Drought is a complex natural hazard, and the uncertainties surrounding its onset and impacts make investment decisions inherently difficult. On the other hand, drought is considered one of the costliest and most destructive natural hazards. With the threat of higher frequency and greater intensity of future drought events due to climate change, the debate in drought management has evolved from whether to implement reactive or proactive drought management approaches – in other words, whether to invest or not in proactive drought actions – to how to invest in proactive drought action. Different and evolving drought events can be mitigated with varying proactive measures, but the best trade-off between efficacy and profitability – be it a financial or an economic profit – must be targeted. The report investigates the broad concept of the economics of drought management, provides a conceptual, two-tier framework for the assessment of proactive and reactive actions, and disseminates case studies for the implementation of the framework in decision-making processes. This report aims to assist decision-makers, policymakers, planners, and national authorities responsible for planning and programming to conduct an exhaustive economic assessment related to drought. With the knowledge gained from the report, a critical step in the drought investment decision-making process can be effectively undertaken.