Ex-Ante Risk Management and Implications for Sustainable Poverty Reduction

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The recent global financial crisis, and the food and fuel price increases in 2008-2009, unfolding in the context of increasing concern and awareness about the negative impacts of climate change on the poor have highlighted the fragility of progress in the fight against global poverty. These crises together with the apparent slowdown in growth globally reveal that progress in poverty reduction and shared prosperity may be easily undermined by the high levels of vulnerability prevalent in many developing countries.  Economic crises and price shocks aside, the incidence of natural disasters, extreme weather events and climate change-related shocks, civil conflicts, crime and violence, health shocks and illnesses, infectious diseases and pandemics may also contribute separately and sometimes in unison, to pushing the vulnerable households below the poverty line, and the poor into deeper poverty. Depending on the ability of households to protect themselves through formal or informal arrangements, and the capacity of existing social safety net programs (when available) to expand coverage to the “new” poor in times of need, the impacts of such covariate and idiosyncratic shocks on poverty may be large, and associated with potentially severe and long-lasting negative effects in human development.

Hill, R., Skoufias, E. "Ex-Ante Risk Management and Implications for Sustainable Poverty Reduction" Ferdi Policy Brief B119, November 2015