A System Dynamics Approach on Forecast-based Financing for Flood Response in Nepal

Humanitarian responses are complex and expensive. Response efforts, particularly, immediately after the disasters are further difficult and challenging. Due to the increasing accuracy and reliability of forecast of climate induced disasters, humanitarian agencies have initiated the Forecast-based Financing as a concept which will provide funding to carry out actions between the window of the forecast and actual event, which may reduce the human suffering and also save a large sum of fund. But there are still many uncertainties how such funding can contribute in disaster response and overall reduction on human suffering. This study applies the system dynamics methodology to simulate the disaster response with and without forecast-based financing in the context of western part of Nepal. This study finds that, in current context, the Forecast-based Financing may help in reducing human suffering with some saving on total expenses; but considering the risk of acting in vain, the primary justification for Forecast-based Financing should be humanitarian rather than financial value.