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Module 11 - Managing Agricultural Risk, Vulnerability, and Disaster

Updates were made to this Module on 12/06/2006.

Public intervention can facilitate better risk management through risk-reducing sectoral development strategies and programs with due emphasis on community-based disaster reduction, improved hydrometeorological alert and information systems, pre-event emergency preparedness and recovery planning, development of financial markets, promotion of market-based price and yield insurance schemes, and ensuring that the poor are able to benefit from these interventions and from participation in emerging systems.

Rationale for Risk Reduction and for Investment

Risk is a function of the vulnerability and capacity of communities and economies in relation to the hazards they confront. The increased vulnerability and inadequate coping capacity within communities have most definitely increased the impact of hazards on their lives and livelihoods. This trend can be attributed to flawed development practices and continued emphasis on reactive approaches to handling disasters. It is possible to reduce risks by improving pre-event preparedness, designing and implementing risk mitigating strategies, developing reliable and timely early warning and response systems, and spreading residual risks through innovative risk financing instruments. Therefore risk reduction must be mainstreamed in policies and programs for sustainable development.

Risk in agriculture is pervasive (box 11.1). Several assessments of risk and vulnerability by the Bank have shown that commodity price, yield (mainly due to weather), and health risks are the most important risks that rural households face. Households are vulnerable to those risks when a significant loss threatens the sustainability of their livelihood base—a common situation for many small-farm households in developing and transition economies.

Box 11.1 Some risks affecting agricultural production systems

  • Climatic risks include risk of crop or herd loss (total or partial) from drought (micro or large-scale disaster, short or long term), flooding, hard rains, hail, frost, snow, hard freeze, or wind.

  • Environmental risks result in damage to land from soil erosion and to flora and fauna and from pest and disease attacks.

  • Social and economic risks include problems such as theft of crops or stock, damage by careless neighbors (fire, cattle), price fluctuations of commodities and key inputs (fertilizer), family illness and loss of labor (HIV/AIDS, death), loss of access to land because of badly designed titling schemes, and infrastructure failure (degraded roads, transport breakdowns).

  • Political risks include more remotely generated (and thus significantly less manageable) events such as community resettlement (for example, dam resettlement schemes), conflict and war, and political alienation/redistribution of land.

  • Market risks include adverse fluctuations in price or input costs, logistics and supply chain difficulties, and risk associated with access to finance to support trading activities.

Source: Authors

Profit is the reward for taking risks, and therefore any profit seekers in the business of farming, as in any other business, must be able to bear some risk. Many farmers, however, are highly vulnerable and cannot readily bear additional risk in their farm/herd management or its potential shocks to their households.


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