Understanding Risk and Uncertainty

Risk, in the first instance, can be thought of as the combination of the probability of occurrence of a future event, and its impact. It is readily seen that the standard for preparedness and response for these events is steadily rising, with a premium placed on readiness before a disaster strikes. Such foresight includes ensuring capabilities for disaster management ahead of time, allowing for their timely deployment when disasters strike. National development plans of countries should establish measures to identify high risks, together with policies and investments to foster resilience building. Some of these investments have long gestation periods, and it would be important not to let the choice of a high discount rate (that marks down the valuation of future returns) rule them out. Risk management is about sound analysis, perceptions of the future, and decision-making, including smart risk-taking for getting results.