Financial Crime World

Financial Institutions in Dominican Republic Risk Management: A Catalyst for Sustainable Growth and Resilience

Introduction

The Dominican Republic, a country frequently affected by natural disasters such as earthquakes, hurricanes, and tropical storms, has been grappling with the challenge of managing risks related to climatic events, pandemics, and public health shocks. To mitigate these risks, the government, with the support of the World Bank, implemented a Disaster Risk Management Development Policy Loan with Catastrophe Deferred Drawdown Option (Cat DDO).

The Cat DDO: A Pioneering Instrument

The Cat DDO was the first to include health emergencies as a trigger and the first in the Caribbean. This instrument not only provided timely liquidity for the government to respond to the COVID-19 pandemic but also enhanced existing Disaster Risk Management (DRM) and Climate Change Adaptation (CCA) systems.

Objectives

The objectives of the Cat DDO were to:

  • Provide financing in the event of a disaster or health emergency
  • Strengthen the resilience of the health sector, complying with international regulations mandated by the Pan American Health Organization (PAHO) and the World Health Organization (WHO)
  • Support measures to mitigate risks from climatic events, pandemics, and public health shocks

Results

The results achieved during the three-year implementation period of the Cat DDO were impressive:

  • The government’s medium-term fiscal framework began to include an assessment of contingent liabilities associated with disasters
  • The Ministry of Education reported that 759 risk assessments of educational centers were carried out using a tool called rapid visual evaluation
  • 100% of projects approved in the National Public Investment System (SNIP) complied with mandatory technical standards incorporating disaster and climate risk analysis

Support from the World Bank

The World Bank provided a loan of $150 million to finance the project, as well as technical assistance to support:

  • The Ministry of Education in undertaking risk assessments of education infrastructure
  • The Ministry of Finance in systematic economic assessment of contingent liabilities associated with disasters

Government Partnerships

The government’s key partners included the ministries responsible for:

  • Education
  • Finance
  • Health
  • Public Works
  • Construction

Future Plans

The success of this program has paved the way for a second Cat DDO, currently under preparation, which will further strengthen national policies and institutions to manage risks from adverse natural and public health events. The World Bank’s technical assistance dialogue with the government will explore opportunities in areas such as:

  • Territorial planning
  • Social protection
  • Climate change
  • Spatial data infrastructure
  • Housing

Conclusion

The Dominican Republic’s experience demonstrates that effective risk management is crucial for sustainable growth and resilience, particularly in countries prone to natural disasters and public health shocks.