Help Write the Next World Development Report 2014 - ‘Managing Risk for Development’

WASHINGTON – In the past few years, the world has experienced a number of turbulent episodes in the form of food, fuel, financial, and fiscal crises.  The Japan Tohoku earthquake in 2011 also brought into focus the dangers posed by natural hazards.  While there has been much debate about managing these risks individually, comparatively little attention has been paid to understanding how to better manage multiple risks.

Without such an understanding, policymakers and other social actors do not always see the whole picture. In particular, there is little debate on who is responsible and who is empowered to manage risks, and how risk management can be better coordinated at all levels of society.

The upcoming World Development Report (WDR) looks at risk, how it is managed, and the implications for economic development and reducing poverty.  The report focuses on how households, communities, businesses and government can support individuals in managing risk.  Among other things, the aim is to explore how people can be empowered to  take  risks that lead to better opportunities, with the support of private and public systems.

For the first time in the history of the World Development Report, the Reports’ authors are using the Web to collect views from individuals across the world for inclusion in the final publication, due out in the fall of 2013.  Firsthand experiences and stories on how individuals confront risks in their pursuit of opportunity are being sought to supplement an extensive on-the-ground consultation effort.

“We’re very serious about collecting stories from people of all walks of life,” says Norman Loayza, Director of the World Development Report. “This type of effort, which hasn’t really been done before for such a high profile World Bank product, could set a precedent for future exchanges between us and citizens of countries where we are active.”

The report looks particularly at how individuals manage losses  of health, wealth, income and safety coming from individual or systemic events, and at the role of different social and economic systems—the household, the community, the enterprise sector, the financial sector, the nation, and the international community—in risk management.

Moving away from single risks, the report will look at interconnections between risks.  One hardship, for example, frequently triggers another.  An individual with health problems may end up unable to work, and as a result face a host of financial problems.  A community experiencing drought may find that the cost of food has risen beyond its means. And as demonstrated in Japan, a natural disaster can be worsened by technological problems, in this case, meltdowns at the Fukushima Daiichi Nuclear Power Plant.

As with previous WDRs, the report will attempt to cast a new lens on the development challenge.

Loayza and team distinguish between shocks that occur suddenly and trends that manifest gradually.  Natural hazards and financial crises would be examples of sudden shocks, while demographic changes and technological improvements would be examples of longer term trends that can have a wide ranging impact.  How individuals, communities, businesses and countries are affected by such situations varies based on their exposure, resilience, internal conditions and external environment.

“Risks can also be imposed or voluntary, with the outcome varying from situation to situation,” adds Inci Otker-Robe, co-author of the report.  “A household living in a seismic area that experiences an earthquake need not fall into dire straits if insurance is available and house constructions are of a good quality.  On the other hand, a household that owns a small farm, and chooses to try out new seeds and inputs, may get higher yields, but could also risk losing its investment if weather and other conditions don’t cooperate.”

Taking cues from the history of risk management at the individual, national, and global level, the report will explore how people prepare for risk, but also cope after the fact.

A family, thinking of moving to a new, malaria-prone town in pursuit of better jobs, for example, may prepare itself by learning about malaria, taking malaria pills and using mosquito nets.  It could also buy health insurance, save money for a rainy day, and work with its new neighbors to drain stagnant ponds and spray insecticides.

Suppose, however, that in spite of these precautions, a family member contracts malaria.  The family could then draw down on its insurance and savings to pay for malaria treatment, and also make use of public hospitals or other government facilities.  But what if things got worse and costs got higher?  Children – often times girls more than boys – might be removed from school and get less food at home to cover the additional medical expenses.

At its core, the report will examine how households, communities, businesses, the financial system, governments and international agencies can support – or curtail – individuals’ ability to manage their own risk when faced with challenges.

Households can serve to support and protect their most vulnerable members - typically the young, the elderly, and the ill – so long as they are not restrained by gender, age, and other biases.  Communities can help their members overcome risks through informal networks of insurance and protection.  Businesses can help stabilize people’s incomes and expenditures, while the financial system can support individuals through insurance and credit lines (so long as the financial system is itself not a source of instability).  Governments can manage country-wide systemic risks, provide social protection, develop infrastructure, and establish rule of law – unless they fall prey to policy uncertainty, capture, corruption or outright predatory behavior.

In tackling these types of issues, the key questions the report will answer are:

• How can policymakers move from ad hoc response to systematic risk management?
• How can risk management unleash opportunity?
• Who is empowered and who is responsible for risk management?
• Should the state “play in the field” or “keep off the grass?”
• How can risk management strategies account for information imperfection and deep uncertainty?

The World Bank kicks off an effort for the next month to collect views and stories on how individuals experience risks, and then transform them into opportunities. Help write the next World Development Report 2014 by sharing your stories and experiences.