The Importance of Governance in Risk Reduction and Disaster Management Joachim Ahrens n and Patrick M. Rudolph nn This paper identifies institutional failure as the root cause for underdevelopment and suscept- ibility to disasters and explores their interdependent relationship. It is demonstrated that only if a country’s governance structure enables the implementation and enforcement of public policies conducive to a country’s economic and social development can sustainable livelihoods be achieved and susceptibility to disasters be reduced. Accountability, participation, predictability and transparency are identified as the key features of a governance structure that fosters development and supports risk reduction. I. Introduction On 26 December 2004, the world was shocked: tsunamis, i.e. massive tidal waves, reached coastal stretches of Indonesia, Sri Lanka, India, Thailand, the Maldives, the Seychelles, Myanmar, Bangladesh and Somalia. The tsunamis were caused by a series of submarine earthquakes, the epicentres of the two strongest earthquakes being located just off the west coast of Northern Sumatra, Indonesia as well as the Nicobar Is- lands, India. They were reported to have a magnitude of 9.0 and 7.5 on the Richter scale, respectively. Their effect on humanity has been devastating: as of 1 February 2005, 157,564 had been reported dead, 26,763 missing and 1,075,350 displaced (OCHA, 2005). Unfortunately, the Indian Ocean tsunamis confirmed an appalling trend: not only has the world witnessed a dramatic rise in disasters in recent years, but the number of people affected by them has also increased significantly. In the 1990s, three times as many people were affected by disasters as in the 1970s. The associated economic losses even rose fivefold over that period (TEARFUND, 2005). Disasters can essentially be viewed as a func- tion of the risk process, i.e. they result from a combination of hazard, conditions of vulnerabil- ity and insufficient capacity or measures to reduce the negative consequences of risk. Disasters dis- rupt the functioning of a community or a society causing widespread human, social, material, eco- nomic and environmental losses which exceed the capacity of the affected people to cope using their own resources. Their vulnerability is shaped by a set of conditions and processes resulting from physical, socio-political, economic and en- vironmental factors that increase their suscept- ibility to the impacts of hazards. Hazards are potentially damaging physical events, phenom- ena or human activities which may cause the loss of life or injury, damage property, disrupt eco- nomic processes or lead to environmental degra- dation. They can have different origins: natural (geological, hydrometeorological or biological) or induced by human processes (e.g., environmental degradation) and may occur single, sequential or combined. Coping capability, i.e. the capacity of people and organisations to use existing re- sources to achieve beneficial ends during and after disasters, is required for a community or a society to withstand the effects of hazards (UN, 2002). This paper takes these observations and con- siderations as its starting point and seeks to systematically elaborate how suitable governance structures can be crafted in order to strengthen capabilities and to create capacities of both public and private stakeholders. This is an unalterable prerequisite to reduce economic risks associated with disasters and to sustainably improve man- agement processes in the public sector and at the interface of the public and the private sphere with the objectives to avoid disasters and, if this cannot be achieved, to significantly reduce per- sonal, economic, and environmental losses dur- ing and after disastrous events. To begin with, the next section investigates briefly the dialectic re- lationship between disasters and underdevelop- ment and highlights institutional failure associated with bad governance as a critical factor. Section III introduces a comparative gov- ernance concept for the analysis of public policy- making. In Section IV, this concept is applied in order to identify pointers of how to improve governance quality so that hazard management could be improved, vulnerabilities reduced, and n Chair for International Eco- nomics Private University of Applied Sciences Goettingen and European Business School Department of Economics Soehnleinstrasse 8 65201 Wies- baden Germany Phone: 149 611 – 36018 600 Fax: 149 611 – 36018 602 E-Mail: ahrens@ pfhgoettingen.de nn Swiss Institute for Interna- tional Economics and Applied Economic Research (SIAW- HSG) and University of St. Gallen Bodanstrasse 8 9000 St. Gallen Switzerland E-Mail: patrick.rudolph@unisg.ch r 2006 The Authors. Journal compilation r 2006 Blackwell Publishing Ltd., 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main St, Malden, MA, 02148, USA Volume 14 Number 4 December 2006 THE IMPORTANCE OF GOVERNANCE IN RISK REDUCTION AND DISASTER MANAGEMENT 207