In light of recent natural disasters in America, most notably tornadoes in the South breaking death toll records, people are questioning the safety of where the live. I’d like to preface with a note that recent assessments of the safety of cities has very much upset something I have always held so dear- my safety and pride in that safety. Over the past 50 years, the frequency of natural disasters has indeed increased (see Chart 1). Natural disasters are more common and affect more people in developing economies (all low- and middle-income countries as defined by the World Bank) than elsewhere (Laframboise and Loko, 2012) (see Chart 2).
Advanced economies are better equipped to absorb the cost of disasters because they have recourse to private insurance, higher domestic savings, and market financing. The dollar value of disaster damage is much larger in advanced economies because of the amount and concentration of capital, but as a percentage of national wealth and output, the damage is usually much greater in developing economies. The most vulnerable members of society, both in high- and low-income countries, are the major victims of natural disasters. In the short term, economic output shrinks and the fiscal deficit worsens after a disaster. After a major disaster, policymakers must decide whether to finance emergency spending by reducing or diverting existing spending or by borrowing.
In small island states and low-income countries, natural disasters often drive up public debt. The impact of natural disasters depends on many things, including the size and structure of the economy, the concentration of people in high-risk areas, per capita income, and financial system development.
While most natural disasters cannot be prevented, our research finds that more could be done to reduce their human and economic costs and minimize welfare losses. There are several obstacles to a more holistic, preventive approach to coping with disasters.
Third, emergency aid and financing can be a strong but rational incentive for developing economies to underinvest in risk reduction. Less obviously, but still important, there is considerable room for improvement in government policy frameworks to better manage risk and mitigate economic and social costs (see table).
Coordination with foreign partners before disaster strikes could mobilize external assistance for risk reduction, which is likely to earn a higher return than emergency help after the fact.
Insurance is the best way to reduce the real costs of natural disasters without raising taxes or cutting spending.
In disaster recovery (DR) planning, once you've completed a business impact analysis (BIA), the next step is to perform a risk assessment. The risk assessment should be able to help you identify events that could adversely impact your organization. To get started with a risk assessment, begin by identifying the most critical business processes from the business impact analysis. An excellent document to assist you in preparing a risk assessment comes from the National Institute for Standards and Technology (NIST).


The risk analysis involves risk identification, assessing the likelihood of the event occurring, and defining the severity of the event's consequences. The sequence in which these measures are implemented depends to a large extent upon the results of the risk assessment. This chart identifies natural and man-made disasters that could adversely impact an organization. Once the risks have been identified, you'll want to identify the potential effects, symptoms and consequences resulting from the event. Quantitative methods, which assign a numeric value to the risk, usually require access to reliable statistics to project the future likelihood of risk. Once all relevant risks have been analyzed and assigned a qualitative category, you can then examine strategies to deal with only the highest risks, or you can address all risk categories. While it seems a better use of time to educate locals and prepare for disaster and learn how to brace or avoid, it is still of interest to some which cities rank as safe and which are unsafe. Not only is Austin in the red zone, it is in the top 8 most dangerous cities regarding natural disasters. Never mind that the study doesn’t take into account tsunamis (hello, California), snowpocalypses (hello NYT offices and everyone up north), volcanoes (oh hi, Hawaii), mud slides (California), extreme heat (okay Texas has that), oil spills (not natural, but whatever, hello Alaska). In addition to the immediate direct human cost, natural disasters often exacerbate poverty and undermine social welfare. Reporting of disasters has improved dramatically, but there has also been a documented rise in the number and intensity of climatic disasters and more people and physical assets are concentrated in at-risk areas. In terms of disasters per capita and disasters per square kilometer, Caribbean countries are ranked among the top 50 riskiest places in the world (Rasmussen, 2006).
Recent studies find that higher skills, better institutions (for example, local governments, health services, police, rule of law), more openness to trade, and higher government spending help lower the economic costs of a natural disaster (Noy, 2009).
We found that there are steps the government can take before a disaster to mitigate the impact on people and output, particularly in countries very prone to disasters for geophysical or meteorological reasons.
First, many low-income countries lack the budget resources and technical and human capacity to prepare for disasters or to build levees or retrofit offices and homes to withstand storms. In fact, because such financing is offered at such low interest rates, it may not make sense to spend scarce resources before a disaster; the expense may not justify the expected return. Read our guide on how to prepare a risk assessment, and then download our free risk assessment template. The BIA helps identify the most critical business processes and describes the potential impact of a disruption to those processes, and a risk assessment identifies internal and external situations that could negatively impact the critical processes. Read our guide, and then download our free risk assessment template, which is available as a Word doc or PDF.
The document is Special Publication 800-30, Risk Management Guide for Information Technology Systems.
It may also be useful to conduct a vulnerability assessment, which helps identify situations in which the organization may be putting itself at increased risk by not performing certain activities.


By contrast, man-made events are those in which an individual or multiple persons may be held accountable for contributing to the event(s) that caused the disaster.
This will depend on management's risk appetite, which is their willingness to deal appropriately with risks. Weighted by land area and population, small island states suffer the highest frequency of natural disasters. The impact can be alleviated by foreign aid and investment, but after large disasters the growth and income effects usually persist. Better institutions and a better-educated population help ensure a capable and efficient disaster response, good allocation of foreign aid, and proper enforcement of such structural measures as building codes and zoning laws, which helps reduce damages when they hit.
In such regions, a policy framework that explicitly takes into account the risks and costs of disasters would allow the government to better prepare for, and respond to, natural disaster shocks. When the economic costs are lessened resources are freed up for disaster preparedness, resilience, and mitigation, which can save lives in the future.
The Caribbean Catastrophe Risk Insurance Facility (CCRIF) is one such example and has recently supported immediate relief to Caribbean countries. Instead, policymakers and their foreign partners should integrate new and better ways to manage risk and reduce costs ahead of time. The risk assessment will also help you determine what steps, if properly implemented, could reduce the severity of the event.
An example may be the increased risk of virus attacks by not using the most current antivirus software. The strategies you define for risks can next be used to help design business continuity and disaster recovery strategies. Countries with deep financial systems and high insurance coverage fare the best, because the risk is transferred to outsiders (even in the case of local insurers through reinsurance policies), so investment and reconstruction place little or no extra fiscal burden on the state. Such preparation falls under the key pillars of risk assessment and reduction, self-insurance, and risk transfer (see table).
Use our risk analysis template to list and organize potential threats to your organization.
Finally, the risk analysis results are summarized in a report to management, with recommended mitigation activities. In our risk analysis template, you will find columns that allow you to assign qualitative terms to each of the risks to your organization.
Regardless of the methodology, the results should map to the critical business processes identified in the business impact analysis, and can help define strategies for responding to the identified risks.



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