cost benefit analysis and multi-criteria analysis are among the most popular tools or frameworks used by governments to assist decision-making across a broad range of policy contexts. The evaluation of disaster risk management options is, however, characterised by some important challenges that can call into question established decision making processes, routines and assumptions. Perhaps of most important, disaster risk management options tend to be characterised by a dichotomy between costs and benefits. While the costs of implementing risk management tend to be relatively certain, immediate and easily quantifiable in financial terms, benefits tend to be subject to high levels of uncertainty, experienced over long time horizons, and difficult to quantify.

This literature review is part of a government funded (Natural Hazards Research Platform) research project ‘Full Cost Accounting of Disaster Risk Management: Risk, meanings and metrics with uncertainty’.  The literature review aims to provide a concise summary of background information, both for researchers and stakeholders. The review includes a summary of the disaster risk management context in New Zealand, traditional economic decision analysis tools, common challenges with existing tools, existing frameworks for disaster risk decision-making and common costs and benefits included in DRM studies.

This project seeks to develop a prototype decision making framework fit for DRM. Within the project the prototype framework will also be applied to a specific DRM case study.

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