Click here to read the full report by the World Bank, entitled Benefit-Cost Analysis for Risk Management:
Summary of Selected Examples”.
Brief – At the centre of any cost-effectiveness calculation are estimates of the likely costs and benefits of an intervention. Many studies attempt to calculate the total cost of an intervention by estimating the direct costs of an intervention in a particular area and then extrapolating across time or geographical area. These cost estimates are then compared to the benefits of preparation should a shock occur. The direct benefits of preparation usually include averted loss of life or disability, and averted material damages. Some indirect benefits—such as improved productivity when illness is averted—may also be relevant, but most studies focus more narrowly on direct benefits alone.1 Many studies provide a range of estimates, based on more pessimistic (or optimistic) assumptions.
While technical in nature, this paper explains the importance of weighing up the costs of managing risks versus the potential benefits.