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Understanding Risk: Concepts and Implications for Development Aid

Created: 01 September 2015

Risk is quickly becoming a buzzword in development aid. The importance of this concept to the success of any development intervention given the growing level of uncertainties in the development context should not be underestimated. However, the multiplicity of ways in which it is interpreted and the terminological diversity result in a concomitant disarray in development policy-making and programming. On4th September 2015 UNISDR will be holding a technical briefing on terminology in preparation for a forthcoming meeting of the Open-Ended Intergovernmental Expert Group on Indicators and Terminology that is to be held at the end of September.

It is certainly the case that 2009 UNISDR Terminology on Disaster Risk Reduction is outdated and requires major revision. However, the main question is whether ‘risk’ will again be interpreted purely in terms of loss and damage and linked solely to ‘disaster’ or will it gain broader and more complete consideration? Based in the current UNISDR terminology ‘risk’ is conceptualized as ‘the combination of the probability of an event and its negative consequences’.[1] Therefore risk management is explained as ‘the systematic approach and practice of managing uncertainty to minimize potential harm and loss’.[2] Although this definition of risk is different from that of disaster risk, which is defined as ‘the potential for disaster losses in lives, health, status, livelihoods, assets, and services, which could occur to a particular community or a society over some specified future time period’.[3] This limited perspective on risk has a variety of implications in development programming, such as risk avoidance and lack of transparency about risk exposure in development interventions, which leads to a culture of blame as risk is often associated with failure and therefore loss of reputation and effective accountability.

Conversely, there is a growing understanding of the importance of addressing the upside of risk, i.e. risk as opportunity. Thus ISO 31000:2009 defines risk as the ‘effect of uncertainty on objective’[4]. Risk management specifically deals with the uncertainties inherent in any development intervention. By identifying and evaluating these uncertainties development organizations are better placed to be able to make informed decisions that lead to fewer losses and more gains. The World Bank (WB) also emphasizes the importance of opportunity management for development in its World Development Report (WDR) 2014.[5] Based on the economics of decision-making under conditions of uncertainty, WDR14 argues that responsible and efficient risk management is crucial, not only to reduce the negative impact of shocks and hazards, but also to enable individuals, households, and enterprises to pursue new opportunities for growth and prosperity. Such a perspective on risk creates room to experiment, consider and search for innovative solutions in a way that is uncoupled from blame and fear of failure.

Such a dual perspective on risk enables a truly integrated approach when dealing with uncertainties, such that the potential consequences can range from negative (disasters) to positive (opportunities for development). This goes beyond the traditional disaster risk reduction (DRR) or disaster risk management (DRM) definition and incorporates innovation and the field of non-DRR/DRM development programming as opportunities to be pursued for the successful realization of the Sustainable Development Goals (SDGs). With this perspective it becomes possible to move away from rather shallow ‘mainstreaming DRR into development programming’ to a consideration of how to respond to disaster risk, climate risk, or any other type of risk, according to the degree of its relevance and urgency.

The new UNISDR terminology will affect not only the field of DRR/DRM but also has major implications for development aid as a whole.

[1] UNISDR Terminology of Disaster Risk Reduction, 2009

[2] Ibid.

[3] Ibid.

[4] ISO 31000:2009

[5] Risk and Opportunity Management for Development, WB, 2014