ABSTRACT
Research studies of safety risk and often focus on learning from disaster. However, learning can also occur from considering risk management practices within organizations in which accidents have occurred. In the UK, cases such as National Grid Company demonstrate integrated management of safety and financial risk. The paper emphasizes on potential strengths, weakness, and present research study from different authors. The article then provides a recommendation that will assist future disaster risks in a move that was seen as addressing a national security concern rather than one of the public safety; the article focuses on several financial and organizational disaster risk that these nations set out to prepare their citizens for the particular hazard. National civil protection agencies are introduced to instruct local and regional governments on the importance and methodology that involves funding that assists in building community shelter, to provide preparedness, public education. Further, it discussed in the article a comprehensive financial risk reduction mechanism by developing financial capacity at the national level and as resources and all these tasks at local levels (Paton & Johnston, 2006). It further introduces concepts of the possibility of microcredit for mitigation investment as well as its primary concern in handling household credit and needs of micro groups immediately after a disaster. The paper concludes by providing a recommendation that emphasizes on financial inquire and economic engagement efforts that ought to be implemented.
Introduction
While it might prove impossible to predict exactly the way each government will conduct and what expectations are in there for them, there are general structures that specific interfaces are possible and might be reasonably anticipated (Bosher et al., 2007). Usually, the ultimate determination concerning the type of structure employed within each country is the form of government in power –ranging from an autocratic totalitarian to a democratic republic preparedness public. In an attempt to understand the way that the financial framework of disaster management has developed in the UK and Australia, it is essential to remember that the concept of comprehensive disaster management is relatively new.
While some group-based insurance policies are connected with improving the physical surroundings, there are many examples of individual incentives in insurance plans, which motivate households in mitigation. On the contrary, relief may discourage investment as families may engage in risky practices after mechanism policies (Pollitt &Bouckaert, 2004). Banking and housing finance markets in Australia as compared to the UK have not yet extended financial services to disadvantaged households for the purpose of building assets. Instead, microfinance organizations have evolved to meet their credit needs. Microcredit could be a possible instrument for providing resources of households for mitigation investment.
Literature Review
Historically, very little has been done to address risk reduction, with any formalized disaster management structures focusing mainly on financial disaster response. It was until well into the twentieth century that the intrinsic value of comprehensive disaster was recognized on a global scale, and risk reduction and more formalized disaster planning emerged (Pelling&Uitto, 2001). It the past, most nations left the responsibility of or managing the consequences of emergencies and disaster on the shoulders of local government. For the most part, these communities had little power or resources of backing to assess the risk adequately and, therefore, prepared only for that event they were aware of because of previous experiences, such as fire and annual floods (Davies et al., 2009). If they had the means, they would develop the capacity of the target to these hazards through designing or purchasing equipment and training responders. With only isolated expectations, the minimal action was taken to reduce the likelihood or consequence components of the risks before they struck.
Local communities became adapted to handling common, average risk (Ives & Mool, 2010). However, in any situation that went beyond these simple events, the local government was quickly overwhelmed. With no formal national framework, higher levels of government do little other than provide funding, equipment, technical assistance or manpower during recovery (Mpelasoka et al., 2008). Because only during the past few decades has the value of mitigation and preparedness become known, governments did not typically dedicate funds to these practices. These skills and assets gradually develop. The resulting pattern was one in which communities were unable to prepare adequately for a disaster until an accident had occurred.
During World War II and the Cold War era, several national governments, including the United Kingdom, Canada, Australia and the United Sates, and the Sovereignty Union, perceived what they believed to be a significant risk of nuclear or another attack (Buckle et al., 2003). In a move that was seen as addressing a national security concern rather than one of the public safety, several of these nations sets out to prepare their citizens for the particular hazard. National civil protection agencies were established to instruct local and regional governments on the importance and methodology of building community shelter, to provide preparedness, public education, for conducting exercises and creating squads of medical and other response crews, among other activities. However, all these can only be possible in case financial strategies are introduced. Unlike the UK, Australia traditional channels for financial disaster relief and recovery, although in many instances less costly than risk transfer, have proved to be inadequate for managing large scale weather related events (Downing & Tol, 2002).
Discussion
According to recent estimates, over the last three years, the Australian Government has covered 25 percent of the total estimated loss arising from natural disasters. Also, to the assistance provided a similar level of support to the community where a natural disaster has occurred. Against the backdrop, the Council of Australian Governments COAG (Prestipino, 2004) commissioned a review of approach in dealing with natural disaster in 2001. The review examined Australia’s approach to dealing with natural disaster had concluded that the national financial framework for natural disaster management could be improved to (or “intending to”) achieving safer more sustainable communities and reduced risk, damage and loss. Central to this approach was the recommendation of a need for a systematic and widespread financial process of disaster risk assessments and a special focus on anticipation and mitigation.
The Act functions so that terrorism exclusions in qualified insurance contracts are deemed to have no effect. In turn, insurers can reinsure any terrorism risk that the Act requires them to assume with the Australian Reinsurance Pool Corporation, which was funded to control the scheme. The ARPC requires insurers a premium for reinsurance and claims that they hold some terrorism risk. The scheme grants cover for terrorism risks through some layers. The first layer of the cover is provided by a monetary pool –which was initially planned to accumulate to AUD 300million, funded by reinsurance premiums. The pool is enhanced by a line of the balance of AUD 1 billion, which is underwritten by the Government after which the Government has provided an AUD 9 million indemnity (Arthur et al., 2008).
In the UK, however, the year 2005 marked the launching by UK’s Department for Environment Food and Rural Affairs of a government program "Making Space for Water," which developed an innovative financial strategy for flood and coastal erosion risk management. This initiative was triggered by serve flood event in 2005 and 2006.Various economic projects are taking place in the UK to assess how natural resources and processes can help against floods, improve urban drainage and reduce coastal erosion. In the past, there was a substantial reliance on rigid financially related structures for flood risk management along the UK's riverbanks and coastlines, which required constant repair and costly upgrades (Lenschow, 2002). Extensive areas of natural forest are protected to provide services for flood control, which is seen as a low-cost alternative to costly infrastructure. Mercer et al. (2010) found in his study from the United Kingdom that most national adaptation strategies can be based on vulnerability assessment informed by broader international and national climate change guidance, rather than any consistent or systematic use of scenario, and financial approaches used for coordination across sectors and multiple government scales.
According to studies conducted in the UK, an essential means of effectively mainstreaming adoption of disaster risk management, involve ‘whole of government’ coordination including the involvement of a broader range of stakeholders. However, the sectors in the United Kingdom that had the highest level of adaptation were those tended to be most affected by current weather and extremes and the specific government initiatives that had been successful in stimulating adaptation that involves financial disaster risk reduction. From multiple triggers, few of these adaptations actions were solely imitated in response to climate change.
Results
One limitation of hazard mitigation insurance according to researchers is that it is the primary and post mechanism. It helps policyholders only through sharing and reducing their losses. It does not necessarily encourage investment in mitigation. While some gathering based protection strategies are associated with enhancing the physical surroundings, there are numerous cases of different impetuses in protection arranges, which inspire families in alleviation. Despite what might be expected, alleviation might demoralize venture as families might take part in unsafe practices after component arrangements. It is necessary to develop financial instruments that allow households to employ financial instruments that enable families to extenuate mitigation measures in Australia.
The need for immediate availability of credit and flexibility of terms innovated the financial instrument of microcredit. The UK Banks needed the concept of microcredit primarily for consumption and entrepreneur activities. The positive economic development results their organizations have produced heralded microcredit as an effective alleviation instrument. Mitigation activities are an integral reduction, and thus, microcredit may be an appropriate mechanism for mitigation investment.
Credit requirements for consumption in the immediate aftermath of a disaster may overwhelm microfinance organizations. Twigg (2004) has examined the disaster intervention to microfinance organizations. Although her article looks at the possibility of microcredit for mitigation investment, its primary concern is handling household credit needs of micro groups immediately after a disaster. Microfinance organizations could also introduce long-term financial services such as insurance against natural disaster and saving services for a personal safety net.
The effectiveness of microfinance organizations in dealing with these situations may depend on their strategic interventions at different stages of the post-disaster operation, distinguishing clearly between the self-recovery and rehabilitation needs of the clients (Benson &Rossetto, 2007). Their role in the relief stage may necessarily be brief and their function as a social net very limited in scope. Successful microfinance organizations are required to have a large client based, thus increasing the risk pool.
The financial instruments discussed above could be applied to reduction only in the particular context of hazard and instructional and social capabilities. Standardizing a tool for the universal application may be tough. Some of these instruments are more relevant for slow-onset disaster while others may be used for an emergency with sudden and cataclysmic impact, the effectiveness of these effects as an ex-ante and ex-post mitigation mechanism may also vary (Mercer, 2010). It requires a great deal of knowledge; reasons, intentional resources, flexibility and public comment make these financial instruments capable vehicles of mitigation.
Conclusion
In sum, perhaps the greatest risk we face is not from nature, but from human nature and our prosperity, for not acting prudently and courageously ahead of time before disaster strikes. Working together, we must redouble our efforts, and invest in the simple, life-saving measures that can reduce our vulnerability to disaster and climate related risk. Disaster risk reduction can save lives, secure livelihoods, and assets and protect our global investment in development. For example, the systems and tools that governments have available to address hazard risk in their communities are relatively universal through the world.
Although each country’s disaster management financial systems have developed independently from different sources, vast institutional sharing between countries has formed an overall standardization of types of financial disaster management, organizational most notably in the area of first response. Additionally, globalization has facilitated the standardization of practices, protocols, and equipment used by disaster management organizations. In general, the evolution of disaster management capacity in any country begins with the most pressing need—response.
Acknowledgment at least in the short term is recognized among the for disaster management functions as having the greatest immediate potential for saving lives and for being the most sensitive. Even in the smallest area, sententious response mechanisms will arise as a result of people’s survival instinct and collective concern. Almost all nations, including the UK and Australia, have at least a limited disaster response financial capacity that presumably can address the most common hazard risks affecting their citizens.
Recommendations
There is a need for a mechanism that will better ensure predictable timely and adequate funding to enable rapid response to crises (McEntire& Mathis, 2007). In Australia, for example, there is a sophisticated modern financial system. The regulatory framework for the Australian financial system was substantially reformed in 1998 in response to the recommendations of the 1997 report of the Financial System Inquiry. The FSI made a series of recommendations designed to promote an efficient, responsive, competitive and flexible financial system that would underpin stronger performances in managing risk (Campbell-Lendrum& Woodruff, 2006). On the other hand, the UK should engage in further efforts. For instance, in line with the OECD/DAC guidance, DFID has made efforts to ensure systematic and more rigorous implementation of the strategical asset. This comes with an increased emphasis on disaster risk reduction, with the 2009 white paper committing to allocate 10 percent of any natural disaster response money for preventing to mainstream further disaster risk reduction in the program. To support its commitment, DFID must maintain appropriate financial resources and technical capacity for broader disaster management issues.
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