Launch of the 2014 World Development Report: Risk Management for Development

24 April 2014

The World Bank, National Team for the Acceleration of Poverty Reduction (TNP2K) and Paramadina Public Policy Institute held a launch event for the "2014 World Development Report: Risks and Opportunities, Risk Management for Development" on Thursday, 24 April 2014 at the Energy Building, Jakarta.

Speakers at the event included Norman Loayza, lead author of the 2014 World Development Report (WDR), TNP2K Policy Working Group Coordinator Suahasil Nazara, World Bank Senior Economist Vivi Alatas, Paramadina Public Policy Institute Managing Director Vitello and Peter Meyer, chairman of the American Chamber of Commerce Indonesian Service Committee.

WDRs are annual reports that highlight the major challenges facing poverty reducing. This year’s theme highlights the potential threats and opportunities of risk management, a powerful instrument for development.

The event was opened by Nazara, who said in a speech that usage of the risk management approach was not yet common in Indonesia. "We are used to responding to something that has happened rather than identifying the risks [in advance]. It is necessary to change this mindset,” he said.

He added that the international community should share its experiences of managing risks so that governments can have greater input for improving performance and establishing two-way communication.

In his presentation, Loayza explained that risk management is a process that is designed to address risks, prepare against them and cope with their impacts. As such, society must change from being “crisis fighters” developing ad hoc responses to unplanned events to using proactive and systematic risk management. He added that risk management is a necessary expense, the cost of which would result in even larger benefits.

“Job losses, crime, social unrest, environmental degradation and economic instability are risks that could turn into crises if not managed, and society’s poor will feel the greatest impact,” Loayza said, adding that “the solution is not to reject changing risks in order to avoid them, but to prepare for all opportunities and threats presented by these changes.”

The level of readiness of countries to face such risks varies. Factors that determine a country's level of preparedness to face risks include human resources, physical and financial assets, and social support.

Loayza concluded by describing five principles of public action for better risk management: (1) does not create uncertainty or unnecessary risks (e.g. policies that can give rise to ethnic or gender inequality); (2) provide appropriate incentives for individuals/institutions to make preparations without increasing risks among other parties; (3) maintain a long-term risk management perspective that establishes institutional mechanisms that can be adopted into policy; (4) promote flexibility of frameworks that are clear and well-planned; and (5) protect the vulnerable while increasing resilience and maintaining fiscal sustainability.