Fiscal resilience over time and its management in the context of multi-risks: an application to the Danube Region

Multi-hazards as well as multi-risk management are increasingly gaining importance in research, policy, and practice, but present a challenging task. Focusing on governments as key risk bearers, we assume a multi-hazard and multi-risk perspective and address the question of how different natural hazards can influence fiscal risk and how fiscal risk can change over time due to other risk realizations (e.g., pandemics). We employ a risk-layer approach to analyze the changes in fiscal risk, comparing the fiscal stress associated with different hazards during distinct time periods and scenarios. In doing so, we address the question under which circumstances risk reduction or risk financing may be needed as well as how an iterative approach can account for changing financing resource levels for different hazards under different scenarios. We apply this methodology to the Danube Region which is exposed to different natural hazards and encompasses countries with different levels of fiscal resilience. Furthermore, the countries in the Danube Region were affected by Covid-19, which acted as an additional stressor and caused large economic costs. The analysis should demonstrate the flexibility as well as the relevance of the presented methodology to address multi-risks within a coherent framework. One of the main outcomes of the study is the appreciation of different fiscal resilience levels for different countries and the different types of disasters they are exposed to, which can inform the diverse strategies needed on a case-by-case basis but within a common framework to tackle current and future risks. The analysis should be therefore not only informative for the Danube Region and respective countries but also regarding the more general question under which circumstances risk reduction or risk financing may be needed as well as how an iterative approach can account for changing financing resource levels against multiple risks.