Globalization of local risks through international investments and businesses: A case for risk communication and climate fragility reduction

Developing countries in general and those in Asia, in particular, have become producers of goods and services for rest of the world as a result of which investments in the region have grown significantly. But before the advent of global investments, the domestic risks that countries are prone to, including disasters, were largely confined to within their borders. With increasing global investments, there is a higher chance now for these local risks to spill beyond borders and to become global as the foreign investments taking place in these countries are exposed to these risks and they tend to bring international implications. For example, hazards can impact international markets and also communities that will suffer from companies’ services being affected. 

Some of the important questions for the Asian host countries are:

• a) what measures are put in place by the host countries to limit and/or mitigate the local risks affecting the international investments,
• b) to what extent the local risks have been communicated to the international investors in a transparent manner, and
• c) what efforts have gone into understanding the uncertainty in the available information to fully understand and address the future risks.

The question for the foreign investing entities are:

• a) are the investors fully aware of the local risks,
• b) what measures have to be taken, including the criteria employed in conducting risk assessments, to mitigate the local risks from spilling over beyond the boundaries of countries where investments took place, and
• c) what it means for the risk assessments and risk communication?

In this paper, an effort has been made to answer some of these questions using a literature review and results from an online structured questionnaire survey of Japanese business entities. This paper also presents a climate fragility risk index (CFRI) that helps assess a country’s suitability for investing from the point of view of the climate fragility risks the country has.

This paper is a contribution to the 2019 edition of the Global Assessment Report on Disaster Risk Reduction (GAR 2019).

To cite this paper: 

Prabhakar, S.V.R.K. and Shaw, R. Globalization of local risks through international investments and businesses: A case for risk communication and climate fragility reduction. Contributing Paper to GAR 2019