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Financial Management of Large-Scale Catastrophes

image of Financial Management of Large-Scale Catastrophes

Dramatic events, such as the earthquake that struck China’s Sichuan Province in 2008 and the devastation caused by Hurricane Katrina in the United States in 2005, have brought the financial management of catastrophic risks once again to the forefront of the public policy agenda globally. To address these issues and develop sound policies, the OECD has established an International Network on the Financial Management of Large-Scale Catastrophes. This publication supports the ongoing activities of the Network.

This book contains three reports focusing on different institutional approaches to the financial management of large-scale catastrophes in selected OECD and non-OECD countries, the role of risk mitigation and insurance in reducing the impact of natural disasters, and the importance of strategic leadership in the management of non-conventional crises.

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The New World Of Risks and Crises

The break between the end of the 20th century and the beginning of the 21stcentury has been violent and disconcerting. Our world used to be relatively stable. Certainly, it could and did undergo serious breakdowns and crises: but those were charted, localized, manageable, and reparable within established frameworks. Now we are in the grip of events which lie beyond "normal" categorizations. We find ourselves thrown into a world that is losing its bearings, its balancing mechanisms and its internal borders. We are moving from the accidental - specific breakdowns within generally stable terrains - to the chaotic: a landscape that is profoundly and permanently de-structured, a matrix of security problems responding to laws that we do not understand. A world where crisis becomes the central operating mode, and which is generated by events, processes, and combinations that are increasingly off the scale. Two essential types of difficulties come together to produce today's crises: • Shocks no longer fit their customary frames of reference: we are witnessing difficulties that in terms of scale, complexity, and speed “burst the seams” of our understanding and our vision. • These shocks are arising against a backdrop of contexts and moorings that are also shifting with increasing speed, which only compounds our loss of bearings, management capacity, and the collapse of confidence. Hence, there can be no "technical" solution, however sophisticated, to these emerging crises. We must first assess the issues and then invent appropriate responses.

English

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