GAR 2015 Main Report

205

explicitly called upon parliamentarians to make “combating corruption and illegal financial flows a priority, as these significantly affect the mobilization and proper allocation of resources”.4

10.2 Risk spills

The concentration of economic assets and activities in hazard-prone areas, coupled with increasing economic connectivity, increases the complexity of risks.

At the same time, as globally connected economies depend on a range of increasingly complex interlinked and dependent systems, disaster losses in one sector now tend to spill over into others, causing cascading and concatenated impacts. The concentration of economic assets and activities in hazard-prone areas goes hand in hand with increasing economic connectivity, the complexity of value chains, and therefore the increasing complexity of risks. Due to the global integration of value and supply chains, the effects of relatively localized disasters can spill over a country’s borders into regional and global markets, creating new risks and increasing the vulnerability of other national economies to interruptions and volatility (UNISDR, 2013a

UNISDR. 2013a,Global Assessment Report on Disaster Risk Reduction: From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction, Geneva, Switzerland: UNISDR.. .

). For example, following the Great East Japan Earthquake, Merck had to stop production in the only factory producing its Xirallic pigment, which is used in automotive paint (SCOR, 2013

SCOR. 2013,Supply Chain and Contingent Business Interruption (CBI), A perspective on Property and Casualty. Focus December 2013. SCOR Global P&C.. .

); this impact rippled through supply chains to affect the automotive industry in other regions.

Complex and interconnected risks have been defined using a range of terms, such as hyper-risks (Beck, 2009

Beck, Ulrich. 2009,Critical Theory of World Risk Society: A Cosmopolitan Vision, Constellations, Vol. 16, No. 1, pp. 3-22.. .

;

Ray-Bennett et al., 2014

Ray-Bennett, N.S., A.J. Masys, H. Shiroshita and P. Jackson. 2014,Hyper-risks in a hyper connected world: A call for critical ‘reflective response’ to develop organisational resilience, Input Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR..
Click here to view this GAR paper.

), cascading effects ( GAR 13 paper

McGee et al., 2014

McGee, Sibel, Jaime Frittman, Seongjin “James” Ahn and Susan Murray. 2014,Risk Relationships and Cascading Effects in Critical Infrastructures: Implications for the Hyogo Framework for Action, Input Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR..
Click here to view this GAR paper.

), cascading failures (Buzna et al., 2007

Buzna, L., K. Peters and D. Helbing. 2007,Optimized response to cascading failures in complex networks, In: Risk, Reliability and Societal Safety, Aven & Vinnem, eds. London.. .

), cascading disasters (Haavisto et al., 2013

Haavisto, Ira, Ruth Banomyong, Gyöngyi Kovàcs and Karen Spens. 2013,Supply Chain Coordination in Cascading Disasters, Paper presented at the International Symposium on Marketing, Logistics, and Business (MLB), Nagoya, Japan. September 2013.. .

) and synchronous failures ( GAR 13 paper

Kent, 2011

Kent, Randolph. 2011,Disaster risk reduction and changing dimensions and dynamics of future drivers, Background Paper prepared for the 2011 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR..
Click here to view this GAR paper.

). Such terms are usually employed when critical infrastructure and systems break down during disasters, as the terms give expression to the fact

that direct damage to and loss of physical assets create additional losses and downstream impacts, possibly triggering further direct losses in new disasters. Usually, these system breakdowns occur across sectors, geographies and different time scales and present a major challenge for the disaster risk reduction sector ( GAR 13 paper

OECD, 2014a

OECD (Organisation for Economic Co-operation and Development). 2014a,Interconnected, Interdependent Risks, Background Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR..
Click here to view this GAR paper.

The rapid evolution of information and communications technology, which is a key factor in competitiveness (Morris, 2010

Morris, I. 2010,Why the West Rules – For Now: The Patterns of History, and What They Reveal About the Future, New York: Farrar, Straus and Giroux.. .

; Acemoglu and Robinson, 2012

Acemoglu, Daron and James Robinson. 2012,Why Nations Fail: The Origins of Power, Prosperity and Poverty, New York: Crown Business.. .

; WEF, 2013

WEF (World Economic Forum). 2013,The Global Competitiveness Report 2013–2014, Full Data Edition.. .

), has also become a driver of the increased social and territorial concentration of economic activity as well as risks. For example, 95 per cent of global equity market capitalization is concentrated in only 24 cities, making the financial services sector potentially more vulnerable than other, less concentrated sectors (Dobbs and Reemes, 2012

Dobbs, Richard and Reemes, Jaana. 2012,Trends, The Shifting Urban Economic Landscape: What Does it Mean for Cities? McKinsey Global Institute. October 2012.. .

). While this sector depends less on transport infrastructure such as ports and highways, it is highly vulnerable to interruptions of energy supply for its electronic transactions and on server capacity and telecommunications for data transmission. In response to this risk, the investment house Black Rock, which runs a platform that manages more than US$13 trillion in assets, has built multiple redundancies into their server capacity, cooling systems and power supply, and is able to switch service and operations between the East and West Coast of the US in the case of disasters.5

10.3 Addressing risks to public and

private investment in the HFA

The way in which countries addressed rising exposure levels as part of the HFA has not been assessed with consistent output indicators at a global scale. As a result, there is little understanding of the level of progress, and most innovation seems to have occurred outside of the disaster risk management sector.

While the HFA does not explicitly address the challenge of increasing exposure through economic

	205 explicitly called upon parliamentarians to make “combating corruption and illegal financial flows a priority, as these significantly affect the mobilization and proper allocation of resources”.4 10.2 Risk spills The concentration of economic assets and activities in hazard-prone areas, coupled with increasing economic connectivity, increases the complexity of risks. At the same time, as globally connected economies depend on a range of increasingly complex interlinked and dependent systems, disaster losses in one sector now tend to spill over into others, causing cascading and concatenated impacts. The concentration of economic assets and activities in hazard-prone areas goes hand in hand with increasing economic connectivity, the complexity of value chains, and therefore the increasing complexity of risks. Due to the global integration of value and supply chains, the effects of relatively localized disasters can spill over a country’s borders into regional and global markets, creating new risks and increasing the vulnerability of other national economies to interruptions and volatility (UNISDR, 2013a x UNISDR. 2013a,Global Assessment Report on Disaster Risk Reduction: From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction, Geneva, Switzerland: UNISDR.. . ). For example, following the Great East Japan Earthquake, Merck had to stop production in the only factory producing its Xirallic pigment, which is used in automotive paint (SCOR, 2013 x SCOR. 2013,Supply Chain and Contingent Business Interruption (CBI), A perspective on Property and Casualty. Focus December 2013. SCOR Global P&C.. . ); this impact rippled through supply chains to affect the automotive industry in other regions. Complex and interconnected risks have been defined using a range of terms, such as hyper-risks (Beck, 2009 x Beck, Ulrich. 2009,Critical Theory of World Risk Society: A Cosmopolitan Vision, Constellations, Vol. 16, No. 1, pp. 3-22.. . ; Ray-Bennett et al., 2014 x Ray-Bennett, N.S., A.J. Masys, H. Shiroshita and P. Jackson. 2014,Hyper-risks in a hyper connected world: A call for critical ‘reflective response’ to develop organisational resilience, Input Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR.. Click here to view this GAR paper. ), cascading effects (McGee et al., 2014 x McGee, Sibel, Jaime Frittman, Seongjin “James” Ahn and Susan Murray. 2014,Risk Relationships and Cascading Effects in Critical Infrastructures: Implications for the Hyogo Framework for Action, Input Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR.. Click here to view this GAR paper. ), cascading failures (Buzna et al., 2007 x Buzna, L., K. Peters and D. Helbing. 2007,Optimized response to cascading failures in complex networks, In: Risk, Reliability and Societal Safety, Aven & Vinnem, eds. London.. . ), cascading disasters (Haavisto et al., 2013 x Haavisto, Ira, Ruth Banomyong, Gyöngyi Kovàcs and Karen Spens. 2013,Supply Chain Coordination in Cascading Disasters, Paper presented at the International Symposium on Marketing, Logistics, and Business (MLB), Nagoya, Japan. September 2013.. . ) and synchronous failures (Kent, 2011 x Kent, Randolph. 2011,Disaster risk reduction and changing dimensions and dynamics of future drivers, Background Paper prepared for the 2011 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR.. Click here to view this GAR paper. ). Such terms are usually employed when critical infrastructure and systems break down during disasters, as the terms give expression to the fact that direct damage to and loss of physical assets create additional losses and downstream impacts, possibly triggering further direct losses in new disasters. Usually, these system breakdowns occur across sectors, geographies and different time scales and present a major challenge for the disaster risk reduction sector (OECD, 2014a x OECD (Organisation for Economic Co-operation and Development). 2014a,Interconnected, Interdependent Risks, Background Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR.. Click here to view this GAR paper. ). The rapid evolution of information and communications technology, which is a key factor in competitiveness (Morris, 2010 x Morris, I. 2010,Why the West Rules – For Now: The Patterns of History, and What They Reveal About the Future, New York: Farrar, Straus and Giroux.. . ; Acemoglu and Robinson, 2012 x Acemoglu, Daron and James Robinson. 2012,Why Nations Fail: The Origins of Power, Prosperity and Poverty, New York: Crown Business.. . ; WEF, 2013 x WEF (World Economic Forum). 2013,The Global Competitiveness Report 2013–2014, Full Data Edition.. . ), has also become a driver of the increased social and territorial concentration of economic activity as well as risks. For example, 95 per cent of global equity market capitalization is concentrated in only 24 cities, making the financial services sector potentially more vulnerable than other, less concentrated sectors (Dobbs and Reemes, 2012 x Dobbs, Richard and Reemes, Jaana. 2012,Trends, The Shifting Urban Economic Landscape: What Does it Mean for Cities? McKinsey Global Institute. October 2012.. . ). While this sector depends less on transport infrastructure such as ports and highways, it is highly vulnerable to interruptions of energy supply for its electronic transactions and on server capacity and telecommunications for data transmission. In response to this risk, the investment house Black Rock, which runs a platform that manages more than US$13 trillion in assets, has built multiple redundancies into their server capacity, cooling systems and power supply, and is able to switch service and operations between the East and West Coast of the US in the case of disasters.5 10.3 Addressing risks to public and private investment in the HFA The way in which countries addressed rising exposure levels as part of the HFA has not been assessed with consistent output indicators at a global scale. As a result, there is little understanding of the level of progress, and most innovation seems to have occurred outside of the disaster risk management sector. 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