RFF Project

Rethinking Risk: New Approaches for Managing Risk and Building Resilience

The world is entering a new era of risk management. Recent extreme events—from Hurricane Katrina to the 2008 financial crisis—have altered preconceived notions of preparedness and exposed the potential for severe losses. These events also have called into question society’s tools for detecting, reducing, and transferring risk, leading to new discussions about who has responsibility for managing disaster risks and who should pay for them. Drawing on decades of work on related topics, experts at RFF are addressing these economic and policy questions under RFF’s new project, Rethinking Risk

Specifically, they are analyzing a wide range of risk management approaches and a developing a diverse set of analytical tools around three themes, listed below. Each theme focuses on the management of “tail events,” whether these are disasters, such as more intense hurricanes, or global catastrophic impacts from climate change. 

Research and analysis focus around several themes:

  • Strategies for Resilience
    Potential changes in weather-related extreme events are raising concerns for federal and local decisionmakers. RFF experts are examining options for adapting to extremes, with a focus on coastal land use and coastal hazard mitigation, as well as the use of nature-based approaches to risk management. They are also exploring trends in disaster losses and how individuals view changing disaster risks.
  • Innovations in Disaster Risk Financing
    Paying for disasters is a costly business. Disasters can be financed either before they occur—through mechanisms such as insurance or other forms of securitization—or afterward, through government aid, credit, or use of individual savings, for example. RFF experts are examining many questions related to disaster financing. Who should bear the costs of disasters? What incentives can help communities and individuals invest in hazard mitigation? How should government interventions in disaster insurance markets be designed? How can moral hazard associated with disaster aid be minimized?
  • Uncertainty Quantification and Modeling
    For decades, experts at RFF have been developing and using economic models to guide natural resource management. These models are now being adapted and expanded to include uncertainty from climate change and other sources. In addition, RFF experts are undertaking multiple projects related to quantifying uncertainty based on structured expert judgment—conforming to scientific requirements for transparency, accountability, and validation. This includes new work on the use of expert elicitation for modeling the dependence between risks.