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Risk Management in Finance: A Roadmap for Dominica

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A comprehensive disaster risk financing strategy is crucial for the Government of Dominica to effectively manage contingent liabilities posed by natural hazards. The Ministry of Finance and Investment (MoF) requires a robust framework to navigate the challenges of disaster risk management, particularly in light of limited fiscal space.

Why a Disaster Risk Financing Strategy?

• A comprehensive disaster risk financing strategy is necessary for effective management of contingent liabilities posed by natural hazards.
• Limited fiscal space makes it essential to have a robust framework for navigating disaster risk management challenges.

Report Overview

This report provides recommendations for a cost-effective disaster risk financing strategy in Dominica, drawing on international best practices and country-specific information. The analysis is informed by a preliminary fiscal risk assessment and a review of current budget management practices for disasters in Dominica.

International Framework

• The World Bank’s operational disaster risk financing framework has assisted several countries worldwide, including those in the Caribbean region, in designing and implementing sovereign catastrophe risk financing strategies.
• This report adapts this approach to the unique institutional, social, and economic context of Dominica.

Key Findings

• A comprehensive disaster risk financing strategy is necessary that incorporates legislative, financial management, fiscal, and insurance market considerations.
• The strategy should leverage international best practices, country-specific information, and similar conditions in Small Island Developing States (SIDS) with limited fiscal space.

Recommendations for MoF

The report provides recommendations for the MoF to develop a robust disaster risk financing strategy, including:

Establishment of a Dedicated Disaster Risk Financing Unit

• To manage the design, implementation, and monitoring of the disaster risk financing strategy

Development of a Disaster Risk Assessment Framework

• To assess the country’s vulnerability to natural hazards and estimate potential losses

Creation of a Sovereign Catastrophe Risk Insurance Pool

• To transfer and manage catastrophic risks

Implementation

Implementation of these recommendations will enable Dominica to:

• Better manage its contingent liabilities posed by natural hazards
• Enhance budget resilience
• Support long-term economic growth and development