A Calculated Risk: How Donors Should Engage with Risk Financing and Transfer Mechanisms

Abstract

Better financial preparedness against risk is a central part of a comprehensive approach to disaster management. Risk financing and risk transfer are approaches to planning for risks that cannot be reduced or avoided practically or cost-effectively and may include a strategy and practical measures to ensure the availability of funds for post-disaster relief and reconstruction, commensurate with the scale and frequency of anticipated risks. Risk financing is of growing interest to a wide range of development and humanitarian actors searching for solutions to bridge a growing global post-disaster financing gap. This report describes key features of risk financing and risk transfer, examines some of the current challenges at the contextual and programmatic levels as well as institutional challenges donors might face in engaging in risk financing and recommends a set of principles and policy approaches to guide future donor support and engagement.