World Development Report (WDR) 2013, presented on October 7, focuses on reducing poverty by appropriate risk management techniques. WDR is the most comprehensive yearly publication of the World Bank. This year, the report looks at how managing risks, ranging from economic crises to natural disasters and health adversities, can end poverty and increase justice.
“Risk management can save lives, avert economic damages, and can provide resilience and prosperity by allowing people to undertake new endeavours,” said Norman Loayza, director of the 2014 WDR. An applied example of positive risk management would be for a flood-prone country to allocate funds for simple projects such as building dams, or making sure houses are built on stilts.
There are currently numerous hindrances to effective risk management in hunt for development aims. These include the behavioral failures of decision-makers, lack of resources, and low levels of information with which to make decisions.
The report proposes that poor risk management has resulted in a stunning child mortality rate from illness and injury in low-income countries – a rate 20 times higher than in high-income countries. Poor risk management has also led to more people dying from droughts in Africa than from any other natural disaster. These trends can however be reversed if government and decision makers succeed in creating a favorable atmosphere for proper risk management. According to WDR, government must play the vital and most significant role in creating a risk-free environment for the vulnerable people.
“We’re advocating a sea change in the way risk is managed,” World Bank Group President Jim Yong Kim said. “Our new approach calls for individuals and institutions to shift from being ‘crisis fighters’ to proactive and systematic risk managers.” Kim suggests that seeing through such changes will help build resilience and will draw us near to our goal; ending extreme poverty and enhancing collective prosperity.
Governments and international institutions are at the epicenter of this new approach. A number of protectivemethods aimed at controlling the ambiguity associated with the risks are to be taken by the decision makers. Experts suggest that one way governments can approach this new idea would be by looking at development as an investment.Once development is seen as an investment, the international community could more easily tackle the inherent risks associated with it, such as financial shocks and natural disasters. Macro-level risk analysis and better management of available information are being cited as the potential strategies of the government.
This report of the World Bank has defined the relationship of the bank with the individual countries and taken us to a new dimension of strategic development. Instead of avoiding risks, governments will need to adopt a more preventive approach. Governments will need to strengthen their banking sector, try to invest more on risk management projects and building infrastructure in order to reduce or counter natural catastrophes like earthquakes, floods and tsunamis. These strategies will, according to WDR, help reduce the levels of poverty of a country.
By: Aimon Tanvir Malghani