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Risk Management in Regulatory Frameworks

Towards a Better Management of Risks

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Recent years have been marked by many catastrophic events both natural and man-made. Close interconnections mean that the impact of these crises has been felt throughout the world. Although many tools have been developed to manage risks successfully, there can be no doubt that many of the losses we have recently witnessed could have been prevented or minimized, in the context of an effective and well-balanced regulatory system. The goal of this publication is to provide insights and recommendations for policymakers on designing regulatory systems that result in an efficient, effective and transparent management of risks. It introduces a holistic model of a regulatory system, function by function and with real-life examples, which is based on the objective of managing risks effectively.

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Introduction: Risk management and regulatory systems

A devastating earthquake hit an already fragile Port-au-Prince in January 2010. It was the deadliest tremor in recorded history, leaving enormous losses in its wake. Yet by seismic standards it was a major, but not cataclysmic, event. The consequences were compounded by Haiti’s chaotic construction, its lack of a comprehensive national building law and seismic design code, and more generally its poor planning capacity for catastrophes. In Chile, by contrast, building codes and risk-based building rules have been regularly updated and enforced since their adoption in 1931. Innovative technologies were introduced and applied to disaster risk management and regular training sessions held in educational institutions. Better preparedness was undoubtedly among the factors that helped reduce the consequences of the earthquake that struck there in February 2010, which was 500 times more powerful than the one in Port-au-Prince (World Bank, 2011; Kaufmann and Tessada, 2010).

English

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