Making Communities More Flood Resilient: The Role of Cost Benefit Analysis and Other Decision-support Tools in Disaster Risk Reduction

Mechler, R. ORCID: https://orcid.org/0000-0003-2239-1578, Czajkowski, J., Kunreuther, H., Michel-Kerjan, E., Botzen, W., Keating, A., McQuistan, C., Cooper, N., & O'Donnell, I. (2014). Making Communities More Flood Resilient: The Role of Cost Benefit Analysis and Other Decision-support Tools in Disaster Risk Reduction. White Paper, Zurich Flood Resilience Alliance (9 September 2014)

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Abstract

Given the series of large-scale flood disasters that have occurred in recent years, there is a growing recognition among community leaders, businesses, insurers, governments and international donors of the need to invest in risk reduction measures before such events happen. Due to the costs of risk reduction measures, these actions need to be justified and as a result there is an increasing need to utilize decision-support tools, which can help to make the case for action to reduce disaster risks and build flood resilience when faced with limited resources.

Across stakeholders, the specific objectives from the use of decision-support tools include (i) demonstrating the efficiency of the action ex-ante (before the flood); (ii) aiding in the selection of a particular intervention in enhancing community flood resilience from a suite of possible options; (iii) helping communities make the right choice when faced with limited investments; (iv) demonstrating the benefits of donor funding of community flood resilience projects; and (v) monitoring the successes and weaknesses of past interventions to generate lessons learned for future work.

Typically, discussion on decision-support for disaster risk reduction (DRR) in floods (as well as for other hazards) has focused on cost-benefit analysis (CBA), however there are a number of other tools available to support decision-making. These include cost-effectiveness analysis (CEA), multi-criteria analysis (MCA) and robust-decision-making approaches (RDMA), which have been applied to similar problems, and can also be used to aid decision-making regarding flooding.

This white paper provides an overview of the opportunities and challenges of applying these different tools, and guides the reader to select among them. Selection depends on the desired objective, circumstances, data available, timeframe to perform analyses, level of detail, and other considerations. We first focus on the CBA decision-tool, as this has been the mainstay of research and implementation. We then go beyond CBA to consider the other techniques for prioritising DRR investments. While our analysis is specific to flood DRR actions, the conclusion are also applicable to other hazards.

The key findings arising from this white paper with relevance to research, policy and implementation of flood DRR decision-support tools, are:

(1) Following a comprehensive review of the quantitative CBA flood DRR evidence, we find that flood DRR investments largely pay off, with an average of five dollars saved for every dollar spent through avoided and reduced losses;

(2) Using CBA for flood risk reduction assessment should properly account for low-frequency, high-impact flood events, and also tackle key challenges such as intangible impacts;

(3) Decision-making can be improved by using various decision support tools tailored to the desired outcomes and contexts.

This white paper is the foundation upon which the Zurich flood resilience alliance work on integration of a decision toolbox will proceed "on the ground," with established community-based risk assessment tools, in particular Vulnerability Capacity Assessments (VCA) or Participatory Capacity and Vulnerability Assessments (PCVA). Based on these findings we propose a way forward over the next several years on informing risk-based decision making as part of the alliance program.

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