Disaster risk financing is about having plans, systems and finance in place before an event to ensure that adequate finance can flow rapidly and effectively in an emergency, reducing impacts and speeding recovery. The approach involves quantifying risks in advance of disasters, pre-positioning funds, and releasing them according to pre-agreed plans. This ex-ante approach can complement more traditional ex-post aid by providing a predictable, well-defined tranche of funding much earlier and faster, based on pre-agreed indicators and protocols.
This finance can flow directly through pre-planned channels (such as shock-responsive systems or local NGOs), ensuring that the right assistance reaches the right people, at the right time. Through creating greater certainty about what finance will be available, and by linking finance to national and local systems, risk financing can enable better preparedness, empower government and local actors, and facilitate coordination. This leads to national systems that are more resilient to climate, disasters and other crises