By Tobias Sieg, IIASA Young Scientists Summer Program alumnus
IIASA Young Scientists Summer Program alumnus Tobias Sieg explains how risk assessments considering uncertainties can substantially contribute to better risk management and consequently to the prevention of economic impacts.
According to the World Economic Forum’s Global Risk Landscape 2018, extreme weather events and natural disasters are ranked among the top three global risks. For many regions, hydro-meteorological risks – in other words, weather or water related events like cyclones or floods that pose a threat to populations or the environment – constitute the biggest threat. This calls for a comprehensive scientific risk assessment with a particular focus on large associated uncertainties.
Assessing the risk of hydro-meteorological hazards without considering these uncertainties, is like entering a pitch-dark labyrinth. You have no idea where you are and where you will end up. If you enter with a flashlight, you might still not immediately know exactly where you will end up, but at least you can assess your possibilities for finding a way out.
We should all care to see those possibilities and to identify uncertainties, since the consequences of hydro-meteorological hazards can have severe impacts on socioeconomic systems, and global- and climate change could favor the occurrence of floods. An increase in extreme weather events, such as heavy precipitation can be expected along with an increasingly warmer climate. In combination with uncontrolled socioeconomic development, these extreme weather events could potentially trigger more intense hazardous flood events in the future. Appropriate management of their consequences is therefore required, starting from today, while pro-actively thinking about the future. To that end, risk management policy and practice need reliable estimates of direct and indirect economic impacts.
The reliability of existing estimates is usually quite low and, what is maybe even worse, they are not communicated properly. This may signal a false sense of certainty regarding the prediction of future climate-related risks.
In two recent studies, my co-authors and I developed and applied a novel method, which specifically focuses on the communication of the reliability of economic impact estimates and the associated uncertainties. The proposed representation of uncertainties enables us to shed some light on the possibilities of how a specific event can affect economic systems. As a Young Scientists Summer Program (YSSP) participant with the IIASA Risk and Resilience Program, I applied the method together with my supervisors Thomas Schinko and Reinhard Mechler, to estimate the overall economic impacts of a major flood event in Germany in 2013.
The estimated overall economic impacts comprise both direct and indirect impacts. Direct impacts are usually caused by physical contact of the floodwater with buildings, while indirect impacts can also occur in regions that are not directly affected by a flood. For example, obstructions of the infrastructure can lead to delayed deliveries, in turn leading to negative impacts for the production of goods outside the flooded areas. The crucial novelty of this method is the integrated assessment of direct and indirect economic impacts. In particular, by considering how the uncertainties associated with the estimation of direct economic impacts propagate further into the estimates of indirect economic impacts.
Being able to reproduce what has happened in the past is essential to making credible predictions about what could potentially happen in the future. A comparison of reported direct economic impacts and model-based estimates reveals that the estimation technique already works quite reliably. The good news is that anyone can help to increase the predictive reliability even further. The method uses the crowdsourced OpenStreetMap dataset to identify affected buildings. The more detailed the given information about a building is, the more reliable the impact estimations can get.
Our study reveals that the potential of short-term indirect economic impacts (without considering recovery) are quite high. In fact, our results show that the indirect impacts can be as high as the direct economic impacts. Yet, this varies a lot for different economic sectors. The manufacturing sector, for instance, is much more affected by indirect economic impacts, since it is heavily dependent on well-functioning supply chains. This information can be used in emergency risk management where decisions have to be made about giving immediate help to companies of a specific sector to reduce high long-term indirect economic impacts.
We are now looking at different possibilities of how flood events could affect the economic system. Having a range of possibilities of the relation between these impacts makes them transferable between different regions with similar economic systems. Our results are therefore also relevant more broadly beyond the German case. This representation of uncertainties can help to get to a more credible and consistent risk assessment across all spatial scales. Thus, the method is able to potentially facilitate the fulfillment of some of the calls of the UN Sendai Framework for Disaster Risk Reduction.
Detailed risk assessments considering uncertainties can substantially contribute to better risk management and consequently to the prevention of economic impacts – direct and indirect, both now and in the future.
 Sieg T, Schinko T, Vogel K, Mechler R, Merz B & Kreibich H (2019). Integrated assessment of short-term direct and indirect economic flood impacts including uncertainty quantification. PLoS ONE 14(4): e0212932. [pure.iiasa.ac.at/15833]
 Sieg T, Vogel K, Merz B & Kreibich H (2019). Seamless estimation of hydro-meteorological risk across spatial scales. Earth’s Future. https://doi.org/10.1029/2018EF001122
Note: This article gives the views of the author, and not the position of the Nexus blog, nor of the International Institute for Applied Systems Analysis.