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In this blog, Dr Gregory Wilson examines the case for leveraging alternative finance for Disaster Risk Management (DRM) in FCV settings:
Natural and man-made disasters are becoming more frequent and severe, fuelled by climate change, rapid urbanization, inaction, and intersecting crises such as economic shocks, and exacerbated where conflict and violence are either a lasting legacy or ongoing. Put simply, the effects of fragility, conflict, and violence (FCV) and disasters are often mutually reinforcing, creating and exacerbating a cycle of human vulnerability. Many of the costs associated with recovery from disasters in low and middle-income countries (LMICs) are currently met by development and humanitarian funds. However, the ALNAP Global Humanitarian Assistance Report 2025 shows a humanitarian sector entering a financial crisis. Simultaneously, the OECD DAC notes international aid fell in 2024 after years of growth. Moreover, the humanitarian ‘reset’ means many humanitarians are going “back to basics”, i.e. a re-focusing on life saving activities. This makes the oft-discussed ‘nexus’ increasingly hard to achieve despite humanitarian tools widely recognised as the wrong tools for sustainable DRM.
We suggest there is a significant need, but also the opportunity to expand investments in emergency preparedness.
Disasters are staggeringly expensive to the world economy. The Global Assessment Report on Disaster Risk Reduction (GAR) 2025, highlights how direct disaster costs have grown to approximately $202 billion annually, but that the true costs of disasters may be over $2.3 trillion when cascading and ecosystem costs are considered. The EU calculates that from 1980 to 2022, natural hazards affected millions of people and cost Member States €650 billion.
The Global Assessment Report on Disaster Risk Reduction (GAR) 2025, highlights how direct disaster costs have grown to approximately $202 billion annually, but that the true costs of disasters may be over $2.3 trillion when cascading and ecosystem costs are considered. The EU calculates that from 1980 to 2022, natural hazards affected millions of people and cost Member States €650 billion.
The Global Assessment Report on Disaster Risk Reduction (GAR) 2025, highlights how direct disaster costs have grown to approximately $202 billion annually, but that the true costs of disasters may be over $2.3 trillion when cascading and ecosystem costs are considered. The EU calculates that from 1980 to 2022, natural hazards affected millions of people and cost Member States €650 billion.
Notably, the Trump Administration has followed through with its threats to reduce the aid budget of the USA. The U.S. Agency for International Development (USAID) has been dramatically affected by sweeping budget cuts and restructuring efforts in 2025. USAID has seen over 90% of its programmes terminated, with funding slashed by nearly $60 billion. Aside from the extreme politically driven action by the Trump Administration, other donors are also cutting development assistance as their national budgets come under pressure. Many projects funded by other donors are being curtailed at short notice. The reductions have had global consequences, including cuts to programmes that would enhance countries’ abilities to forecast natural disasters, respond to weather-related events like droughts and typhoons, and build resilience to minimize displacement or economic shock when those events happen. The impact in situations of fragility and conflict will be multiplied. The debt and economic losses associated with disasters inhibit the potential for economic growth and in turn, foster instability. The reinforcing negative cycle of weak economy, weak social contract, increased vulnerability and occurrence of disasters reinforces the weak economy. The cumulative impact of these cuts is that people will face worsening disasters, with less capacity to respond and fewer resources to prepare. Ultimately, many will be forced to leave their homes and communities. A new approach is needed to arrest this negative cycle that locks people into significant poverty.
Prior to the recent reduction in aid budgets there was already a very clear need to leverage development finance for DRM in FCV settings, but also to ensure sustainability of the identified investment recommendations.
Not so long ago, we undertook a comprehensive analysis of the main characteristics of the strategies and policies that the different Multilateral Development Banks MDBs and Development Finance Institutions (DFIs) have developed to address fragility and conflict. The lessons we identified from these financial institutions can help us to understand how to frame recommendations for investment in FCV settings. Not exclusively to enhance disaster preparedness or resilience, but more concerned with understanding and framing our decision-making in FCV situations.
A number of key lessons or recommendations for framing investment in FCC were identified from the review and analysis of MDB/DFI strategies and work in FCV settings. We have related these lessons to the challenges of FCV situations and DRM.
The world is unfortunately becoming more reactive and less prepared, FCV situations bear the brunt of these intersecting ‘crises’, exacerbated by the current funding crisis. With climate change accelerating the frequency and intensity of disasters, and the incidence of conflict on the rise, the time is right to look again at financing for DRM in countries facing fragility and conflict.
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