Designing risk models

Risk models are a representation of reality, but are only as good as the data used.

The convergence of public and private sector risk modelling efforts promises to increase the availability of open access, open source risk information that can be used by business, government, insurance and citizens alike (UNISDR, 2013). However, while the experts developing these models clearly understand their limitations, especially at subnational levels, DRR practitioners using the information produced by these models may understand these limitations less well (GFDRR, 2014a).

Though important challenges remain in assessing risk, more hazard data and models are available; tools and models for identifying, analysing, and managing risk have grown in number and utility; and risk data and tools are increasingly being made freely available to users as part of a larger global trend towards open data (GFDRR, 2014a). More generally, and in contrast to 2005, today there is a deeper understanding—on the part of governments as well as development institutions—that risk must be managed on an ongoing basis (GFDRR, 2012), and that disaster risk management requires many partners working cooperatively and sharing information (GRDRR, 2014a).

Risk information provides a critical foundation for managing disaster risk across a wide range of sectors:

• In the insurance sector, the quantification of disaster risk is essential, given that the solvency capital of most non-life insurance companies is strongly influenced by their exposure to natural catastrophe risk.
• In the construction sector, quantifying the potential risk expected in the lifetime of a building, bridge, or critical facility drives the creation and modification of building codes.
• In the land-use and urban planning sectors, robust analysis of flood risk likewise drives investment in flood protection and possibly effects changes in insurance as well.
• At the community level, an understanding of hazard events—whether from living memory or oral and written histories—can inform and influence decisions on preparedness, including life-saving evacuation procedures and the location of important facilities.

Source: GFDRR (2014a)

It is well recognized that risk is not static and that it can change very rapidly as a result of evolving hazard, exposure, and vulnerability. Decision makers therefore need to engage today on the risk they face tomorrow. Fortunately, significant new methodologies and data sets are being developed that will increasingly make modelling future risks possible (GFDRR, 2014).