GOVERNANCE GOVERNANCE EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT Disaster Resilient and Responsive Public Financial Management: An Assessment Tool © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. >>> Contents Acknowledgments iii Abbreviations and Acronyms iv Disaster Resilient and Responsive Public Financial Management Assessment 1 Pillar 1: DRR-PFM Institutional Arrangements 6 Pillar 2: Resilient Information Systems and Records 7 Pillar 3: Planning and Budgeting for Disaster Risk Management 9 Pillar 4: Disaster-Informed Public Investment and Asset Management 11 Pillar 5: Budget Management, Control, and Reporting during Disasters 13 Pillar 6: Disaster-Responsive Public Procurement 16 Pillar 7: Disaster-Responsive Audit and Oversight 18 Pillar 8: Social Inclusion 19 Applying the DRR-PFM Assessment 21 Assessment Method 21 Review Process 23 Stakeholders in the Review Process 23 Documents for Review 23 Glossary 25 Bibliography 28 Figures Figure 1. DRR-PFM Pillars 2 Figure 2. Types of Natural Hazards 4 Figure 3. DRR-PFM Assessment Scale 22 Tables Table 1. PFM Objectives and the DRR-PFM Agenda 5 >>> Acknowledgments The Disaster Resilient and Responsive Public Financial Management (DRR-PFM) Assessment was prepared by Leah April, Richard Sutherland, James Newman, Bernard Myers, Urška Zrinski, and Adrian Fozzard of the World Bank Group’s Governance Global Practice, Latin America and the Caribbean. The team benefited from contributions from Joanna Watkins, Sophia Whyte- Givans, Samim Cilem, Jeanette Hughes, Diana Annandsingh, Angela Nieves Marques Porto, Abdulaziz Almuzaini, Jamie Lazaro, and Ivana Smolenova. The authors are grateful to all participating governments—Antigua and Barbuda, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Lucia, and Saint Vincent and the Grenadines— and their respective ministries of finance, national disaster response agencies, and gender directorates for their collaboration in the development and piloting of the DRR-PFM. The team is grateful to the following colleagues for their insights, helpful comments, and contributions at various stages in preparing and updating this methodology: Elif Ayhan, Khuram Farooq, Jonas Arp Fallov, Marlon Rolston Rawlins, Ruxandra Burdescu, Gabriel Yorio, Davide Zucchini, Onur Erdem, Mitchell O’Brien, Patricia McKenzie, Arun Manuja, Shaun Moss, Yvolyn Maxwell, Adrienne Hathaway, Josef Trommer, Mirtha Escobar, Mary Boyer, Tingjie Meng, Hanna Haile, Eduardo Estrada, Douglas Levermore, Cointha Thomas, Anthonia Ogundele, Hunt La Cascia, Moad Alrubaidi, Juan Carlos Serrano-Machorro, Alejandro Roger Solanot, and Tatiana Skalon. The first iteration of this assessment methodology—the Post-Disaster Public Financial Management (PD-PFM) Review and Engagement Framework—was developed with the financial support of the Government of Canada under the “Supporting Economic Management in the Caribbean Externally Funded Output” (SEMCAR EFO). This updated iteration—the DRR- PFM Assessment—was prepared under the World Bank Mainstreaming Climate Change in Governance Program with support from the Swiss State Secretariat for Economic Affairs. Editing by Graham Colin-Jones and design by Maria Lopez. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< iii >>> Abbreviations BCP Business continuity plan CFA Central finance agency DR Disaster recovery DRM Disaster risk management DRR Disaster resilience and responsiveness DRR-PFM Disaster resilient and responsive public financial management PEFA Public Expenditure and Financial Accountability PFM Public financial management EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< iv >>> Disaster Resilient and Responsive Public Financial Management Assessment The Disaster Resilient and Responsive Public Financial it considers how central finance agencies can use risk Management (DRR-PFM) Assessment is designed to analysis to inform their risk reduction, response, and recovery help countries strengthen the capability of their Public planning. The DRR-PFM Assessment identifies opportunities Financial Management (PFM) systems to prepare for, for reforms to laws, regulations, policies, and systems that can respond to, and recover from disasters. The DRR-PFM strengthen a country’s capacity to manage disaster-related Assessment expands upon an analytical tool first developed risks and sustain PFM functions after a disaster. Successive to support resilience in nine Caribbean countries.1 The DRR-PFM assessments can track reform implementation. updated framework integrates ex-ante risk reduction explicitly; 1. The previous Post-Disaster PFM (PD-PFM) Review was conducted on Antigua and Barbuda, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Lucia, and Saint Vincent and the Grenadines. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 1 The DRR-PFM Assessment covers five key areas of the institutions.2 The Assessment acknowledges the need for PFM system: planning and budgeting, public investment close collaboration between central finance and national and asset management, budget execution and control, disaster management agencies to ensure adequate, effective, public procurement, audit and oversight, as well as the and inclusive preparation for, response to, and recovery three cross-cutting themes of institutional arrangements, from disasters. Although questions about relevant laws and IT systems and records, and social inclusion (see regulations, strategies, and plans, are a means to understand Figure 1). The Assessment encompasses the central the institutional and policy frameworks in place, in the actual finance agencies (CFAs) as they regulate and manage core application of the Assessment it is critical to understand and PFM functions, spending or line agencies, and oversight confirm the actual practices. > > > F I G U R E 1 - DRR-PFM Pillars Disaster Resilient and Responsive Public Financial Management (DRR-PFM) Pillar 1 DRR-PFM Institutional Arrangements Pillar 2 Resilient Information Systems and Records Pillar 3 Pillar 4 Pillar 5 Pillar 6 Pillar 7 Planning Disaster- Budget Disaster- Disaster- and Informed Management, Responsive Responsive Budgeting Public Control, and Public Audit and for Disaster Investment Reporting Procurement Oversight Risk and Asset during Management Management Disasters Pillar 8 Social Inclusion 2. CFAs include ministries of finance, treasuries, and accountant general’s departments. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 2 PILLAR 1: DRR-PFM INSTITUTIONAL PILLAR 5: BUDGET MANAGEMENT, ARRANGEMENTS CONTROL, AND REPORTING DRR-PFM Institutional Arrangements assesses the clarity Budget Management, Control, and Reporting during of roles and responsibilities within government for planning Disasters focuses on the controls in place to ensure that and managing disaster response and recovery. resources for post-disaster response and recovery are used as intended in a transparent manner. This pillar also examines the extent to which financial transactions for post-disaster response and recovery can be tracked and verified ex-post. PILLAR 2: RESILIENT INFORMATION SYSTEMS AND RECORDS PILLAR 6: DISASTER-RESPONSIVE Resilient Information Systems and Records examines PUBLIC PROCUREMENT how staff manage PFM functions and information systems so that they can maintain business continuity and digital records through disaster events and disruptions to normal Disaster-Responsive Public Procurement examines operating conditions. the extent to which agencies responsible for procurement have planned for expected emergency and disaster-related procurement needs. PILLAR 3: PLANNING AND BUDGETING FOR DISASTER RISK MANAGEMENT PILLAR 7: DISASTER-RESPONSIVE AUDIT AND OVERSIGHT Planning and Budgeting for Disaster Risk Management examines how planning and budgeting processes can support the timely, efficient, and responsible use of funds for ex- Disaster-Responsive Audit and Oversight examines how ante disaster risk management and ex-post response and disaster-related expenditures are reviewed and scrutinized to recovery activities. ensure compliance and discourage fraud, waste, and abuse. PILLAR 4: DISASTER-INFORMED PUBLIC INVESTMENT AND ASSET PILLAR 8: SOCIAL INCLUSION MANAGEMENT Disaster-Informed Public Investment and Asset Social Inclusion assesses the extent to which governments Management assesses the extent to which disaster risks are identify the needs of different segments of the population and integrated into the investment project identification, appraisal, make provisions to address these needs in plans, budgets, and selection processes. It also reviews the extent to which and programs in response to disasters. asset management policies integrate disaster risks. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 3 The DRR-PFM Assessment focuses on rapid onset be foreseen. The frequency and severity of meteorological disasters caused by natural hazards. Figure 2 presents and hydrological hazards will likely increase over time as a the range of hazards. Some hazards may take many years to result of climate change. Some elements of the DRR-PFM materialize (such as those related to climate change), others Assessment would also be relevant for building institutional may take days (storm events) or even minutes (earthquakes). resilience and responsiveness for epidemics; however, the Some may follow predictable cycles (storms, floods, pest framework does not attempt to address the range of health- infestations), allowing time for planning and preparation, system considerations that one may need to consider. even if the exact timing and severity of the event cannot > > > F I G U R E 2 - Types of Natural Hazards Slow onset Rapid onset Climate and Meteorological Environmental Change Biological and Hydrological Geophysical • Changes in temperature • Epidemics • Hurricanes/Tropical • Earthquakes and rainfall patterns • Insect and animal pest Cyclones • Tsunamis • Ecosystem degradation infestation • Storms • Volcanic eruptions • Drought • Storm surges • Rising sea levels • Tornados • Desertification • Intense rainfall events • Salinization • Heatwaves • Thawing of glaciers and • Flooding permafrost Rapid onset hazards addressed by DRR-PFM Assessment The impact of natural hazards depends on the severity state of emergency, the government is legally empowered to of the hazard event, the territory affected, the exposure undertake actions for the safety and protection of citizens which and vulnerability of communities, and the extent to would not normally be permitted. Disaster risk management which economic activities are affected. Exposure refers concepts are defined in the Glossary. to the presence of people and assets in the area affected by the hazard. Settlement in flood-prone areas, for example, Disasters pose extraordinary challenges for PFM increases exposure. Vulnerability refers to the susceptibility of systems, because they place urgent demands on an individual, community, assets, or institutions to the impacts governments for relief and recovery while simultaneously of hazards. Vulnerability is determined by a wide range of disrupting economic activity and the normal operations physical, social, economic, governance, and environmental of governments. PFM practices that are appropriate during factors. Lack of awareness of disaster risks and unsafe normal operations may be ill-suited for disaster response. building practices are factors that increase vulnerability. Resources may need to be shifted to disaster response without going through the usual approval process. Budget The terms “disaster” and “emergency” are often execution and public procurement procedures may need to used interchangeably, but this assessment refers to be expedited in order to ensure timely delivery of disaster “emergency” only in the context of a formal declaration of relief. Table 1 outlines some of the impacts of disasters on a state of emergency. Governments may decide to declare a PFM systems, and how resilience can be incorporated into the state of emergency in the context of disaster events. During a DRR-PFM response. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 4 > > > T A B L E 1 - PFM Objectives and the DRR-PFM Agenda PFM objective Normal circumstances DRR-PFM context DRR-PFM response Sustainability Aggregate expenditures and Reduced revenues and Risk management provides deficits are consistent with a unanticipated expenditures for risk retention and risk sustainable macro-economic may increase deficits. transfer mechanisms to framework and level of debt. accommodate additional financing needs. Policy Alignment Public funds are applied in Resources may have to be Resilient systems anticipate support of the government’s reallocated from development the potential need for disaster development policy policies to disaster response response and allow flexibility objectives. and recovery. to reallocate resources. Efficiency Outputs are delivered at Supply disruptions may Planning and expedited lowest cost. Value for money hinder and increase the procedures help mitigate the considerations encompass cost of the delivery of public risk of supply disruptions and costs to society as well as to services and the recovery of sudden price spikes. the public sector. assets. Effectiveness Public funds are applied in Government priorities shift Budget and procurement a manner that successfully towards disaster response, systems adapt to new policy achieves the intended recovery, and reconstruction. priorities and facilitate outcome. achievement of disaster response, recovery, and reconstruction goals. Transparency & Public funds are applied Expedited procedures Control systems anticipate Accountability transparently for the intended may lead to a relaxation of the need for not only purposes, with reliable controls, increasing the risks expedited expenditure, but systems of internal and of waste and abuse, and may also audits, and retain the external control. hinder reporting. ability to track and report on expenditure ex-post. Equity Public funds are allocated Needs may be unevenly Government identifies and fairly, in a manner that is weighted towards some targets adversely affected inclusive of all social groups segments of the population populations and responds to and takes account of their on a temporary basis. their needs. needs. Timeliness Public funds are executed Government must respond Government uses expedited expeditiously following to immediate threats to operating procedures to standard operating persons and property during meet disaster response and procedures. disaster response and restore recovery needs. economic activity during recovery. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 5 Pillar 1: DRR-PFM Institutional Arrangements This pillar focuses on the clarity of institutional roles for declaring a disaster or emergency, the coordination and responsibilities within government for anticipating arrangements among key institutions, and the institutional and managing disaster response. While natural hazards mandate of the CFA for disaster preparedness and response. are unavoidable, appropriate regulatory and institutional It also looks at critical aspects of business continuity planning arrangements for DRR-PFM can help mitigate their impacts. for the CFAs. This includes verification that the CFA and Streamlined procedures enable the transmission of information its units have evaluated PFM mission critical functions and and decisions between the central finance and emergency systems and have disaster recovery plans and strategies response agencies. This pillar examines the dimensions of in place. disaster preparedness, including how authority is assigned Elements Issues 1.1 Disaster 1. Is there a law or regulation that defines Proclamation a. which events may be treated as disasters and/or emergencies, b. who has authority to declare a disaster or state of emergency, and c. the criteria for terminating a state of national disaster and/or emergency? 1.2 Institutional 1. Is there a centralized entity that has the responsibility and authority to coordinate Mandate for Disaster disaster response at the national and/or subnational levels? Risk Management 2. Are the roles and authorities of the national disaster agency relative to other (DRM) government bodies clearly defined? 1.3 CFA Capacity for 1. Are mechanisms in place to facilitate coordination and communication between the DRM CFA and disaster/emergency response entities? 2. Are public finance officers trained annually on how to execute their specific roles and responsibilities in support of disaster-response activities? 3. Are post-disaster reviews conducted to assess the impact of disasters on key PFM functions? 1.4 CFA Business 1. Does the CFA have a business continuity plan (BCP) that includes a prioritized list Continuity Planning of mission-critical PFM functions, informed by the business impact analysis of key units? 2. Was the BCP executed during the most recent catastrophe? 3. Is there a management process to ensure that critical budgetary units’ BCPs are up-to-date, routinely maintained, and readily accessible to all personnel? 4. Are there clear standard operating procedures for working from home, including adequate connectivity, suitable software and hardware tools, and the existence of procedures to guarantee the adequate use of sensitive information? EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 6 Pillar 2: Resilient Information Systems and Records This pillar examines how PFM institutions prepare assets, and working arrangements for staff with PFM functions, information systems and digital records so that they can considering potential disruptions to office-based work. It respond to and continue to operate following disasters. also examines if robust backup routines are in place and if It reviews regulations and management practices for data, IT arrangements are adequate for the continuity of data centers. Elements Issues 2.1 Regulatory 1. Does the legal and regulatory framework consider the following data management, Framework IT asset, and working arrangements for staff with PFM functions? a. Use of disaster-resilient storage arrangements for data and IT assets (e.g., storing data on the cloud or off-site) b. Staff access to PFM systems in emergency and post-disaster situations (e.g., remote access, office-based access in a crisis) c. Access to email, capacity to run home-based work/videoconferencing (e.g., VPN, security standards, basic access, confirmation, testing) d. Electronic document acceptance and electronic signature (e.g., policy on digital documents and approvals, related systems) EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 7 Table continued Elements Issues 2.2 Planning for IT 1. Does the CFA have a prioritized list of IT systems that are most critical to the Resilience agency’s business operations and an assessment of the impact of failure for each system? 2. Has the CFA set a maximum allowable outage/risk tolerance for disruption for crucial PFM systems (e.g., if electricity were down)? 3. Is there a business continuity plan to manage risks pertaining to the critical failure of important IT systems and applications (e.g., third-party service providers uptime and service level commitments)? 4. Is there a mechanism that ensures payments can be made in post-disaster situations even when IT systems, connectivity, and power are not available? 2.3 IT Resilience 1. Does the CFA have an IT disaster recovery (DR) plan addressing risks to hardware, software, and communications that is tested annually? 2. Are essential CFA records digitized? (Provide a listing of known records and electronic records status.) 3. Are backup routines sufficiently and suitably robust (i.e., level of confidence) with regard to the following? a. Backups are stored securely off-site and encrypted b. Backup and DR technologies are sufficiently resilient (e.g., tape, disk, cloud, site-to-site replication) c. Records are maintained of backup frequency (backup logs) and successful redundancy 4. Is the government’s data center resilient and secure with respect to the following? a. Smoke, fire, humidity and flood detection, underneath data center raised floors, fire barriers, and robust building architecture ensure that servers are physically secure b. Uninterruptible power supply with battery backup and generators can maintain operation in case of power cuts c. Redundant servers and storage with failover provisions at hardware and software levels support business continuity EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 8 Pillar 3: Planning and Budgeting for Disaster Risk Management This pillar reviews how planning and budgeting transparent allocation of resources to the disaster response processes can support risk reduction, resilience, and the activities. Governments will need to put in place mechanisms timely, efficient, and responsible use of funds for disaster to identify the most vulnerable segments of the population and response and recovery activities. CFAs should proactively ensure that their needs are addressed. assess risks and help ensure that funding mechanisms are available to address the foreseeable impacts of disaster This pillar also examines how CFAs can make financial events. Effective planning and budgeting for disaster risks provision for costs likely to be incurred for disaster can reduce the exposure of people and assets to disasters response and recovery. Planning begins with an estimation and improve resilience. Ensuring that financial provision is of direct costs for the restoration of infrastructure and basic made before disasters occur can accelerate the government’s needs of citizens, and the contingent liabilities that are likely to response, allowing agencies to assist victims when they need be triggered. It also examines whether an appropriate disaster help the most. Governments may choose to cap the payments risk financing strategy has been put in place. Such a strategy to households and businesses in the event of disasters in would include consideration of which risks to “retain” and which order to limit implicit contingent liabilities and encourage ones to “transfer.” Governments typically retain risks (accept households and businesses to reduce risks and purchase their financial responsibility) posed by higher-frequency and lower- own insurance. Forward-looking budget planning can take the severity hazards through mechanisms such as reserve funds. form of either pre-authorized flexibility to reallocate national Governments will usually “transfer” risks posed by lower- resources to where it is most needed or of access to external frequency and higher-severity hazards through the purchase financing to supplement domestically financed resources. of disaster risk financing instruments such as insurance. Policies and procedures should facilitate an efficient but Elements Issues 3.1 Fiscal Risk 1. Are the following fiscal risks associated with natural hazards assessed and Assessment quantified, including an assessment of average annual losses and probable maximum losses from the relevant hazards? a. Direct costs or explicit contingent liabilities (e.g., emergency response, repair and reconstruction of public physical assets) b. Implicit contingent liabilities (liabilities for which the government has no legal obligation but provides compensation or pay-outs, e.g., payments to businesses and households for disaster relief and recovery, support for state- owned enterprises) c. Fiscal impacts (reductions in revenue collection, increases in prices, worsening public debt-to-GDP) 2. Does the government specify and cap disaster relief, recovery, and reconstruction entitlements for households and businesses? 3. Does the government present a fiscal risk statement that integrates and quantifies disaster risks for the short-, medium-, and long-term? 4. Is the fiscal risk statement publicly available and updated regularly? 3.2 Expenditure 1. Is disaster risk reduction integrated into budget planning and budget documents Planning for Disaster using one or more of the following instruments? Risk Reduction and a. Programs for disaster risk reduction and resilience activities Resilience b. Programs for disaster response and recovery, which can be activated as needs arise EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 9 Table continued Elements Issues c. Regular reviews of resource allocations for disaster risk reduction, resilience, response, and recovery taking into account updated risk assessments d. Programs for subnational governments for disaster risk reduction and resilience activities 2. Do adaptive social protection programs that support the poor and vulnerable populations or specific disaster recovery programs that target resources for disaster response and recovery to households and businesses meet the following criteria? a. Relevant agencies maintain a registry of beneficiaries of such programs b. Registries can be updated quickly to integrate those who are newly vulnerable and in need of disaster response and recovery assistance c. Programs have mechanisms in place to ensure the timely, secure transfer of funds to beneficiaries in the event of disasters 3.3 Financing of 1. Does the government have a disaster risk financing strategy that layers disaster Disaster Response risk financing (DRF) instruments based on the frequency and severity of risks and Recovery using the following tools? Risk Retention a. General contingency, reserve and/or stabilization funds (appropriated) b. Dedicated funds for disaster relief, recovery, and reconstruction (appropriated) c. Contingent financing instruments Risk Transfer d. Indemnity-based insurance e. Parametric insurance (sovereign or sector specific) f. Pooled risk financing instruments g. Catastrophe bonds, or other market-based instruments 2. Does the government consistently fund DRF instruments in line with its strategy, especially those requiring an appropriation, such as disaster funds or dedicated reserve funds? 3. Does the strategy provide reasonable coverage of the government’s disaster- related fiscal risks, including the contingent liability associated with the government’s average annual losses? EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 10 Pillar 4: Disaster-Informed Public Investment and Asset Management This pillar examines the extent to which disaster risks This pillar also assesses the extent to which physical and disaster response are integrated into the investment asset management policies consider disaster risks. project identification, appraisal, and selection processes. This includes: the arrangements in place to monitor physical It reviews the policies and processes at the portfolio and assets based on asset type, location, value, vulnerability to project levels. It also assesses arrangements to fast-track disaster events; the functionality of asset registry and other urgent public investments for disaster response, recovery, digital geo-referenced platforms as a tool for disaster risk and reconstruction. Project design, physical placement, and management; and the use of risk transfer mechanisms, such construction should consider vulnerability to natural hazards as insurance, to manage disaster-related risks to physical using projections of the frequency and intensity of extreme assets. Disaster risk management requires the identification of weather events over the asset’s intended lifetime. Project critical infrastructure assets that will ensure network resilience appraisal practices should verify that vulnerability to natural following disasters. Disaster risk management practices hazards and changing environmental conditions has been also require the identification of assets to be insured against adequately considered and addressed. Appraisal and design damage and loss, allowing governments to consolidate and standards should ensure that critical infrastructure is built optimize insurance coverage. and maintained to withstand low frequency, high intensity disaster events. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 11 Elements Issues 4.1 Disaster-Informed 1. Do building codes set appropriate risk tolerance standards and regulations for Public Investment public and private infrastructure based on expected environmental conditions and Management hazards and taking into account climate change, and are they enforced? 2. Does the government identify and set design standards for critical infrastructure? 3. Do land use plans identify natural hazards and apply zoning restrictions for infrastructure? 4. Do public investment procedures require hazard risk assessment during project screening at an early stage of preparation? 5. Do public investment procedures require hazard risk assessment and the identification of risk mitigation measures during project appraisal and before approval? 6. Are disaster risks identified, quantified, and clearly assigned between parties in the context of public-private partnerships and infrastructure service contracts? 7. Do public investment procedures facilitate the fast-tracking of appraisal, selection, and approval of disaster response, recovery, and reconstruction projects? 8. Are expedited projects subject to ex-post evaluations? 4.2 Disaster-Informed 1. Does the government have an asset management policy that integrates the Asset Management following disaster risk management considerations? a. Assesses vulnerability to hazards b. Sets resilience standards for physical assets c. Establishes criteria for the identification of critical infrastructure d. Sets resilience standards for critical infrastructure e. Assesses the value of important physical assets f. Sets guidelines for the maintenance of physical assets g. Establishes guidelines on damage and loss insurance for physical assets 2. Does the government maintain an up-to-date registry of its physical assets that addresses the following disaster risk management considerations? a. Identification of physical asset (description, geo-location, ownership) b. Classification of physical assets to distinguish critical infrastructure c. Assessment of risk exposure for each physical asset d. Assessment of annual and periodic maintenance costs e. Assessment of replacement cost f. Insurance valuation and premium cost 3. Does the government have a digital asset management information system? 4. Is there a single institution responsible for managing the asset registry or with access to registries that are managed by other entities? 5. Is the asset registry used in practice to inform budget planning as it pertains to disaster risk management? 6. Is there is a specific entity that coordinates procurement of insurance for public assets? EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 12 Pillar 5: Budget Management, Control, and Reporting during Disasters This pillar assesses the controls in place to ensure that misappropriation, and should be followed in times of disasters resources for post-disaster response and recovery are as well. used as intended in a transparent manner. When disasters strike, governments have to act expeditiously to provide This pillar also examines the extent to which financial relief for affected populations and restore services. Urgency transactions for post-disaster response and recovery can is not incompatible with effective control and accountability. be tracked and verified ex-post. It assesses the availability Transparency is particularly important in the context of disaster of reliable, relevant, and timely information about citizens’ response and recovery. Governments should be able to entitlements, funding allocations, procurement, implementation demonstrate that funds are allocated fairly and support those progress, and contract management. In general, governments most in need. Expedited spending should take place within should consider how best to distinguish disaster-related items control mechanisms that can be adapted and streamlined to or sub-accounts in their chart of accounts. This could include ensure timeliness without compromising safeguards. A single disaster-related expenditure tagging and tracking options for individual or small group of individuals should not be able existing codes and programs that are used in an emergency. to initiate, approve, undertake, and review the same action. This has taken on increasing importance as countries have Separation of functions is one of the most important features struggled to respond to the COVID-19 pandemic. of an internal control plan, to reduce the risk of fraud or Elements Issues 5.1 Post-Disaster 1. Does the Treasury have up-to-date information on ALL flows and the application of Treasury externally-sourced funds (insurance payouts, loans, development partners grants Management and financial assistance/donations) for disaster response and recovery through one or more of the following? a. Funds are managed and payments to suppliers executed by the Treasury b. Funds are channeled through the treasury account to executing budgetary units c. Funds are channeled directly to executing budgetary units with simultaneous notification to the Treasury d. Funds are channeled directly to executing budgetary units with regular reporting to the Treasury 5.2 Post-Disaster 1. Do laws and regulations lay out the following procedures to facilitate adjustments Budget Flexibility in budgets in response to disasters? a. Inclusion in the budget of programs and/or activities for disaster response and recovery, which can be activated as needs arise b. Authority for the CFA to reallocate funds without approval of the legislature c. Authority for spending agencies to reallocate funds with/without authorization of the CFA d. Access to contingency, reserve, stabilization, and disaster funds for disaster response e. Escape clauses for fiscal rules in the event of disasters f. Provisions in loans and external financing agreements that enable deferment of servicing, accelerated drawdown and/or adjustments, in the application of funds following a disaster EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 13 Table continued Elements Issues 5.3 Post-Disaster 1. Do laws and regulations authorize changes to the following ex-ante Expenditure Control expenditure controls (timing, authorizing officer, and delegations of authority) following disasters? a. Eligibility of disaster-related expenditures b. Availability of appropriate budget allocation c. Legality of the expenditure d. Verification of goods and services provided e. Provision of supporting documents for expenses incurred 2. Do laws and regulations authorize changes to the following commitment controls to expedite expenditures for disasters? a. Unplanned expenses b. Expenditures without appropriation c. Expedited approval d. Flexible procurement arrangements 3. Do regulations authorize changes in the control framework for extra-budgetary units after disasters? 5.4 Accounting for and 1. Does the Chart of Accounts or other reporting classification identify the following Tracking Disaster- categories of disaster-related expenditure, and are they used consistently across Related Expenditure budgetary units? a. Specific programs, segregated line items or sub-accounts for disaster-related expenditures b. Expenditures by disaster phase (response, recovery, reconstruction) c. Expenditures by type of hazard and/or event d. Expenditures by beneficiary group e. Externally financed public expenditures 2. Do accounting regulations and instructions ensure traceability of disaster response related accounting records for budgetary and extra-budgetary units including the following? a. Timely and uniform reporting of disaster-related spending by all public agencies b. Requirements to retain supporting documents for a reasonable period 3. Does the CFA record disaster-related expenditure information in a way that can be easily compiled, monitored, and reported on through the country’s information systems? 5.5 Post-Disaster 1. Does the internal audit entity conduct pre-emptive audits of the existence of Internal Audit adequate mechanisms for disaster response (before a disaster occurs)? 2. Does the internal audit entity conduct specific audits of post-disaster response and recovery activities and expenditures that include the following? a. Specific guidelines for conducting internal audits of disaster response and recovery activities and expenditures b. Adequate scope of audits of disaster response and recovery activities and expenditures c. Requirements for internal audits for disaster response and recovery activities and expenditures to be undertaken during the implementation of these activities EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 14 Table continued Elements Issues 3. Have specific audits identified issues with the adequacy and effectiveness of internal controls during or after disaster response and recovery? 4. Has management responded to audit recommendations on disaster operations? 5.6 Transparency of 1. Does the government prepare and publish the following disaster-related Disaster-Related information in a timely and transparent manner? Expenditure a. Entitlements for persons, households, and businesses for disaster relief, response, and recovery and how these entitlements can be accessed b. Programs for persons, households, and businesses for disaster relief, response, and recovery and how these programs can be accessed c. Budget allocations for disaster-related expenditures d. Information on disaster-related programs and their intended activities e. Periodic budget execution reports for disaster-related expenditures and annual reports on specific funds dedicated to disaster response f. Public procurement contracting information for disaster response and recovery activities, including both ex-ante (list of pre-qualified/pre-selected contractors) and ex-post (contract awards, basis of awards) data g. Disaster response implementation reports summarizing financed activities and associated results 2. Is disaster-related expenditure and program information made available in open data formats and with adequate privacy safeguards? EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 15 Pillar 6: Disaster-Responsive Public Procurement This pillar examines the extent to which agencies be undertaken, this is normally supplemented by detailed responsible for procurement have planned for disasters instruments and instructions, providing guidance on how to and disaster-related procurement needs. This entails apply the legislation in specific post-disaster circumstances. market research and the preparation of procurement plans, These include standard operating procedures, handbooks, sourcing strategies, framework agreements, memoranda user guides, or other manuals, together with model documents of understanding, and other strategic initiatives to optimize and templates that guide the formulation of procurement purchases for disaster response and recovery. documents for the purchase of goods, works, and services in post-disaster situations. These documents should This pillar also assesses the extent to which procuring specify implementation conditions, including the conditions entities with disaster response and recovery under which, within a certain limit and/or defined criteria, responsibilities have and use expedited procurement contractors may perform agreed activities before submitting procedures. Expedited procedures should ensure prices. Expedited procedures should be developed during accountability, transparency, and overall value for money, normal operating conditions, with associated training taking considering quality, cost, and time of delivery. While legislation place at this time so that they can be executed effectively in may define circumstances in which urgent procurement can disaster response. Elements Issues 6.1 Procurement 1. Does the centralized procurement agency have authority to coordinate line agency Planning for Post- disaster response procurement plans and activities? disaster Response 2. Are government agencies required to prepare annual or multi-annual procurement plans? 3. Are procurement plans used as inputs to the annual budget? 4. Do procurement plans use any of the following tools to prepare for potential disruptions in supply chains or changing procurement needs in the event of disasters? a. Spend analyses to extrapolate future requirements from historical disaster response purchases b. Ex-ante market research and cost analyses to assess supplier markets c. End-to-end supply chain visualizations (geographic maps and network graphs) to plan the response to supply chain disruptions d. Pre-identification of suitable and potential suppliers and alternate suppliers e. Framework agreements with potential suppliers f. Memoranda of understanding for emergency purchases g. Contract provisions to increase contract flexibility following disasters (such as clauses that enable adjustments in volumes) 6.2 Expedited 1. Do legislation and/or regulations define expedited procurement procedures Procurement for disaster response and recovery, the circumstances under which expedited Procedures procedures may be applied, and the agencies authorized to apply them, including the following? a. Documented standard operating procedures, protocols, and/or instruction manuals that outline how entities should execute procurement and contracting for disaster response and recovery b. Thresholds for the use of competitive procedures for procurement for disaster response and recovery operations EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 16 Table continued Elements Issues c. Adjustments to routine competitive procurement procedures to expedite response d. Mechanisms to facilitate timely determination of vendor eligibility and their registration status e. Special requirements for overseas-based vendors and contractors 2. Has the government published model procurement documents (templates) for goods, services, and civil works that are most frequently purchased for disaster response and recovery and made these documents accessible to all procuring entities? 3. Is institutional responsibility for the preparation and updating of model documents clearly assigned? 4. Is a justification required for exceptions to the expedited procurement procedures for disaster response and recovery? 5. Are expedited procedures effective in accelerating the procurement of goods, services, and works for disaster response and recovery in terms of the following? a. Accelerated contractor registration b. Accelerated award contracts after issuing tenders 6.3 Contract 1. Do contracts for disaster response and recovery operations adequately address Management the following contract management requirements? a. Specify implementation conditions b. Define and assign management functions and responsibilities c. Establish protocols to ensure adequate and timely access to information on each phase of procurement d. Define post-award contract oversight functions and procedures 2. Are contract management practices performed consistently and adequately in the following areas? a. Monitoring of contract performance, especially with respect to the timely delivery and receipt of goods, works, and services to disaster-affected areas b. Inspection, quality control, supervision of civil works, and final acceptance of products c. Examination of invoices and timely processing of payments 3. Is aggregate information on procurement/contract management transactions, reported and monitored? EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 17 Pillar 7: Disaster-Responsive Audit and Oversight This pillar assesses how disaster-related expenditures disaster response, recovery, and reconstruction phases, as are internally and independently reviewed to ensure well as the sanctions or remedies that can be applied. The compliance with legislation and regulations and to pillar seeks to verify that the control framework and provisions disincentivize fraud, waste, and abuse. It includes a review for public engagement are maintained despite the challenges of instruments that the supreme audit institution and the to normal operations. legislature can deploy to oversee the use of funds during the Elements Issues 7.1 External Audit 1. Does the external audit authority have procedures and systems in place to assure that audit functions can be carried out post-disaster? 2. Does the external audit authority conduct specific audits of disaster response, recovery, and reconstruction expenditures that include the following? a. Specific guidelines for conducting such audits b. Adequate scope for the audits c. Requirements that the audits be undertaken shortly after the completion of these activities 3. Have audits identified issues with the adequacy and effectiveness of internal controls during or after disaster response, recovery, and reconstruction? 4. Has the executive or the audited entity taken action, based on the external audit recommendations on post-disaster expenditures? 7.2 Legislative 1. Does the legislature authorize and amend the allocation of resources to disaster Oversight response, recovery, and/or reconstruction activities? 2. Does the legislature conduct specific reviews of disaster response, recovery, and reconstruction activities and expenditures? 3. Have recommendations been issued and followed up on? 4. Are the legislature’s hearings or meetings on disaster response, recovery, and reconstruction activities and expenditures open to the public and/or are reports publicly available? 7.3 Participation 1. Does the government hold public consultations on the allocation and application of disaster response, recovery, and reconstruction activities, and related budget measures? 2. Does the government provide the public with feedback on how citizens’ inputs have been used in the disaster response, recovery, and reconstruction activities? EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 18 Pillar 8: Social Inclusion This pillar assesses the extent to which governments into the provision of public services during and after disasters identify the needs of different segments of the population to mitigate the disproportionate impacts on the vulnerable and make provision to address their needs in plans, segments of the population. budgets, and program implementation in response to disasters. Understanding the differential needs of the Social inclusion considerations can be integrated different segments of society—men and women, youth and throughout the budget cycle in planning for disaster elderly, people with disabilities, ethnic minorities, and others— risk reduction, response, and recovery. Integration of is key to providing equitable public services. Often the poor social inclusion considerations in DRM entails ministries of and vulnerable groups are the first and most severely affected finance working in close coordination with line ministries, by disasters; they live in areas that are exposed to hazards, disaster agencies, gender and/or equality offices, civil have precarious livelihoods, and have limited resources to society organizations, statistics offices, supreme audit fall back upon. Gender considerations apply to both sexes: institutions, legislatures, and others. Collection and analysis as disasters and disaster response programs will have of disaggregated data plays a key role in understanding differential impacts on men and women. While the provision of social inclusion gaps and in informing disaster-related policy services can become more challenging in times of disasters, formulation and design; evidence of its use should ideally be there is a heightened need for social inclusion to be integrated seen in budget documentation and budget measures. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 19 Elements Issues 8.1 Policy Framework 1. Is disaggregated socio-economic data (e.g., by gender, age, ethnicity) made and Planning for available to and collected by the central finance and planning agencies and Social Inclusion agencies responsible for disaster risk management and disaster response, recovery, and reconstruction? 2. Is there a (sub)national policy/plan for promoting social inclusion/gender equality in the context of disasters and disaster response, recovery, and reconstruction programs that includes the following elements? a. An overview of key social inclusion gaps b. Situational analysis of the potential impacts of disasters and/or climate change on women and men, youth and elderly, people with disabilities, ethnic minorities, and others 3. Do disaster response and recovery plans address social inclusion considerations (e.g., location and design of shelters, extraction points for vulnerable groups, design of health and social protection programs)? 8.2 Institutional 1. Is there an entity responsible for promoting social inclusion/gender equality in Coordination for disaster risk management and disaster response, recovery, and reconstruction Social Inclusion activities including the following? in Disaster Risk a. Identification of potential social inclusion gaps in disaster risk management Management b. Preparation of measures to address the identified gaps c. Monitoring the implementation of disaster risk management to identify and report on social inclusion gaps 2. Are there established coordination arrangements in place to promote and address social inclusion/gender equality issues including the following? a. Central finance agency b. Central planning agency c. National disaster management entity d. Relevant line ministries responsible for social inclusion and the delivery of disaster recovery and response activities e. External stakeholders such as women’s organizations, disadvantaged groups, civil society organizations, and non-governmental organizations? 8.3 Social Inclusion- 1. Is the budget process used to guide and implement social inclusion policies for Informed Budget disaster risk management and disaster response, recovery, and reconstruction System for Disaster programs, including the following? Risk Management a. A statement of social inclusion priorities b. Analysis of the impacts of these policies on social inclusion c. A requirement for budget units to include information on the social inclusion impacts of new budget proposals in their budget submissions 2. Is the procurement of goods and services in preparation for and during disaster response and recovery from disasters informed by the social inclusion assessment (e.g., procurement of sanitary menstrual hygiene kits, and pre-natal, pregnancy, and lactating care products for shelters)? 3. Is there an independent review of the social inclusion impacts of disaster response, recovery, and reconstruction activities? 4. Does the legislature’s review of disaster risk management and disaster response, recovery, and reconstruction activities assess social inclusion impacts? EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 20 >>> Applying the DRR-PFM Assessment Assessment Method The DRR-PFM Assessment reviews the extent to which The summary score for the element is calculated by adding disaster resilience and response considerations are together the scores for each question and expressing the final integrated into key PFM functions. The review allows an score as a percentage of the potential score if all questions assessor to quickly collect data that describes how a CFA, were scored as 1. The summary score can be used to provide in cooperation with other relevant stakeholders, operates an overall assessment of the degree of integration of disaster in disaster situations, highlighting potential weaknesses resilience and responsiveness considerations across the and strengths. PFM systems and within each PFM pillar. The extent to which disaster resilience and responsiveness considerations are The questions that are mapped to each of the elements integrated into PFM functions are assessed in four quartiles: of key pillars are first assessed on a three-point scale Low, Basic, Moderate, and Advanced, as shown in Figure 3. based on the existence of the function or process with Detailed instructions and a complementary spreadsheet are the following scores: Yes = 1, Partial = 0.5, and No = 0. available separately to facilitate scoring. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 21 > > > F I G U R E 3 - DRR-PFM Assessment Scale Low Integration An aggregate score of less than 25 percent means a less than basic degree of integration of disaster resilience and responsiveness (DRR) across the PFM systems and institutions. It denotes that few PFM functions support DRR and those that do are likely to be incidental rather than part of a coherent strategy. This may indicate a low level of awareness of disaster risk as a functional imperative of the overall PFM system. Significant improvements are needed to facilitate effective DRR. Basic Integration An aggregate score of between 25 and 50 percent indicates that DRR considerations are integrated with some key PFM functions. Some PFM processes are carried out with the intent to facilitate DRR, but this approach is not yet systematic. This category signals that disaster risk awareness is still limited. The PFM system would benefit from further strengthening to facilitate DRR. Moderate Integration An aggregate score of between 50 and 75 percent denotes that DRR considerations are integrated with the majority of key PFM functions. Many PFM processes are performed with the intent to expedite DRR, and these functions are documented, reasonably well coordinated, and streamlined. This category signals awareness of disaster risk as a functional imperative. The PFM system is capable of effective DRR. Advanced Integration An aggregate score of over 75 percent denotes that DRR considerations are integrated with most or all key PFM functions. Most PFM processes support DRR. The PFM system is used strategically to optimize the financial management of DRR. Most processes are documented, coordinated, streamlined, and automated where possible. This category signals that the capability of the PFM system to prepare for, respond to, and recover from disasters is accepted as a core functional requirement and efforts have been in practice long enough to demonstrate their impact on DRR performance. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 22 Review Process Other stakeholders may also be involved. These stakeholders are not necessarily resident within the CFA, but they have a bearing on the CFA’s capacity to respond. A suggested list of The DRR-PFM Assessment can be administered in the stakeholders includes: following three stages, either in person or remotely: • Line ministries Stage 1: Desk Review • Ministry/department for public investment/works This entails an in-depth review of legislative, policy, and • National disaster agency operational documents, assessments, and reports. This • National statistical office would include budget laws, financial regulations, parliamentary • Public procurement unit rules of procedure/conventions, and various PFM or disaster • IT department/team risk assessments to ascertain the enabling environment for • Gender equity office managing disaster response from a PFM perspective. A team • Supreme Audit Institution of assessors reviews the “As-Is” state of preparedness against • Legislature and its bodies the list of key interview questions and criteria outlined in this • Civil society document. Once these practices are documented, they are confirmed in Stage 2. It typically takes a week to complete this stage. Documents for Review Stage 2: Country Visit The review team meets with country officials to map the Assessment teams should review relevant documents PFM processes and practices that facilitate response to to conduct the assessment. The recommended list of disasters. Through discussions with government authorities, documents for review below is not meant to be exhaustive areas of strength and vulnerability are identified. The output of but rather aims to guide the teams on which key sources Stage 2 is a draft report of the results with recommendations should be consulted. The assessment teams may also find on ways to strengthen vulnerable PFM areas. The country it helpful to review any internal or external assessments of visit can be conducted virtually. performance, such as the latest Public Expenditure and Financial Accountability (PEFA) reports, Public Investment Stage 3: Validation and Action Plan Development Management Assessment reports, IMF Climate Change In the final stage of the review, a validation exercise is Policy Assessment, and others. conducted with key stakeholders to ensure that the findings of the DRR-PFM Assessment are valid and Suggested documents to review: credible. This involves a two-step validation process. First, a validation exercise of the draft report will be conducted • Annual budget law/documentation/estimates approved by with stakeholders, including government officials, civil society the legislature organizations, etc. to ensure that findings of the DRR-PFM • Annual financial report Assessment are valid and credible. Second, the team develops • Appraisal report for major investment projects recommendations and works together with the government • Asset management law, rules, procedures, and/or policies to formulate a prioritized reform strategy to address the key • Budget circular challenges identified in the prior two stages. All assessment • Budget units’ cash forecasts reports undergo an internal quality enhancement review by the • Business continuity plans of the government, including the World Bank to encourage consistency of application across CFA countries. Stages 2 and 3 could take place simultaneously • Chart of accounts and would require about one week to be completed. • Commitment ceilings issued by the CFA • Date of hearings on audit findings • Disaster risk financing policy Stakeholders in the Review Process • Disaster risk management and/or climate change adaptation plan/strategy • Documentation on the digital asset management platform The main stakeholder in the review process is the CFA, • Emergency preparedness and response plans of the which is the authority responsible for the fiscal response. government, including the CFA EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 23 • External audit reports • Parliamentary procedures for the review of budget and • Internal audit act, rules and/or procedures audit reports • In-year budget reports • PFM act, rules and/or procedures • IT disaster recovery plan/strategy • Procurement plans • Legislation and regulations governing the Supreme • Procurement reports Audit Institution • Procurement website information • List of fiscal information published • Project selection evaluation criteria • List of major capital investment projects • Public investment management act, rules and/or • Ministry budget statements or performance plans procedures • Monitoring reports of major investment projects • Public procurement act, rules and/or procedures • National and/or sector policy for social inclusion and/or • Public procurement database gender equality • Recommendations issued by legislature on external audits • National development and sector policies/strategies • Register of fixed assets, land, and subsoil assets • National guidelines for appraisal of investment projects (including age and usage) • Organizational chart of the CFA and other relevant • Rules on internal controls for non-salary expenditure line ministries EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 24 >>> Glossary The glossary draws extensively on the following United natural internal processes or external forces, or to persistent Nations and World Bank publications: anthropogenic changes in the composition of the atmosphere. United Nations Office for Disaster Risk Reduction, Climate extreme event. The occurrence of a climate variable https://www.undrr.org/terminology above (or below) a threshold value near the upper (or lower) ends of the range of observed values of the variable. World Bank. 2012. The Sendai Report: Managing Disaster Risks for a Resilient Future. World Bank, Washington, DC. Contingent liabilities. Obligations that may occur or may https://openknowledge.worldbank.org/handle/10986/23745 not come due, depending on whether particular events occur. The probability of their occurrence may be exogenous Adaptation. In human systems, the process of adjustment to to government policies (for example, if they are related to actual or expected climate change and its effects in order to disasters) or endogenous (for example, as a consequence of moderate harm or exploit beneficial opportunities. In natural government policy). systems, the process of adjustment to climate change and its effects. Human intervention may facilitate adjustment of • Explicit contingent liabilities. Represent specific natural systems to expected climate change. obligations, created by law or contract, that governments must settle. Average annual loss. The expected loss per year associated • Implicit contingent liabilities: Represent moral obligations with the occurrence of future hazards assuming a long or burdens that, although not legally binding, are likely to be observation time frame. It considers the damage caused to the borne by governments because of public expectations or exposed elements by small, moderate, and extreme events. It political pressures. is a useful and robust metric for risk ranking and comparisons. Damage. Total or partial destruction of physical assets Business Continuity Planning. Process for creating a existing in an affected area. Damage occurs during and after system of prevention and recovery from potential threats, the disaster and is measured in physical units (i.e., square usually through a plan that ensures that personnel and assets meters of housing, kilometers of roads, etc.). Its monetary are protected and are able to function quickly in the event of value is expressed in terms of replacement costs according to a disaster. prices prevailing just before the event. Capacity. The combination of the strengths, attributes, and Damage and loss insurance. Insurance which pays out resources available to an individual, community, society, or when a specified event causes damage or loss to an insured organization, which can be used to achieve established goals. asset. The amount of the payout is capped at the assessed Climate change. A change in climate conditions that persists value of the asset. Damage and loss insurance may exclude for an extended period. Climate change may be due to specified hazards. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 25 Disaster. Severe alterations in the normal functioning Early warning system. The set of capacities needed to of a community or a society due to hazardous physical generate and disseminate timely and meaningful warning events interacting with vulnerable social conditions, leading information to enable individuals, communities, and to widespread adverse human, material, economic, or organizations threatened by a hazard to prepare and to act environmental effects that require an immediate emergency appropriately. The system also gives sufficient time to reduce response to satisfy critical human needs and that may require the possibility of harm or loss. external support for recovery. Economic loss. Total economic impact that consists of direct Disaster risk. The likelihood over a specified time period of and indirect economic loss. severe alterations in the normal functioning of a community or a society due to hazardous physical events interacting with • Direct economic loss. The monetary value of disaster vulnerable social conditions. This may lead to widespread damages. adverse human, material, economic, or environmental effects • Indirect economic loss. Monetary value of the that require an immediate emergency response to satisfy consequence of direct economic loss and/or human and critical human needs and that may require external support environmental impacts. Indirect economic loss includes for recovery. microeconomic impacts (for example, a decline in revenue from business interruption); mesoeconomic impacts (for Disaster risk reduction. Measures taken in advance of example, a decline in revenue from supply chain impact a disaster aimed at decreasing or eliminating its impact on or temporary unemployment); and macroeconomic impacts society and the environment. (for example, price increases or increases in government debt). Indirect economic losses can occur inside or outside Disaster risk financing. The practice of managing fiscal the hazard area and often with a time lag. impacts and economic losses caused by natural hazards (e.g., cyclones, droughts, earthquakes, floods) and increasing Emergency. A serious disruption of the functioning of a financial resilience to disaster and climate risk. community or a society at any scale due to unforeseen events that pose an immediate threat to life, health, property, the Disaster risk financing strategy. Strategies to protect environment, and/or society. Emergencies may arise because governments, businesses, and households from the economic of natural hazards, social or political events. The occurrence burden of disasters. DRF strategies can include programs of an emergency is formally declared as a state of emergency. to increase the financial capacity of a state to respond to a During a state of emergency, the government is legally disaster impact or an emergency while protecting the fiscal empowered to undertake actions that would not normally balance. They can also promote the deepening of insurance be permitted. markets at a sovereign and household level and social protection strategies for the poorest. Exposure. People, property, systems, or other elements present in hazard zones that are thereby subject to Disaster risk governance. The system of institutions, potential losses. mechanisms, policy and legal frameworks, and other arrangements to guide, coordinate, and oversee disaster risk Extreme (weather) event. The occurrence of a weather reduction and related areas of policy. variable above (or below) a threshold value near the upper (or lower) ends of the range of observed values of the variable. Disaster risk management. Processes for designing, Extreme weather events are of relatively short duration and implementing, and evaluating strategies, policies, and include storms, storm surges, tornados, intense rainfall measures to improve the understanding of disaster risk, events, droughts, heat waves, and flooding. foster risk reduction, and transfer, and promote continuous improvement in disaster preparedness, response, Hazard. The potential occurrence of a natural or human- and recovery practices, with the explicit purpose of induced physical event that may cause loss of life, injury, increasing human security, wellbeing, quality of life, and or other health impacts, as well as damage and loss to sustainable development. property, infrastructure, livelihoods, service provision, and environmental resources. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 26 Mitigation (of disaster risk and disaster). The lessening of Recovery. The restoring or improving of livelihoods and the potential adverse impacts of physical hazards (including health, as well as economic, physical, social, cultural, and those that are human-induced) through actions that reduce environmental assets, systems, and activities of a disaster- the hazard, exposure, and vulnerability. affected community or society, aligning with the principles of sustainable development and “build back better”, to avoid or Natural hazard. The potential occurrence of a natural physical reduce future disaster risk. event that may cause loss of life, injury, or other health impacts, as well as damage and loss to property, infrastructure, Resilience. The ability of a system, community, or society livelihoods, service provision, and environmental resources. exposed to hazards to resist, avoid, absorb, accommodate, adapt to, transform, and recover from the effects of a hazard Parametric insurance. Insurance which pays out on the in a timely and efficient manner, including through the occurrence of an event (such as a storm or earthquake of preservation and restoration of its essential basic structures specified intensity), not the magnitude of the resulting loss. and functions through risk management. The trigger mechanisms establish whether such an event has occurred and if payment under a parametric insurance Response. Actions taken directly before, during or immediately contract is required. Triggers may be: after a disaster in order to save lives, reduce health impacts, ensure public safety, and meet the basic subsistence needs of • Purely parametric. The trigger is based solely on evidence the people affected. of the event having occurred (such as recordings such as wind speed or rainfall amount). Risk assessment. A methodology to determine the nature • Parametric index or model. The trigger is based on a and extent of risk by analyzing potential hazards and formula, index, or model as a proxy for the actual event. evaluating existing conditions of vulnerability that together could potentially harm exposed people, property, services, Preparedness. The knowledge and capacities developed livelihoods, and the environment on which they depend. by governments, professional response and recovery organizations, communities, and individuals to effectively Risk transfer. The process of formally or informally shifting anticipate, respond to, and recover from, the impacts of likely, the financial consequences of particular risks from one party imminent, or current hazard events or conditions. to another. During this process, a household, community, enterprise, or state authority will obtain resources from the Probable maximum loss. A risk metric that represents the other party after a disaster occurs, in exchange for ongoing maximum loss that could be expected, on average, within a or compensatory social or financial benefits provided to that given number of years. It is widely used to establish limits other party. related to the size of reserves that, for example, insurance companies or a government should have available to buffer Risk retention. Risk management strategy for planned losses: the higher the return period, the higher the expected acceptance of and financial responsibility for expected loss. It always has an associated mean return period. losses from a given risk. Risk-retention instruments include reserve funds, contingency funds, and other self-insurance Reconstruction. The medium- and long-term rebuilding and mechanisms. This approach is usually appropriate for risks sustainable restoration of resilient critical infrastructures, that have higher frequencies and lower severities of impact. services, housing, facilities, and livelihoods required for the full functioning of a community or a society affected by a disaster, Vulnerability. The physical, social, economic, and aligning with the principles of sustainable development and environmental conditions that increase the susceptibility of “build back better”, to avoid or reduce future disaster risk. an individual, a community, assets, or systems to the impacts of hazards. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 27 >>> Bibliography Bowen, Thomas Vaughan; Del Ninno, Carlo; Andrews, Colin; Coll-Black, Sarah; Gentilini, Ugo; Johnson, Kelly; Kawasoe, Yasuhiro; Kryeziu, Adea; Maher, Barry Patrick; Williams, Asha M..2020. Adaptive Social Protection: Building Resilience to Shocks (English). International Development in Focus Washington, D.C.: World Bank Group. http://documents.worldbank.org/ curated/en/579641590038388922/Adaptive-Social-Protection-Building-Resilience-to-Shocks Cevik, S. and Huang, G. (2018). How to Manage the Fiscal Costs of Natural Disasters. International Monetary Fund, Washington, D.C. Dos Anjos Ribeiro Cordeiro, Maria Joao; Bennett, Christopher R.; Michaels, Sean David; Pedroso, Frederico Ferreira Fonseca; Forni, Marc S.; Rozenberg, Julie. 2017. Climate and disaster resilient transport in small island developing states: a call for action (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/879491510323939763/Climate- and-disaster-resilient-transport-in-small-island-developing-states-a-call-for-action Espinet Alegre, Xavier; Rozenberg, Julie; Rao, Kulwinder Singh; Ogita, Satoshi. 2018. Piloting the use of network analysis and decision-making under uncertainty in transport operations: preparation and appraisal of a rural roads project in Mozambique under changing flood risk and other deep uncertainties (English). Policy Research working paper; no. WPS 8490. Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/787411529606457222/ Piloting-the-use-of-network-analysis-and-decision-making-under-uncertainty-in-transport- operations-preparation-and-appraisal-of-a-rural-roads-project-in-Mozambique-under-changing- flood-risk-and-other-deep-uncertainties Fengler, W., Ihsan, A., and Kaiser, K. (2008). Managing Post-Disaster Reconstruction Finance: International Experience in Public Financial Management. World Bank Policy Research Working Paper. GFDRR (2017). Assessing Financial Protection against Disasters: A Guidance Note on Conducting a Disaster Risk Finance Diagnostic. World Bank publication, Washington, D.C. Ghesquiere, Francis; Mahul, Olivier. 2010. Financial protection of the state against natural disasters: a primer (English). Policy Research working paper; no. WPS 5429. Washington, DC: World Bank. http://documents.worldbank.org/curated/en/227011468175734792/Financial- protection-of-the-state-against-natural-disasters-a-primer Hallegatte, Stephane; Rentschler, Jun; Rozenberg, Julie. 2019. Lifelines: The Resilient Infrastructure Opportunity. Sustainable Infrastructure. Washington, DC: World Bank Group. https://openknowledge.worldbank.org/handle/10986/31805 EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 28 IMF (2016). Small States’ Resilience to Natural Disasters and Climate Change—Role for the IMF. IMF Policy Paper. International Monetary Fund, Washington, D.C. IMF (2020). Digital Solutions for Direct Cash Transfers in Emergencies. https://www.imf.org/~/ media/Files/Publications/covid19-special-notes/en-special-series-on-covid-19-digital-solutions- for-direct-cash-transfers-in-emergencies.ashx Intergovernmental Panel on Climate Change (IPCC). 2012. Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation. Cambridge, United Kingdom: IPCC. https://www.ipcc.ch/report/managing-the-risks-ofextreme-events-and- disasters-toadvance-climate-change-adaptation/ International Federation of Red Cross and Red Crescent Societies (2010). A Practical guide to Gender-sensitive Approaches for Disaster Management. Kristensen, Jens Kromann; Bowen, Martin; Long, Cathal; Mustapha, Shakira; Zrinski, Urška. 2019. PEFA, Public Financial Management, and Good Governance. International Development in Focus. Washington, DC: World Bank. Mahul, Olivier; Signer, Benedikt Lukas; Hamada, Hideaki; Gamper, Catherine Desiree; Xu, Rui; Himmelfarb, Anne [Editor]. 2019. Boosting Financial Resilience to Disaster Shocks: Good Practices and New Frontiers - World Bank Technical Contribution to the 2019 G20 Finance Ministers’ and Central Bank Governors’ Meeting (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/239311559902020973/Boosting-Financial- Resilience-to-Disaster-Shocks-Good-Practices-and-New-Frontiers-World-Bank-Technical- Contribution-to-the-2019-G20-Finance-Ministers-and-Central-Bank-Governors-Meeting Mechler, Reinhard; Mochizuki, Junko; Hochrainer-Stigler, Stefan. 2016. Disaster Risk Management and Fiscal Policy: Narratives, Tools, and Evidence Associated with Assessing Fiscal Risk and Building Resilience. Policy Research Working Paper; No. 7635. World Bank. https://openknowledge.worldbank.org/handle/10986/24209 PEFA (2016). Public Expenditure and Financial Accountability (PEFA) Framework for Assessing Public Financial Management. PEFA Secretariat, Washington, D.C. Saxena S. and Yläoutinen S. (2016). Managing Budgetary Virements. International Monetary Fund, Washington, D.C. Secretariat of the Pacific Community (2015). Pacific Disaster Risk Finance and Insurance in the Kingdom of Tonga – post disaster budget execution guidelines. TADAT Secretariat (2015). Tax Administration Diagnostic Assessment Tool (2015). Field Guide. TADAT Secretariat, Washington, D.C. United Nations Office for Disaster Risk Reduction (UNDRR). 2016. Report of the open-ended intergovernmental expert working group on indicators and terminology relating to disaster risk reduction. https://www.preventionweb.net/files/50683_oiewgreportenglish.pdf. United Nations Office for Disaster Risk Reduction (2021). Terminology. https://www.undrr.org/ terminology EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 29 World Bank (2012). The Sendai Report: Managing Disaster Risks for a Resilient Future. World Bank, Washington, DC. https://openknowledge.worldbank.org/handle/10986/23745 World Bank (2014). Climate Change Public Expenditure and Institutional Review Sourcebook, Chapter 4 Disaster Risk Management. World Bank (2015). Fiji Country Note: Disaster Risk Financing and Insurance. PCRAFI. World Bank (2016). Colombia - Policy strategy for public financial management of natural disaster risk (English). Washington, D.C.: World Bank Group. http://documents.worldbank.org/ curated/en/698881477989321563/Colombia-Policy-strategy-for-public-financial-management- of-natural-disaster-risk World Bank (2018). Advancing Disaster Risk Finance in Jamaica. Social, Urban, Rural and Resilience Global Practice Latin American and the Caribbean Unit. Zrinski, U., Bowen, M., and Bosnic, M. 2020. PEFA Supplementary Framework for Assessing Gender Responsive Public Financial Management. Washington, DC: PEFA Secretariat / World Bank. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 30 For more information, contact: Adrian Fozzard (afozzard@worldbank.org) Bernard Myers (bmyers@worldbank.org) Urška Zrinski (uzrinski@worldbank.org)