This review of available literature on the benefits of action and costs of inaction of drought mitigation and preparedness shows that significant progress has been made over the past decade in improving understanding of droughts and their impacts. However, significant gaps in research, policy and practice remain. This paper reviews several methodologies for making economic drought impact assessments and describes the main obstacles and opportunities facing the transition from crisis management to risk management. It identifies drivers of ex ante and ex post action against drought and highlights actions that are associated with co-benefits beyond drought risk management. The findings underline the need for mutually compatible methodologies as a means of comprehensively assessing drought costs and impacts.