"Decision making in international development contexts is heavily influenced by economic and financial considerations. Investments in Disaster Risk Reduction (DRR) must compete for limited public and private sources with a myriad of other potential development investment opportunities. Unless the economic and financial case for such investments can be demonstrated, proponents of DRR will lack the basic information required for informed financial decision making. As a result, estimates documenting the economic costs and benefits of investments in DRR are of fundamental importance for decision making."
"A major decision-supporting tool commonly used for project appraisal is cost-benefit analysis (CBA). CBA is used to organize, appraise and present the costs and benefits, and inherent tradeoffs of projects taken by public sector authorities like local, regional and central governments and international donor institutions to increase public welfare".
There are two critical areas where the use of CBA in natural disaster risk mitigation can prove invaluable:
- Assessing risk management measures and helping in the selection of the most profitable projects in terms of damages avoided.
- Mainstreaming risk and risk management measures in project and development planning.
This UNISDR document, published in 2007 includes the review of CBA methods, gaps and limitations and provides suggestions for using CBA for DRR.
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