Whether man-made or naturally occurring, large-scale disasters can cause fatalities and injuries, devastate property and communities, savage the environment, impose significant financial burdens on individuals and firms, and test political leadership. Moreover, global challenges such as climate change and terrorism reveal the interdependent and interconnected nature of our current moment: what occurs in one nation or geographical region is likely to have effects across the globe. Our information age creates new and more integrated forms of communication that incur risks that are difficult to evaluate, let alone anticipate. All of this makes clear that innovative approaches to assessing and managing risk are urgently required.
When catastrophic risk management was in its inception thirty years ago, scientists and engineers would provide estimates of the probability of specific types of accidents and their potential consequences. Economists would then propose risk management policies based on those experts' estimates with little thought as to how this data would be used by interested parties. Today, however, the disciplines of finance, geography, history, insurance, marketing, political science, sociology, and the decision sciences combine scientific knowledge on risk assessment with a better appreciation for the importance of improving individual and collective decision-making processes.
The essays in this volume highlight past research, recent discoveries, and open questions written by leading thinkers in risk management and behavioral sciences. The Future of Risk Management provides scholars, businesses, civil servants, and the concerned public tools for making more informed decisions and developing long-term strategies for reducing future losses from potentially catastrophic events. Contributors: Mona Ahmadiani, Joshua D. Baker, W. J. Wouter Botzen, Cary Coglianese, Gregory Colson, Jeffrey Czajkowski, Nate Dieckmann, Robin Dillon, Baruch Fischhoff, Jeffrey A. Friedman, Robin Gregory, Robert W. Klein, Carolyn Kousky, Howard Kunreuther, Craig E. Landry, Barbara Mellers, Robert J. Meyer, Erwann Michel-Kerjan, Robert Muir-Wood, Mark Pauly, Lisa Robinson, Adam Rose, Paul J. H. Schoemaker, Paul Slovic, Phil Tetlock, Daniel Västfjäll, W. Kip Viscusi, Elke U. Weber, Richard Zeckhauser.
—Howard Kunreuther, Robert J. Meyer, and Erwann O. Michel-Kerjan
PART I. BEHAVIORAL FACTORS INFLUENCING DECISION-MAKING UNDER RISK AND UNCERTAINTY
Chapter 1. The Arithmetic of Compassion and the Future of Risk Management
—Paul Slovic and Daniel Västfjäll
Chapter 2. "Risk as Feelings" and "Perception Matters": Psychological Contributions on Risk, Risk-Taking, and Risk Management
—Elke U. Weber
Chapter 3. Risk-Based Thinking
Chapter 4. Structured Empirical Analysis of Decisions Under Natural Hazard Risk
—Craig E. Landry, Gregory Colson, and Mona Ahmadiani
Chapter 5. Mixing Rationality and Irrationality in Insurance Demand and Supply
Chapter 6. The Disaster Cycle: What We Do Not Learn from Experience
—Robert J. Meyer
PART II. IMPROVING RISK ASSESSMENT
Chapter 7. Using Models to Set a Baseline and Measure Progress in Reducing Disaster Casualties
Chapter 8. Learning from All Types of Near-Misses
Chapter 9. Managing Systemic Industry Risk: The Need for Collective Leadership
—Paul J. H. Schoemaker
Chapter 10. Measuring Economic Resilience: Recent Advances and Future Priorities
PART III. DEVELOPING BETTER RISK COMMUNICATION STRATEGIES
Chapter 11. Improving Stakeholder Engagement for Upstream Risks
—Robin Gregory and Nate Dieckmann
Chapter 12. Improving the Accuracy of Geopolitical Risk Assessments
—Barbara A. Mellers, Philip E. Tetlock, Joshua D. Baker, Jeffrey A. Friedman, and Richard Zeckhauser
Chapter 13. Efficient Warnings, Not "Wolf or Puppy" Warnings
—Lisa A. Robinson, W. Kip Viscusi, and Richard Zeckhauser
PART IV. ROLE OF RISK MITIGATION, RISK-SHARING, AND INSURANCE
Chapter 14. Threats to Insurability
Chapter 15. The Role of Insurance in Risk Management for Natural Disasters: Back to the Future
Chapter 16. Improving Individual Flood Preparedness Through Insurance Incentives
—W. J. Wouter Botzen
Chapter 17. Strong and Well-Enforced Building Codes as an Effective Disaster Risk Reduction Tool: An Evaluation
PART V. GOVERNMENT AND RISK MANAGEMENT
Chapter 18. Getting the Blend Right: Public-Private Partnerships in Risk Management
Chapter 19. The Regulation of Insurance Markets Subject to Catastrophic Risks
—Robert W. Klein
Chapter 20. Rethinking Government Disaster Relief in the United States: Evidence and a Way Forward
—Erwann O. Michel-Kerjan
List of Contributors
"Extraordinarily thoughtful and insightful, the authors of The Future of Risk Management provide students and professionals in the field of risk management new pathways for approaches and solutions to our myriad areas of risk. Moreover, anyone interested in understanding the risks our societies face should study these essays."
~Franklin W. Nutter, President, Reinsurance Association of America
"The field of risk management has exploded in recent decades as natural disasters, financial meltdowns, pandemics, and other damaging events have wreaked havoc across borders. The Future of Risk Management brings together essays from leading thinkers on ways to reduce risk so that today's threats do not turn into tomorrow's catastrophes. Aimed at policy leaders seeking strategies to reduce future harm, this volume deserves a close read and a spot on the bookshelf of all forward-thinking decision-makers."
~Alice Hill, The Hoover Institution, Stanford University
"The Future of Risk Management engages in a critical discussion on how we as a nation and the world as a whole should better prepare for and reduce the costs of future disasters. The authors correctly recognize that our current disaster preparedness and response paradigm is fundamentally broken-plagued by inconsistencies, short-sightedness, and a lack of integration. Instead, we need to take a holistic, long-term approach to disaster response and risk management and allocate resources based on the best objective data available."
~Jason M. Tuber, U.S. Congressional Staffer
"This comprehensive, critical, and lucid survey demonstrates convincingly that effectively managing climate change and other major threats requires understanding how the average person reacts to risk. It's a story about lessons learned and lessons forgotten, about logic and bias, about positive incentives and perverse incentives-and serves as a warning that we have a long, long way to go before we manage risk effectively."
~Michael Oppenheimer, Princeton University