Enhancing Involvement of Private Sector in Disaster Risk Reduction Financing

The private sector has a significant share and interest in reducing disaster risk as there are many direct and indirect risks to businesses, both locally and at a distance. Despite the stakes, the private sector's engagement in disaster risk reduction has overall been limited. Given that most countries have limited budgetary resources available for investment in DRR, it is important to encourage the private sector to invest in DRR and create a favorable environment for these investments. 

Market-related factors favor the overall low participation of the private sector, including fewer investment opportunities and predictable returns, less reactive business models, lack of predictability, and the up-front costs of risk reduction projects. The motivation to act is determined by the return on investment and positive social and environmental impacts. 

Importantly, as small and medium-sized enterprises (SMEs) constitute a large part of the economy for many developing (and developed) countries in Asia and the Pacific, financing mechanisms must be tailored to meet their specific needs and encourage their potential to provide DRR-related products and services. 

In addition to eliminating market imperfections, governments can provide fiscal incentives to encourage DRR investments. Including these incentives in private sector investments in the development of technology to protect against disasters will increase the efficiency of disaster-related expenditures and strengthen disaster protection.