Risk management for development--assessing obstacles and prioritizing action

Abstract

Throughout the process of economic and social development, decisionmakers from the household to the state level are confronted with a multitude of risks: from health and employment risks, to financial and political crises, as well as environmental damages and from the local to global level. The World Bank's 2014 World Development Report (WDR) provides an in-depth analysis of how the management of such risks can be improved. In particular, it argues that a proactive and integrated approach to risk management can create opportunities for fighting poverty and achieving prosperity--but also acknowledges substantial obstacles to its implementation in practice. This article presents and discusses these obstacles with respect to their causes, consequences, interlinkages, and solutions. In particular, these include obstacles to individual risk management, the obstacles that are beyond the control of individuals and thus require collective action, and, finally, the obstacles that affect the ability of governments and public authorities to manage risks. From these obstacles, this article derives a policy roadmap for the development of risk management strategies that are designed not only around the risk they have to cope with, but also around the practical obstacles to policy implementation.

Keywords: Development; WDR 2014; obstacles; risk management; uncertainty.