SURVEY - SOCIAL RISK MANAGEMENT

Inclusion is a two-way street

Included and excluded have responsibilities

Typical ways of protecting excluded

Hardware interventions - infrastructure, equipment

Software interventions - education, training, institutions

Social Protection as a third pillar

• Never at the center of development discussions

• Broadly understood as public measures to provide income security to the population

static state (chronic, persistent)

Povery is not a

Poverty

• Social security and other safety nets are difficult to establish during deep crises or when experiencing chronic or persistent poverty

• Various risks and complexities are now more translational and global or universally-affecting

Development programs are challenged to sustain

• What needs to be done now

• What needs to be sustained in the future

Developing countries post more grave challenges

• Cost and cost-effective concerns can’t be guaranteed for all

• Poorer countries are disproportionately affected by all forms of risks, compounding on one another

accelerate and sustain development

Risk management is necessary to

the vulnerability of the poor

Addressing risks of the poor means addressing

vulnerable

To be poor is to be

Vulnerability

• One’s predisposition to risk

• Probability of falling into poverty as a consequence of exposure to risks

• Everyone experiences or has some form of vulnerability

Why are the poor especially vulnerable?

• Lower future outcomes than current outcomes because risks are higher

• May increase depth of poverty

• Lower future income than current income

• Decline in food consumptions compared to current consumption

Factors of Vulnerability

• Exposure

• Sensitivity

• Adaptive Capacity

Exposure

• Nature and degree to which a group is exposed to significant hazards

Sensitivity

• Degree to which a group is affected, either adversely or beneficially

Adaptive Capacity

• Ability of a group to adjust, to moderate the potential damage, to take advantage of its opportunities, or to cope with its consequences

Poor as risk averse

• When current outcomes decline, the poor is more affected than the non-poor due to higher vulnerability

• Willingness to engage in high-risk, high-return activities for the poor is lower

• Not just income poor but also vulnerable (elderly, women, child laborers, PWDs, orphans, IPs, etc.)

• Government and other groups cut back on programs for the poor during crisis

Reasons for Vulnerability

Lack of productive assets, lack of human capital, lack of savings, lack of accses to social assistance, voicelessness, informal livelihood, insecure property rights

MEANS

Income deprivation

Entitlements failure

Capabilities failure

Social exclusion

Sources of Risks

• Natural disasters

• Health shocks

• Social diasters and risks

• Economic shocks

• Political or governance shocks

• Environmental shocks

• Life cycle shocks

Characteristics of Risks

• Source: Natural or man-made

• Pattern: Idiosyncratic, covariant, repeated, bunched

• Impact: Catastophic, catastrophic

Pattern of Risks ICRB

1. Idiosyncratic - Individuals or particular households

2. Covariant - Affecting many people

3. Repeated - occurs over times

4. Bunched - together with other risks

Impact of Risks

Catastrophic - Low frequency but severe welfare effects

Non-catastrophic - High frequency but low welfare effects

Risk of Irreversibility

Chronic poverty - long-term poverty

Persistent or situational poverty - insistent movement from poor to non-poor; poverty caused by sudden or temporary shocks

Common Risk Management Practices of the Poor

1. Reducing consumption of goods/services

2. Dissaving (spending beyond one’s income)

3. Increasing productivity by making women and children work

4. Selling productive assets

Many coping mechanisms provide temporary relief

• Reduce available assets

• Negative long-term consequences

• Often Counterproductive

Risk Management Mechanisms

1. Ex ante - Implement before event (prevention, mitigation)

2. Ex post - Implement after the event (coping)

3. Strategies and interventions to address risks vary depending on the risk profile

Risk Reduction (Prevention)

Reducing the probability and severity of shocks

Ex: Pursuing education, vaccination, climate-adaptive plant varieties

Risk Management (Mitigation)

Reducing the impact of shocks

Ex: Self, mutual, formal

Risk Coping

Relieving the impact of experiencing shocks

Ex: Borrowing, selling assets, migration, child labor, consumption or expenditure postponement

Risk Management Arrangements

1. Informal - Social networks

2. Market-Based - Market forces, money, banks, insurance companies

3. Public - Limited coverage in developing countries

Mechanisms x Arrangements

Challenges for Risk Management (esp the poor)

• Think long-term

• Acknowledge vulnerabilities

• Anticipate risks

• Pay for risk management