Oct 27, 2025 Policy Indicators Briefs No. 36 Using Building Regulations to Lower Risks from Disasters and Strengthen Private Sector Resilience Gina Cardenas and Giovanni Biasiucci* U sing data from the World Bank Business Ready (B-READY) 2024 project and the United Nations University’s World Risk Index (WRI), this Brief nds that streamlined, transparent building regulations can lower disaster risks across income levels––primarily by enhancing economies’ capacities to anticipate, prepare for, recover, and learn from natural shocks. is also helps rms reduce disruptions to their operations. Yet building regulations alone are not enough. Accessible public services (such as digital platforms, hazard mapping, and simpli ed permitting processes) are essential enablers that lower the cost of compliance with regulations, encourage adherence, and help make buildings safer and more resilient. Together, sound and e ectively enforced regulations and public service delivery foster a private sector and a business environment that is more resilient to disasters—which, in turn, promotes long-term, sustainable economic growth. e Brief emphasizes that building regulations are not just a preventive measure but a vital adaptation strategy that helps economies become disaster-ready and also more attractive to investors. Building resilience for a competitive private disaster-prone and rapidly urbanizing regions like sector Sub-Saharan Africa, Latin America and the Caribbean, and East Asia and Paci c ( gure 1). e increasing frequency and intensity of natural disasters and weather events pose signi cant risks to economies Evidence from the 2011 Great East Japan Earthquake worldwide (IPCC 2023), with far-reaching consequences for (GEJE) illustrates this pattern clearly. A study of 1,300 business growth, investment, and job creation. Over the past manufacturing rms found that physical damage to o ce decade, both high- and middle-income economies have buildings was the primary source of disruption to their experienced an estimated US$1.5 trillion in economic losses operations (Chujyo, Fujii, and Ishikawa 2013). is example highlights a wider trend: disasters often reveal weak spots in due to storms, oods, and other natural hazards. Individual infrastructure and regulations—but they can also prompt catastrophic events—like earthquakes in New Zealand and meaningful reform. Despite substantial losses, economies Chile—have caused losses equivalent to up to 20 percent of may respond to disasters by approving and implementing national GDP (OECD 2014). improved, enforced building regulations. A major driver of these losses is the damage to e case of Japan exempli es this approach (box 1). Being infrastructure and business capital, such as buildings, one of the world’s most disaster-prone countries has not equipment, and inventory. is damage impairs business prevented Japan from maintaining economic stability and operations, supply chains (Dai and Tang 2024), investment supporting private sector growth. is is largely attributed to returns (OECD 2014), business survival rates (Basker and continuous building regulatory upgrades anchored in a Miranda 2018; Zaveri, Gatti, and Islam 2024), and deeply institutionalized disaster risk management system, productivity (Goicoechea and Lang 2023; Grover and Kahn long-standing commitments to resilience to seismic shocks, 2024; Jones et al. 2024). About 10 percent of rms around and strong coordination between national and local the world reported damage to physical assets from extreme governments. ese e orts have turned hard-earned lessons weather (such as storms, oods, droughts, or landslides) as of into a valuable global resource and benchmark for building 2023, according to the global average of World Bank resilience, particularly in developing countries. It is no Enterprise Survey data. is share is particularly high in coincidence that updating resilient building standards and gcardenas@worldbank.org *Affiliations: Regulatory Efficiency Unit. Global Indicators Group, Development Economics, World Bank. For correspondence: gcardenas@worldbank.org Acknowledgements: The authors are grateful to Norman Loayza, Valentina Saltane, Davis Francis, Seung Hee Nam, Penelope Demetra Fidas, and Burak Turkgulu for their valuable comments and guidance during the publication process. Nancy Morrison provided editorial assistance. All errors remain our own. Objective and disclaimer: This series of Policy Indicators Briefs synthesizes existing research and data to shed light on a useful and interesting question for policy debate. The names of the authors are indicated above and should be cited accordingly. The findings, interpretations, and conclusions are entirely those of the authors. They do not necessarily represent the views of the World Bank Group, its Executive Directors, or the governments they represent. All Briefs in the series can be accessed via: https://www.worldbank.org/en/research/brief/global-indicators-briefs-series https://www.worldbank.org/en/research/brief/global-indicators-briefs-series DECIG – Policy Indicators Briefs No. 36 Figure 1 Extreme weather hits firms hardest in disaster-prone and rapidly urbanizing regions 20% 18% 16% 14% Percentage 12% 10% 8% 6% 4% 2% 0% South Asia North Europe & East Asia & Latin Middle East Sub-Saharan America Central Asia Pacific America & & North Africa Caribbean Africa % of firms affected by extreme weather, Global average Enterprise Surveys Source: World Bank Global Indicators Group, using firm-level data from the World Bank Enterprise Surveys 2023. Note: The sample includes more than 250,000 firms across 159 economies, aggregated by geographical region. Within each economy, firms are stratified by size, industry sector, and geographic location to ensure representativeness. Box 1 Building resilience in action: Japan’s comprehensive approach Japan’s long history of dealing with natural disasters––including 185 major events between 1995 and 2018 (Japan, Cabinet O ce 2018)––has shaped an integrated disaster risk management system that ties building and infrastructure resilience directly to its competitiveness agenda, ensuring e ective coordination between national and local governments (Kechichian, Takemoto, and Shin 2020; World Bank 2018a). Major disasters such as the 1923 Great Kantō earthquake, the 1995 Kobe earthquake, and the 2011 Great East Japan Earthquake (GEJE) have served as turning points for regulatory and policy innovation, signi cantly strengthening the preparedness of Japan’s private sector. Each event prompted targeted reforms. For instance, the 1923 earthquake led to the world’s rst seismic clause in an Urban Building Law; the 1968–78 earthquake sequence resulted in the 1981 New Anti-Seismic Design Standard; and the aftermath of the 2011 GEJE brought new measures such as designs to build coastal infrastructure on two levels to enhance protection against tsunamis and storm surges, and mandatory seismic-safety disclosures for large private buildings. e 2025 revision goes further, requiring all new constructions and renovations to meet modern resilience standards (Yamamoto 2025). Together, these reforms re ect Japan’s ongoing commitment to integrating the latest scienti c and engineering advances into policy reforms to reduce disaster risk and protect economic activity. E ective enforcement has been central to this e ort. A 1998 revision of the Building Standard Law empowered certi ed private agencies to conduct plan checks and inspections, accelerating compliance while maintaining high standards (World Bank and GFDRR 2018). ese reforms have been especially e ective in coastal areas that generate 2 DECIG – Policy Indicators Briefs No. 36 more than half of Japan’s economic output (World Bank 2020; OECD 2005). Surveys conducted after the GEJE by the Building Research Institute found that base-isolated buildings in Miyagi Prefecture, which use shock-absorbing systems between the building and its foundation to absorb earthquake shocks, for example, greatly reduced lateral motion and avoided structural damage (Ranghieri and Ishiwatari 2014). Japan complements regulation with digital tools and public services, such as retro t subsidies, hazard maps, and mandatory disclosures (SMEA 2012), giving businesses both the incentives and the resources to comply. Its approach is globally recognized: Japan ranks in the top quartile of a World Bank assessments for the quality and e ciency of its construction permitting system (Hallegatte, Rentschler, and Rozenberg 2019). It demonstrates that even in one of the world’s most disaster-prone regions, e ective regulations, anchored in local enforcement and coordination, can foster a resilient and competitive private sector. Leveraging this expertise, Japan actively shares knowledge and collaborates worldwide, helping to advance building safety standards and establish a valuable benchmark across diverse regions (JICA 2024). codes remains a top policy priority across Asia and the Paci c services—public service delivery stands out as a key enabler (ADB 2024). of resilience. As illustrated in gure 3, a one-point increase in the B-READY Public Services score is associated with a Adopting and enforcing building regulations is considerable improvement in adaptive capacities in the WRI among the most efficient ways to build a index (a 3.38-point increase). is relationship remains resilient private sector robust even after accounting for di erences in country income levels. Building regulations shape cities’ growth, business operations, and societal preparedness for shocks. When e underlying logic is simple: while natural hazards are well-designed and properly enforced, addressing both largely unpredictable, their impacts can be mitigated. structural integrity and environmental risks, building Governments cannot control the occurrence of hazards, but regulations can signi cantly reduce physical damage from they can reduce exposure and vulnerability by adopting and natural disasters and minimize business disruptions enforcing streamlined, transparent building regulations that (Hallegatte, Rentschler, and Rozenberg 2019; Kechichian, integrate up-to-date disaster risk management practices. Takemoto, and Shin 2020; Moullier and Krimgold 2015), When tailored to local contexts and supported by e cient thereby contributing to the competitiveness of businesses and accessible public services (such as digital platforms, and industries. Moreover, as highlighted in a recent World hazard mapping, and simpli ed permitting processes), they Bank analysis (2025), through the integration of energy lower the cost and complexity of compliance, making it codes and sustainable construction standards, building easier for builders and developers to follow formal channels regulations enhance energy e ciency and advance the (the o cial procedures for permits and approvals) and less climate and development objectives of the 2030 Agenda for likely to skirt regulations through informality. is is Sustainable Development and the Paris Agreement. particularly critical for the construction sector, which is a key Combined, these regulatory and sustainability approaches engine for job creation, private investment, and local contribute to an economy’s overall resilience, understood as economic development, contributing on average one-third its capacity to absorb, adapt to, and recover from external of global GDP (World Bank Development Indicators 2024). shocks. Strengthening this sector through e ective regulations and Drawing on data from the World Bank Business Ready public services promotes safer, more resilient building (B-READY) project to assess the quality and e ciency of practices, and helps establish a broader culture of shared building regulations and the United Nations University’s responsibility for disaster preparedness—laying the World Risk Index (WRI), this Brief nds a compelling groundwork for long-term, sustainable economic growth. correlation between streamlined building regulations and In addition to gains in resilience, e cient regulatory e cient public services with lower disaster risks ( gure 2). systems also bring measurable economic bene ts. A study by A closer look at the WRI components shows that the the American Institute of Architects (AIA) found that correlation is strongest (the line is steepest) for the dimension streamlining building permitting processes can lead to a 5.7 of adaptive capacities, which captures economies’ ability to percent increase in construction activity, a 16 percent rise in anticipate, learn from, and prepare for future hazards. In property tax revenues (PwC 2005), and a 0.6 percent boost other words, economies that perform better on building in investment returns (World Bank 2018b). Conversely, regulation quality and enforcement are better equipped to ine ciencies in permitting can add up to 5 percent to total e ectively respond to and recover from natural shocks. construction costs, eroding project pro tability and Among the business environment elements discouraging future investment (Wrenn and Irwin 2015). In examined—namely, the regulatory framework and public fact, investor con dence hinges on the presence of the right 3 DECIG – Policy Indicators Briefs No. 36 Figure 2 Effective building regulations and public services correlate with lower disaster risk 80 80 Risk by Component, WRI Risk by Component, WRI 60 60 40 40 20 20 0 0 0 20 40 60 0 20 40 60 Regulatory Framework Scores of Building Regulations, B-READY Public Services Scores of Building Regulations, B-READY Average Risk (-0.32) Average Risk (-0.31) Vulnerability (-0.42) Vulnerability (-0.41) Lack of Coping Capacities (-0.32) Lack of Coping Capacities (-0.20) Lack of Adaptive Capacities (-0.57) Lack of Adaptive Capacities (-0.71) Source: World Bank Global Indicators Group, using data from the World Bank B-READY 2024––specifically Pillar I (Regulatory Framework) and Pillar II (Public Services) scores for Building Permitting and Environmental Permitting for Constructions––and the United Nations University’s World Risk Index (WRI). Note: Pearson correlation coefficients (reported in parentheses) range from –1 to 1; values closer to ±1 indicate stronger correlations. The sample comprises 46 economies, stratified by income group. The WRI comprises five components: exposition, susceptibility, lack of coping capacities, lack of adapting capacities, and vulnerability. This analysis focuses on the latter three dimension because they are the most directly influenced by government action. B-READY = Business Ready. conditions (Banja 2025), such as a regulatory environment Building resilience requires intentional policy that is predictable, enforcement that is consistent, and action and strong coordination climate-resilient standards that are well integrated. When buildings are made to last and regulations signal long-term Resilience is not accidental; it stems from an intentional, stability, private investment is more likely to follow coordinated policy agenda that integrates quality building (Kechichian et al. 2020; Molfetas and Wille 2018). regulations with urban planning, environmental standards, disaster risk management, and e cient public service Despite these well-documented bene ts, global building delivery that make compliance practical and a ordable, stock remains alarmingly vulnerable. Less than 13 percent of reduce transaction costs, and incentivize businesses to follow buildings worldwide include seismic provisions, even though o cial permitting processes. Building regulations must be nearly half are located in earthquake-prone zones (World treated as a key element within broader development policies Bank and GFDRR 2024). is vulnerability spans both that foster a conducive business environment. To translate high- and lower-income countries, often driven by this vision into action, it is critical to: regulatory gaps and weak enforcement. In Türkiye, for 1. Prioritize regional data to close implementation gaps. example, the devastating 2023 earthquakes, where more than While national frameworks set the direction, resilience is 3,000 buildings, including newly constructed ones, collapsed ultimately built (or undermined) at the local level. Local due to noncompliance with building codes, tragically governments often face limited technical capacity, illustrated the consequences of regulatory failure (BBC fragmented coordination, and outdated regulatory tools, 2023). Meanwhile, in the United States, two-thirds of local resulting in weak enforcement and inconsistent service jurisdictions (counties, cities, and towns) have yet to adopt delivery. Closing these gaps requires disaggregated modern building codes, and this regulatory gap is expected regional data to identify speci c bottlenecks and guide to lead to US$32 billion in avoidable disaster-related losses smarter reforms tailored to speci c contexts. Tools over the next 20 years (FEMA 2020). As global urbanization like Subnational B-READY o er precisely this: accelerates and the building stock is projected to double in evidence-based insights into local regulatory performance the next 15 to 20 years (World Bank and GFDRR 2024), the and enforcement challenges. For example, a 2024 risks will only intensify, especially in rapidly growing cities. assessment across six European Union countries revealed 4 DECIG – Policy Indicators Briefs No. 36 Efficient public services for building permitting play a key role in reducing disaster risk and Figure 3 enhancing adaptive capacities 80 Lack of Adaptive Capacities Component, WRI 70 60 50 40 30 20 10 0 0 10 20 30 40 50 Public Services Scores of Building Regulations, B-READY Low income Upper-middle income Trend Line Lower-middle income High income (Slope = -3.38*) Source: World Bank Global Indicators Group, using data from the World Bank B-READY 2024––specifically Pillar II (Public Services) scores for Building Permitting and Environmental Permitting for Constructions––and the United Nations University’s World Risk Index (WRI). Note: The fitted line illustrates the estimated regression relationship. Its slope represents the regression coefficient, and the asterisk indicates statistical significance at the 5 percent level. The standard error (0.25) was computed using 1,000 bootstrap replications to improve the reliability of confidence intervals. For a more robust analysis, the regression includes controls for contextual factors: institutional quality (government effectiveness, regulatory quality, political stability via World Bank Governance Indicators); economic conditions (GDP per capita, urban population share); and geographic heterogeneity (coastal versus noncoastal, using World Bank GeoSpatial Data). The latter factor is included because coastal locations tend to face higher risk to climate-related hazards such as hurricanes and sea-level rise. The sample comprises 46 economies, stratified by income group. Data labels use International Organization for Standardization (ISO) country codes. B-READY = Business Ready. major regional disparities in building regulations possible risks, and safeguarded against future contingencies implementation and enforcement (World Bank 2024). (Sakoda et al. 2025). is includes calibrating Romania, one of the countries analyzed, used these requirements and factors such as compliance burden, ndings to take concrete action. Faced with permitting construction practices and technical feasibility. Equally times ranging from 53 to 382 days across cities for similar important is modernizing how public services are planned projects, the government issued Emergency Ordinance and delivered, leveraging digital tools and new 31/2025 to streamline urban planning and construction technologies. is demands not only technical updates permitting processes (Cli ord Chance 2025). but also institutionalized processes for monitoring, learning, and stakeholder engagement. 2. Commit to continuous policy adaptation. Building resilience is not a one-o reform––it is a dynamic, Conclusion ongoing process. As climate change and other risks evolve alongside their impacts, regulatory frameworks must is Brief suggests that well-designed and e ectively adapt accordingly as static building codes quickly become enforced building regulations are a powerful tool to reduce outdated. Regular reviews and updates to standards, disaster risks, enhance adaptive capacity, and minimize procedures, and enforcement mechanisms are essential to disruptions to business operations—thereby fostering a more ensure that regulations remain relevant, cognizant of resilient private sector. However, regulations alone are not 5 DECIG – Policy Indicators Briefs No. 36 enough. Compliance can be costly, sometimes discouraging is Brief highlights that building regulations are not just adherence and driving construction into the informal sector, a preventive measure but a vital adaptation strategy that which undermines the safety and resilience that regulations helps economies become disaster-ready and also more are intended to ensure. E cient and accessible public services attractive to investors. Given this, further research is needed are therefore essential enablers that can reduce compliance to better understand how building regulations in uence costs and administrative burdens for both authorities and investor perceptions and serve as a proxy for investment businesses, making resilience more feasible and scalable. appetite. References ADB (Asian Development Bank). 2024. Disaster Risk Management Action Molfetas, Haris, and Christopher Wille. 2018. Leveraging Technology to Plan, 2024–2030. Manila: Asian Development Bank. 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