The urbanisation challenge

Forecasts by the UN in its report on World Urbanisation Prospects predict that the urban population of Africa will rise from 399m in 2010 to 661m in 2020 and 1.23bn by 2050; a similar picture exists in Asia Pacific and Latin America. The UN also estimates that 60% of the area expected to be urbanised by 2030 is yet to be built. Flagship projects such as Konza and Tatu cities in Kenya, and Eko Atlantic and Centenary cities in Nigeria are at the forefront of this urbanisation movement and present exciting visions of the future, making a key contribution to the prosperity of the region. Critical infrastructure is also required to support these urban developments including airports, ports, road and rail, power plants, and communications networks.

This exponential growth in urban areas, while presenting major opportunities for investors, developers, and contractors, comes with significant attendant risk. They will face a range of societal, technological, political and security hazards and threats. Environmental hazards, particularly from extreme weather events such as river flooding, cyclones, and tsunamis will be magnified significantly in large urban areas. The anticipated global average annual losses from such events are now estimated at US$314 billion in the built environment alone. This number is likely only to rise as ever more areas are given over to development.

This complex risk landscape has led to increasing interest in the subject of resilience. While there are differing interpretations of what this actually means, we describe it as the ability of an entity to adapt and evolve to changing environments whilst minimising the probability and/or impact of all hazards and risk events – a concept that has clear utility in the planning, implementation, and operation of new urban centres.

Managing the risk

It would be reasonable to state that questions of risk, resilience, and disaster risk reduction for new urban centres are not particularly well understood. Many urbanisation projects commence with little or no consideration of these issues. Risk is rarely approached and acted upon from an all-hazard or whole-life perspective and this will have significant negative impacts through the project lifecycle. The UN observes that, “there is little evidence that the risk information produced is really informing development or disaster risk reduction. The production of risk information generally continues to be supply-driven and is rarely translated into risk knowledge for potential end –users”.¹ More worryingly for long-term investors and asset owners is the UN assertion that “investment decisions rarely take into account the level of hazard in these locations, or they discount the risk excessively due to short-term profits to be made. As a consequence, large volumes of capital continue to flow into hazard-prone areas, leading to significant increases in the value of exposed economic assets”.²

There is also a tendency to focus on post-event remediation and crisis management in place of fully integrated resilience strategies that form a part of initial feasibility studies and master plans, and which permeate all aspects of a development. This is founded on an over reliance on the ability of civil defence and emergency service organisations to develop and implement contingency plans to manage incidents.

Implementing resilience to deliver value

Control Risks advocates a coordinated, integrated, and multi-stakeholder approach to resilience. This should be risk led and outcome focussed, should recognise the importance of crisis preparedness and response, and must address corruption risks. This will deliver value over the project lifecycle by addressing the problems that previously described.

Such an approach should commence at a governmental level through the development of effective resilience frameworks. These should stem from effective national risk assessments that consider all hazards and threats (see Figure 1).

Figure 1: The national risk assessment process

This approach is supported by the OECD, which recommends to:

• Establish and promote a comprehensive, all-hazards and trans-boundary approach to country risk governance to serve as the foundation for enhancing national resilience and responsiveness

• Build preparedness through foresight analysis, risk assessments, and financing frameworks, to better anticipate complex and wide-ranging impacts

• Raise awareness of critical risks to mobilise households, businesses, and international stakeholders and foster investment in risk prevention and mitigation

• Develop adaptive capacity in crisis management

• Demonstrate transparency and accountability in risk-related decision-making by incorporating good governance practices and continually learning from experience ³

The resulting framework should provide a common understanding of risk and serve to support the formulation of resilience strategies at a regional and city level. It will provide a baseline for the creation of an effective approach for new urban development.

Figure 2: National resilience beta framework    

Source: World Economic Forum

Ideally, building resilience should commence as a multi-agency activity from the feasibility study stage of a project and be an integral part of a scheme master plan. It must be based on a horizon-scanning, all-hazards risk assessment with due consideration given to environmental, economic, integrity, political, security, and cyber issues. This will help inform initial investment decisions and the development of mitigation options can then follow. These can then be assessed in terms of cost and benefit and then factored into project budgets. Such activities should help drive investor confidence at these critical early stages.

Figure 3: Whole-life-cycle approach to urban resilience

This unified concept also allows a more holistic approach to resilience, providing a view of the project focussed on the interdependencies of the systems involved rather than a simple statement of the vulnerabilities of each component. This comprehensive view enables mitigation strategies to be consolidated and coordinated, resulting in more effective resilience strategies that tackle multiple risks in a cost effective way. On a practical level, for example, flood mitigation ditches could mitigate the threat from hostile vehicles, and landscaping can improves security as well as flood resilience.⁴

Meeting the Challenge to Build Resilience

The challenge of meeting the huge demand for new cities, and ensuring that they are resilient, is significant but manageable. Adopting a multi-agency and stakeholder approach that is threat and hazard led, and which commences at the feasibility stage of any new scheme, will help to reduce risk exposure through the whole lifecycle of the project.

This in turn will deliver real, tangible value that helps protect the interests for all stakeholders, from investors through to end-users, and will contribute to the overall success and prosperity of the world’s future cities.

At Control Risks we work with clients through the entire real estate value chain from project inception through planning design and construction and into the operational phase. Adopting an all hazards, outcome focused approach, we help minimise risk and maximise opportunity for developers, investors, planners, engineers, contractors and portfolio managers.

from:  Mark Whyte, Senior Managing Director, Crisis and Security Consulting