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Disaster preparedness is rare, but better and cheaper than after-the-disaster remedies

In the last decade, almost 1 million people have been killed and trillions of dollars have been lost in natural disasters worldwide.

As climate change threatens to increase the frequency and severity of extreme weather events, the prospect of even bigger disaster-related losses alone would make a case for more disaster-proofing investment.

The case gets stronger when you have the actual numbers including the most recent estimate of $2 billion in damage from the bomblike tornado that shattered Moore (population 56,000), a suburb of Oklahoma City, earlier this week.

Many of Moore's schools and houses did not have storm-sheltering cellars, despite the fact that Moore suffered from a previous violent tornado. And the town's more strongly built medical center, which became a place of refuge for people fleeing homes and stores, was turned into a ruin by 200 mph winds.

According to a report by the U.N. International Strategy for Disaster Reduction (UNISDR) released last week, total annual average loss from just earthquakes and wind damage from tropical cyclones is estimated to be more than $180 billion this century.

Looking at international and national disaster loss data for 56 countries, survey responses from 1,300 businesses in accident-prone locations in the Americas and risk management practices in 14 big corporations, the U.N. report showed that previous figures in global datasets over the last decade -- which describe $1 trillion in losses -- may have been quite conservative.

A lowball figure for damages

"Disaster risk is increasing with every passing day," said U.N. Secretary-General Ban Ki-moon at the launch of the report. "Our startling finding is that direct losses from floods, earthquakes and drought have been underestimated by at least 50 percent."

"So far this century, direct losses from disasters are in the range of $2.5 trillion," Ban added.

Poverty, uncontrolled urbanization and climate change are among the many factors contributing to higher risk exposure, Ban said. But so is globalization.

More businesses are outsourcing production to facilities in hazard-prone low- or middle-income countries with lower labor costs, without realizing they are exposing themselves to the same risks. Yet little has been done in terms of disaster preparedness and resiliency.

A new study by the Overseas Development Institute (ODI) showed that for every $10 spend on dealing with disasters, little more than $1 is used to prepare for or prevent them in the first place.

A business approach to a riskier world

Over the past two decades the international community has pledged more than $3 trillion in international aid, the institute reported. Of total aid, $93.2 billion was spent on disaster relief and reconstruction while $13.5 billion was devoted to prevention and preparedness.

"These figures should provide plenty of reasons to stop and think about whether we are really on the right course when it comes to dealing with disasters," ODI Climate and Environment Program research associate Jan Kellett said in a statement. "It seems like common sense that where possible we should be preventing disasters, not just to help save lives but also to save money."

Companies seem to be realizing this too.

As more businesses perceive a riskier world, investments in disaster risk management are being seen less as a cost and more of an opportunity to increase resilience, competitiveness and sustainability, the UNISDR said.

Aside from protecting businesses' bottom lines, according to the report, disaster risk reduction generates a shared value in securing local employment, increased productivity, tax revenue and welfare. And the more risk-sensitive businesses become, the bigger the incentive for governments to invest in disaster risk reduction themselves.

"In the years ahead, trillions of dollars will be invested in hazard-exposed regions," Ban said, and whether these investments address nature hazards and vulnerabilities will determine how sustainable their returns can be.

"Our challenge is to be on the right side of that ledger. The smart side, the prevention side," he said.

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